<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended September 27, 1998
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission file number: 0-28942
PRIMEX TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Virginia 06-1458069
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10101 Ninth Street North, St. Petersburg, Florida 33716-3807
(Address of principal executive offices) (Zip Code)
(727) 578-8100
(Registrant's telephone number, including area code)
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
----- -----
As of October 30, 1998, there were outstanding 5,106,376 shares of the
registrant's common stock, par value $1.00 per share.
<PAGE>
PRIMEX TECHNOLOGIES, INC.
INDEX
Part I. Financial Information
Page No.
--------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
September 27, 1998 and December 31, 1997............. 3
Condensed Consolidated Statements of Operations -
Three Months Ending September 27, 1998 and
September 30, 1997; Nine Months Ending
September 27, 1998 and September 30, 1997............ 4
Condensed Consolidated Statements of Cash Flow -
Nine Months Ending September 27, 1998 and
September 30, 1997................................... 5
Notes to Condensed Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 9
Part II. Other Information
Item 1. Legal Proceedings.................................... 13
Item 6. Exhibits and Reports on Form 8-K..................... 14
Signatures........................................... 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
PRIMEX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 27, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
Assets
- ------
Current Assets:
Receivables ........................................... $ 109,230 $ 94,657
Inventories, Net ...................................... 53,999 35,157
Other Current Assets .................................. 8,151 7,263
--------- ---------
Total Current Assets ............................. 171,380 137,077
Property, Plant and Equipment ............................... 259,613 260,189
Less: Accumulated Depreciation .............................. (164,948) (161,529)
--------- ---------
94,665 98,660
Goodwill, Net ............................................... 42,886 44,821
Other Assets ................................................ 16,749 15,733
--------- ---------
Total Assets .......................................... $ 325,680 $ 296,291
========= =========
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-Term Borrowings ................................. $ 39,000 $ 24,100
Accounts Payable ...................................... 23,392 28,894
Contract Advances ..................................... 37,285 35,070
Accrued Liabilities ................................... 35,344 32,522
--------- ---------
Total Current Liabilities ........................ 135,021 120,586
Other Liabilities ........................................... 28,450 22,904
--------- ---------
Total Liabilities ..................................... 163,471 143,490
Shareholders' Equity
Common Stock; $1.00 par value; 60,000,000 shares
authorized; issued and outstanding 5,106,376
shares at September 27, 1998 and 5,137,637 shares at
December 31, 1997 ................................... 5,106 5,138
Other Shareholders' Equity ............................ 157,103 147,663
--------- ---------
Total Shareholders' Equity ....................... 162,209 152,801
--------- ---------
Total Liabilities and Shareholders' Equity ............ $ 325,680 $ 296,291
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 27, September 30, September 27, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales .......................... $112,753 $118,861 $336,072 $346,581
Operating Expenses:
Cost of Goods Sold .......... 88,607 96,688 261,548 282,156
Selling and Administration .. 15,947 14,615 51,699 44,785
Research and Development .... 2,294 1,824 6,245 4,440
-------- -------- -------- --------
Operating Income ............... 5,905 5,734 16,580 15,200
Interest Expense ............... 529 517 1,312 3,405
Other Income, Net .............. 740 167 1,918 766
Non-Recurring Income ........... 220 -- 2,920 --
-------- -------- -------- --------
Income Before Income Taxes ..... 6,336 5,384 20,106 12,561
Income Tax Provision ........... 2,536 2,357 8,274 5,799
-------- -------- -------- --------
Net Income ..................... $ 3,800 $ 3,027 $ 11,832 $ 6,762
======== ======== ======== ========
Net Income Per Share:
Basic .................... $ 0.74 $ 0.59 $ 2.30 $ 1.30
======== ======== ======== ========
Diluted .................. $ 0.71 $ 0.57 $ 2.20 $ 1.28
======== ======== ======== ========
Dividends Per Share ............ $ 0.15 $ 0.15 $ 0.45 $ 0.45
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
September 27, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Operating Activities
- --------------------
Net Cash Provided (Used) by Operating Activities ............ $ (10,693) $ 114,812
Investing Activities
- --------------------
Capital Expenditures ........................................ (10,718) (4,874)
Proceeds from Disposition of Business ....................... 10,000 --
--------- ---------
Net Cash Provided (Used) in Investing Activities ...... (718) (4,874)
Financing Activities
- --------------------
Net Short-Term Borrowing .................................... 14,900 19,900
Net Long-Term Debt Repayment ................................ -- (145,000)
Repurchases of Common Stock ................................. (1,177) (1,666)
Dividends Paid .............................................. (2,312) (2,330)
--------- ---------
Net Cash Provided (Used) in Financing Activities ...... 11,411 (129,096)
--------- ---------
Net Increase (Decrease) in Cash ............................. $ -- $ (19,158)
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
PRIMEX TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
($ in thousands, except per share amounts)
(Unaudited)
Basis of Presentation and Significant Accounting Policies
The accompanying unaudited condensed consolidated financial
statements of Primex Technologies, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 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. The condensed consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant inter-company transactions
and accounts have been eliminated. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included.
