-----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, WmIpksfusFpYbhCaOEkGDPyNChgWPD0okXRsHAV570IWXrvjGa4jj7VioIAqchwy gVqX4dRe1qlonKhwls+AwA== 0000950114-97-000283.txt : 19970602 0000950114-97-000283.hdr.sgml : 19970602 ACCESSION NUMBER: 0000950114-97-000283 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970530 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: 97616589 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 six months ended April 30, 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 May 15, 1997 was 3,140,319. 2 ENGINEERED SUPPORT SYSTEMS, INC. INDEX
Page ---- Part I - Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of April 30, 1997 and October 31, 1996 3 Condensed Consolidated Statements of Income for the three months and six months ended April 30, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows for the six months ended April 30, 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
April 30 October 31 1997 1996 -------- ---------- (Unaudited) ASSETS Current Assets Cash $ 4,603,379 $ 1,415,773 Accounts receivable 4,799,084 4,855,330 Contracts in process and inventories 4,431,353 10,014,627 Other current assets 1,845,431 1,149,054 ----------- ----------- Total Current Assets 15,679,247 17,434,784 Property, plant and equipment, less accumulated depreciation of $13,982,507 and $13,176,403 14,349,496 14,096,927 Intangible assets 839,834 966,234 Other assets 1,404,154 1,594,186 ----------- ----------- Total Assets $32,272,731 $34,092,131 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current maturities of long-term debt $ 61,978 $ 786,802 Accounts payable 4,122,591 5,834,454 Other current liabilities 2,377,451 2,459,315 ----------- ----------- Total Current Liabilities 6,562,020 9,080,571 Long-term debt 1,239,806 1,937,805 Deferred income taxes 2,801,639 2,801,639 ESOP guaranteed bank loan 947,100 1,020,900 Shareholders' Equity Common stock, par value $.01 per share; 10,000,000 shares authorized; 3,741,773 and 3,687,273 shares issued 37,418 36,873 Additional paid-in capital 9,349,485 8,998,489 Retained earnings 15,330,974 13,465,694 ----------- ----------- 24,717,877 22,501,056 Less ESOP guaranteed bank loan 947,100 1,020,900 Less treasury stock at cost, 592,266 and 522,313 shares 3,048,611 2,228,940 ----------- ----------- 20,722,166 19,251,216 ----------- ----------- Total Liabilities and Shareholders' Equity $32,272,731 $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 Six Months Ended April 30 April 30 ------------------------------- ------------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Net revenues $22,851,462 $18,923,798 $43,582,302 $35,971,371 Cost of revenues 19,172,750 15,955,531 36,788,303 30,522,716 ----------- ----------- ----------- ----------- Gross profit 3,678,712 2,968,267 6,793,999 5,448,655 Selling, general and administrative expense 1,854,077 1,623,960 3,598,705 3,159,633 ----------- ----------- ----------- ----------- Income from operations 1,824,635 1,344,307 3,195,294 2,289,022 Interest expense (interest) (8,670) 150,099 29,158 285,986 ----------- ----------- ----------- ----------- Interest before income taxes 1,833,305 1,194,208 3,166,136 2,003,036 Income tax provision 735,000 477,000 1,265,000 800,000 ----------- ----------- ----------- ----------- Net income $ 1,098,305 $ 717,208 $ 1,901,136 $ 1,203,036 =========== =========== =========== =========== Net income per share $ .33 $ .22 $ .57 $ .37 ===== ===== ===== ===== See notes to condensed consolidated financial statements.
4 5 ENGINEERED SUPPORT SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended April 30 ------------------------------- 1997 1996 ----------- ----------- From operating activities: Net income $ 1,901,136 $ 1,203,036 Depreciation and amortization 946,850 919,214 ----------- ----------- Cash provided (used) before changes in operating assets and liabilities 2,847,986 2,122,250 Net (increase) decrease in non-cash current assets 4,943,143 (452,663) Net increase (decrease) in non-cash current liabilities (1,793,727) (302,180) (Increase) decrease in other assets 191,124 (76,052) ----------- ----------- Net cash provided by (used in) operating activities 6,188,526 1,291,355 ----------- ----------- From investing activities: Additions to property, plant and equipment (1,058,673) (471,646) ----------- ----------- Net cash provided by (used in) investing activities (1,058,673) (471,646) ----------- ----------- From financing activities: Net payments under line-of-credit agreement (838,336) Payments of long-term debt (1,422,823) (399,764) Purchase of treasury stock (823,597) (51,422) Exercise of stock options 340,028 245,539 Cash dividends (35,855) (29,811) ----------- ----------- Net cash provided by (used in) financing activities (1,942,247) (1,073,794) ----------- ----------- Net increase (decrease) in cash and cash equivalents 3,187,606 (254,085) Cash and cash equivalents at beginning of period 1,415,773 386,609 ----------- ----------- Cash and cash equivalents at end of period $ 4,603,379 $ 132,524 =========== =========== See notes to condensed consolidated financial statements.