Operating results for the three and nine-month periods ended
September 27, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements, and notes thereto, for the year ended December 31, 1997,
as presented in the Company's Annual Report on Form 10-K.
In the first quarter of 1998, the Company adopted a 4-4-5 quarterly
accounting cycle having a fiscal year ending on December 31. The adoption of
this accounting cycle will have no significant effect on the comparability of
interim financial information.
Net Income Per Share
The following sets forth the number of shares of common stock
included in the computation of basic and diluted net income per share for the
three and nine-month periods ended September 27, 1998 and September 30, 1997.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- -----------------------------
September 27, September 30, September 27, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Denominator for basic net
income per share:
Weighted average shares
outstanding and vested .... 5,140,772 5,144,109 5,147,629 5,183,437
Effect of dilutive securities:
Employee Stock Options ...... 28,436 -- 33,315 --
Restricted Stock Unit Grants 215,441 153,356 207,760 89,174
--------- --------- --------- ---------
Dilutive potential common shares 243,877 153,356 241,075 89,174
--------- --------- --------- --------
Denominator for diluted
net income per share ........ 5,384,649 5,297,465 5,388,704 5,272,611
========= ========= ========= =========
</TABLE>
6
<PAGE>
PRIMEX TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
($ in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Inventories September 27, December 31,
1998 1997
---- ----
<S> <C> <C>
Inventories consist of the following:
Raw materials and work in progress .................... $ 57,291 $ 34,832
Finished goods ........................................ 4,615 8,232
--------- ---------
61,906 43,064
Less revaluation to LIFO .............................. 7,907 7,907
--------- ---------
$ 53,999 $ 35,157
========= =========
</TABLE>
Inventories valued using the last-in, first-out (LIFO) method are
based on an annual determination of quantities and costs as of year end;
therefore, September 27, 1998 balances reflect certain estimates relating to
inventory quantities and costs at December 31, 1998. Inventory balances at
September 27, 1998 and December 31, 1997 are net of reductions for progress
payments in the amount of $7,973 and $9,657 respectively.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards 130,
"Reporting Comprehensive Income," in the first quarter of 1998. Comprehensive
income includes net income and all other changes in equity during a period
except those resulting from investments by and distributions to the Company's
shareholders. On this basis, the Company's comprehensive income which includes
currency translation and minimum pension liability adjustments, totaled $3,800
and $3,042 for the three-month periods and $11,630 and $6,763 for the nine-month
periods ended September 27, 1998 and September 30, 1997, respectively.
Stock Option Plan
A total of 250,000 and 25,000 stock options were granted to certain
key employees on January 2, 1998 and May 5, 1998, respectively, under the 1996
Long Term Incentive Plan of Primex Technologies, Inc., as amended. The exercise
price of the January and May options is $33.88 and $47.44 per share,
respectively, which was the fair market value of the Company's common stock on
the date of the grant. These options become vested in one-third installments
over a three-year period beginning one year from the date of grant and have a
ten-year term from the date of grant. All options granted were outstanding on
September 27, 1998. The Company accounts for stock-based employee compensation
using the intrinsic value method; accordingly, no compensation cost has been
recognized for the stock options granted.
Dispositions
On April 15, 1998, the Company sold substantially all of the assets
related to its high-power pulsed energy device product line for $10,000 in cash.
A gain on this sale of approximately $800 was included in other income during
the second quarter of 1998. Sales of products and services in this product line
were $16,833 for the year ending December 31, 1997 and $3,698 for the first
quarter of 1998. Net income for this product line was not material to the
Company's consolidated net income.
7
<PAGE>
PRIMEX TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
($ in thousands, except per share amounts)
(Unaudited)
Arbitration Award
The Company received an arbitration award net of expenses, in the
amount of $4,189 as the result of a binding arbitration concerning a breach of
contract of which $1,269 represents payments due under the contract which were
included in operating income during the second quarter of 1998. The remaining
$2,920 balance of the award represents future payments which have been
recognized as non-recurring income in the amount of $2,700 during the second
quarter of 1998 and $220 in the third quarter of 1998 when the amount of the
award and related expenses were finalized.
Contingencies
The Company has agreed to a settlement regarding costs associated
with environmental remediation at a location where the Company formerly had
manufacturing operations. The Company recorded a net settlement expense of $800
during the second quarter of 1998.
Stock Repurchase
In August 1998, the board of directors authorized the repurchase, at
management's discretion, of up to 250,000 shares of the Company's common stock.
During the third quarter of 1998, the Company purchased and retired 32,000
shares of common stock at an aggregate cost of $1,177.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
----------------------
The following table sets forth certain data, expressed as a percentage of
sales, from the Company's Condensed Consolidated Statements of Operations for
the three and nine month periods ended September 27, 1998 and September 30,
1997.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
September 27, September 30, September 27, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales:
Large caliber ammunition ... 33.3% 27.9% 33.4% 30.1%
Medium caliber ammunition .. 14.7% 16.8% 11.2% 19.6%
BALL POWDER(R) propellant .. 8.6% 9.5% 9.4% 10.7%
Electronic products ........ 15.4% 9.4% 14.7% 8.8%
Space products ............. 9.6% 9.2% 8.8% 9.1%
Other products and services 18.4% 27.2% 22.5% 21.7%
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
Cost of goods sold ............... 78.6% 81.4% 77.8% 81.4%
------ ------ ------ ------
Gross profit ..................... 21.4% 18.6% 22.2% 18.6%
Selling and administration expense 14.2% 12.3% 15.4% 12.9%
Research and development expense . 2.0% 1.5% 1.9% 1.3%
------ ------ ------ ------
Operating income ................. 5.2% 4.8% 4.9% 4.4%
Interest expense ................. 0.5% 0.4% 0.4% 1.0%
Other income, net ................ 0.7% 0.1% 0.6% 0.2%
Non-Recurring Income ............. 0.2% -- 0.9% --
------ ------ ------ ------
Income before income taxes ....... 5.6% 4.5% 6.0% 3.6%
Income tax provision ............. 2.2% 2.0% 2.5% 1.7%
------ ------ ------ ------
Net income ....................... 3.4% 2.5% 3.5% 1.9%
====== ====== ====== ======
</TABLE>
Results of Operations
The Company's sales of $112.8 million during the third quarter of 1998
decreased by $6.1 million, or 5.1%, compared to the third quarter of 1997. Sales
of $336.1 million for the first nine months of 1998 were 3.0%, or $10.5 million,
lower than the corresponding period in 1997. The third quarter sales decrease
reflects lower Ordnance and Tactical Systems Division sales which were $77.6
million in 1998 compared to $87.5 million in the corresponding period of 1997.