5 6 ENGINEERED SUPPORT SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) APRIL 30, 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 six month period ended April 30, 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 is based on the weighted average number of common and common equivalent shares outstanding of 3,293,471 and 3,256,495 for the three months ended April 30, 1997 and 1996, respectively, and 3,313,512 and 3,247,858 for the six months ended April 30, 1997 and 1996, 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:
April 30, 1997 October 31, 1996 -------------- ---------------- Raw materials $ 1,716,286 $ 1,643,824 Work-in-process 172,904 142,604 Finished goods 722,297 557,900 Inventories substantially applicable to government contracts in process, less progress payments of $14,013,299 and $17,619,487 1,819,866 7,670,299 ----------- ----------- $ 4,431,353 $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 21% in the second quarter of 1997 to $22.9 million from $18.9 million in the second quarter of 1996, and increased 21% to $43.6 million in the first six months of 1997 from $36.0 million in the first half of 1996. The increase in revenues was a result of higher volume at both subsidiaries. Revenues for Engineered Specialty Plastics, Inc. (ESP) increased 27% to $7.1 million in the second quarter of 1997 and increased 22% to $13.2 million in the first six months of 1997. These strong gains are the direct result of an intensified marketing effort at this subsidiary. Revenues for Engineered Air Systems, Inc. (Engineered Air) increased 18% to $15.7 million in the second quarter of 1997 and increased 21% to $30.4 in the first half of 1997. The most significant production contracts for Engineered Air included the Aviation Groud Power Units, C-5 and MA-3D Flight Line Air Conditioners, Revetment Kits, Harvest Falcon Water Distribution Systems, and B-1B Air Conditioners. In addition, the defense subsidiary has performed significant developmental work during the period on the Chemical and Biological Protected Shelter System (CBPSS) and the Chemically/Biologically Hardened Air Management Plant (CHAMP). Gross profit for the second quarter of 1997 increased $0.7 million, or 24%, over the amount for the comparable 1996 period reflecting both the increase in production volume and significantly higher margins at ESP. The gross margin for the second quarter was 16.1% and 15.7% in 1997 and 1996, respectively. The gross margin for the first six months of the year was 15.6% and 15.1% in 1997 and 1996, respectively. Selling, general and administrative expense was $1.85 million and $1.62 million in the second quarter of 1997 and 1996, respectively. As a percent of net revenues, selling, general and administrative expense decreased from 8.6% in the second quarter of 1996 to 8.1% in 1997. For the six months ended April 30, 1997, this percentage was 8.3% compared to 8.8% for the first half of 1996. Interest expense decreased $159,000 in the second quarter of 1997 as compared with the second quarter of 1996. This was the result of strong cash flow at both subsidiaries. LIQUIDITY AND CAPITAL RESOURCES At April 30, 1997, the Company's working capital and ratio of current assets to current liabilities were $9.1 million and 2.39 to 1 as compared to $8.4 million and 1.92 to 1 at October 31, 1996. As of April 30, 1997, the Company had cash and cash equivalents of $4.6 million and unused credit related to its loan agreement of $6.4 million. BUSINESS AND MARKET CONSIDERATIONS As of April 30, 1997, Engineered Air's funded backlog of defense orders was $71 million compared to $104 million a year ago. The Company is heavily dependent on the U.S. Government for business. Approximately 70% of consolidated net revenues for the six months ended April 30, 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 diversification into commercial markets. Management is currently pursuing 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. (iv) Registration Statement Number 333-27695 on Form S-8 dated May 23, 1997 for the registration of 50,000 shares of Engineered Support Systems, Inc. common stock, $.01 par value, pursuant to the Engineered Support Systems, Inc. 1997 Stock Option Plan for Non-employee Directors, 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 six months ended April 30, 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: May 30, 1997 By: /s/ MICHAEL F. SHANAHAN SR. --------------- ------------------------------------ MICHAEL F. SHANAHAN SR. Chairman of the Board, President and Chief Executive Officer Date: May 30, 1997 By: /s/ GARY C. GERHARDT --------------- ------------------------------------ GARY C. GERHARDT Executive Vice President and Chief Financial Officer 9 EX-11 2 COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11 ENGINEERED SUPPORT SYSTEMS, INC. STATEMENT RE: COMPUTATION OF NET INCOME PER SHARE
Three Months Ended Six Months Ended April 30 April 30 ------------------------------ ------------------------------ 1997 1996 1997 1996 ---------- ---------- ---------- ---------- NET INCOME $1,098,305 $ 717,208 $1,901,136 $1,203,036 ========== ========== ========== ========== NET INCOME PER SHARE Average shares outstanding 3,177,412 3,025,947 3,179,802 3,004,461 ========== ========== ========== ========== Net income $ .35 $ .24 $ .60 $ .40 ========== ========== ========== ========== PRIMARY EARNINGS PER SHARE Average shares outstanding 3,177,412 3,025,947 3,179,802 3,004,461 Net effect of dilutive stock options 116,088 212,821 122,062 221,730 ---------- ---------- ---------- ---------- 3,293,500 3,238,768 3,301,864 3,226,191 ========== ========== ========== ========== Net income $ .33 $ .22 $ .58 $ .37 ========== ========== ========== ========== FULLY DILUTED EARNINGS PER SHARE Average shares outstanding 3,177,412 3,025,947 3,179,802 3,004,461 Net effect of dilutive stock options 116,059 230,548 133,710 243,397 ---------- ---------- ---------- ---------- 3,293,471 3,256,495 3,313,512 3,247,858 ========== ========== ========== ========== Net income $ .33 $ .22 $ .57 $ .37 ========== ========== ========== ========== 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 SIX MONTHS ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS OCT-31-1997 NOV-01-1996 APR-30-1997 4,603,379 0 5,062,086 263,002 4,431,353 15,679,247 28,332,003 13,982,507 32,272,731 6,562,020 2,186,906 37,418 0 0 20,684,748 32,272,731 43,582,302 43,582,302 36,788,303 36,788,303 3,590,455 8,250 29,158 3,166,136 1,265,000 1,901,136 0 0 0 1,901,136 .58 .57
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