This decline reflects the absence of artillery propelling charge sales in the
1998 third quarter. Third quarter Aerospace and Electronics Division sales
increased to $35.1 million in 1998 as compared to $31.4 million in the
corresponding period of 1997. The higher Aerospace and Electronics Division
sales reflect electronic product and solid systems sales increases of 56.0% and
52.0%, respectively, which more than offset the absence of sales associated with
the high-power pulsed energy device product line that was disposed of in April
1998. Ordnance and Tactical Systems Division sales for the first nine months
declined from $256.6 million in 1997 to $234.1 million in 1998 while Aerospace
and Electronics Division sales increased from $90.0 million in 1997 to $102.0
million in 1998. Ordnance and Tactical Systems Division sales in the first nine
months of 1997 benefited from a higher level of medium caliber shipments as the
result of a production recovery from 1996. Additionally, shipments of BALL
POWDER(R) Propellant during the first nine months of 1998 were 14.7% below the
corresponding period of 1997. The increase in Aerospace and Electronics Division
sales between the first nine months of 1997 and 1998
9
<PAGE>
reflects a 61.7% increase in electronic product sales attributable to shipments
of EmPower(TM) airline passenger seat power supply systems. The electronic
product sales increase more than offset the decline in sales associated with the
high-power pulsed energy device product line that was disposed of in April 1998.
Increased sales of other products and services for the first nine months of 1998
compared to the corresponding period of 1997 results primarily from higher
shipments of commercial pipe joint components.
Gross margins, as a percentage of sales, increased to 21.4% in the third
quarter of 1998, compared to 18.6% in the third quarter of 1997. For the first
nine months of 1998, gross margins as a percentage of sales increased to 22.2%
from 18.6% during the first nine months of 1997. The gross margin improvement in
the third quarter and first nine months of 1998, compared to 1997, reflects a
favorable product sales mix and the absence of unfavorable performance that was
experienced on ammunition demilitarization and medium caliber ammunition
programs during the first nine months of 1997.
Selling and administration expenses increased by $1.3 million, or 9.1%, in
the third quarter of 1998 and increased by $6.9 million, or 15.4%, in the first
nine months of 1998, compared to corresponding periods in 1997. Increases in the
third quarter of 1998 primarily reflect higher management incentive costs
associated with the improvements in the Company's operating performance. The
increases in the first nine months of 1998 reflect higher bid and proposal
expenditures, associated with large caliber and space product activities during
the first six months of 1998, which were 68.4% higher than the corresponding
period in 1997, as well as higher management incentive costs which were 55.6%
higher than the corresponding period in 1997.
Research and development expenses increased by $0.5 million, or 25.8%,
during the third quarter of 1998 and by $1.8 million, or 40.6%, during the first
nine months of 1998, compared to corresponding periods in 1997. These higher
expenditures reflect increased research and development activity in the
Company's space and electronics products business units.
Interest expense of $0.5 for the third quarter of 1998 was similar to the
corresponding period in 1997 and declined to $1.3 million in the first nine
months of 1998 compared to $3.4 million for the corresponding period in 1997.
This decrease reflects the lower level of debt outstanding during 1998 compared
to 1997.
Non-operating income and expense for the first nine months of 1998
include a pre-tax gain of approximately $0.8 million recognized on the sale of
the Company's high-power pulsed energy device product line and a pre-tax charge
of $0.8 million associated with a settlement regarding costs for environmental
remediation at a former manufacturing site, both of which were recognized during
the second quarter.
The Primex Aerospace Company, a wholly owned subsidiary of the Company was
awarded, net of expenses, approximately $4.2 million in a binding arbitration
concerning a breach of contract. The award was based on the defendant's ceasing
and failing to complete payments on the production of certain components used in
automobile airbags. Approximately $1.3 million of the award represents payments
due under the contract which were included in operating income during the second
quarter of 1998. The balance of approximately $2.9 million represents future
payments which have been recognized as non-recurring income of $2.7 during the
second quarter of 1998 and $0.2 in the third quarter of 1998 when the amount of
the award and related expenses were finalized.
10
<PAGE>
The Company's effective tax rates differ from statutory tax rates due
principally to expenses associated with goodwill which are not deductible for
federal and state income tax purposes and from the favorable federal tax
treatment given to certain export sales.
Net income of $3.8 million for the third quarter of 1998, and $11.8
million for the first nine months of 1998 compares favorably to the $3.0 million
and $6.8 million of net income during corresponding periods in 1997.
Liquidity and Sources of Capital
Cash flow used by operations was $10.7 million during the first nine
months of 1998 compared to cash provided by operations of $114.8 million during
the first nine months of 1997. The decrease primarily resulted from timing in
the receipt of contract advances in the form of performance based payments which
accelerated cash flow on a one-time basis during the first nine months of 1997.
Investing activities during the first nine months of 1998 reflect an
increase in planned capital expenditures to $10.7 million from $4.9 million
during the first nine months of 1997. Additionally, the Company received $10.0
million from the sale of assets related to its high-powered pulsed energy device
product line. Funds from operations were sufficient to pay dividends of $0.15
per share in each of the first, second and third quarters of 1998 and 1997.
The Company has a revolving credit agreement ("RCA") under the terms of
which participating banks have committed a maximum of $160.0 million for cash
borrowing and letters of credit. The RCA expires on December 31, 2001. The RCA
contains covenants requiring the Company to maintain ratios of (i) minimum
earnings before interest and taxes to interest expense, and (ii) maximum total
debt to earnings before interest, taxes, depreciation and amortization and also
contains certain minimum tangible net worth requirements. The Company also
borrows from RCA participating banks on an uncommitted and unsecured short term
basis at rates similar to the RCA. Aggregate borrowings are limited to the
committed RCA maximum. Management believes that the Company is currently in
compliance with all covenants and requirements under this credit facility. At
September 27, 1998, the Company had unused availability under the RCA facility
and short term credit lines of $121.0 million.
In August 1998, the Board of Directors of the Company authorized the
repurchase, at management's discretion, of up to 250,000 shares of the Company's
common stock. During the third quarter of 1998, the Company purchased and
retired 32,000 shares of common stock at an aggregate cost of approximately $1.2
million.
The Company believes, based on its anticipated working capital, fixed
capital requirements, and dividend policy, that future cash flow from operations
and amounts available under the RCA facility and short term credit lines are
adequate to meet the Company's anticipated cash requirements in the foreseeable
future.
On October 13, 1998, the Company announced that it had signed a
conditional agreement to acquire the CMS Group, an operating division of
Daimler-Benz Aerospace AG ("DASA"). The CMS Group is a defense contractor
headquartered in Tampa, Florida. The consummation of the purchase of the CMS
Group is subject to, among other conditions, federal government review and
clearance under the Hart-Scott-Rodino Act and approval by DASA's parent
corporation Daimler-Benz AG.
11
<PAGE>
Impact of Year 2000
The Company continues to address the "Year 2000" software issues described
in its "Annual Report on Form 10-K for the year ended December 31, 1997." The
processes for evaluating and managing the risks and costs associated with this
potential problem are being managed by a team of internal staff and outside
consultants. The Company's financial and operational systems are being
identified and assessed for Year 2000 compliance and efforts to modify existing
software or convert to new software are currently being taken. The Company
believes the identification and assessment phase of this process is
substantially complete.
The Company employs a number of information technology systems in its
operations, including, without limitation, computer networking systems,
financial systems and other similar systems. A number of these systems have been
recently implemented by the Company and these recently implemented systems are
believed to be Year 2000 compliant. The Company's assessment has indicated that
some of the Company's financial systems could be affected by the Year 2000 and
accordingly, the Company has begun a process of either modifying or converting
these systems to make them Year 2000 compliant. The Company believes that the
modification or conversion of these financial systems will be substantially
completed by early 1999.
The Company also employs electronic equipment containing software and
embedded chips in its production and manufacturing systems. The Company's
assessment has indicated that this electronic equipment is not likely to be
susceptible to a material system failure resulting from the Year 2000. Selective
equipment upgrades are currently being implemented where warranted and the
Company believes that it can complete necessary modifications and conversions
without a material impact on the Company.
The Company has completed an assessment of Year 2000 issues associated
with major products that the Company has sold and believes that the Company has
no material exposure related to the Year 2000 for products it has sold.
The Company has initiated communications with significant vendors,
customers and other third party service providers to evaluate whether they are
making adequate efforts to achieve Year 2000 compliance. To date, the Company is
not aware of any third parties with a Year 2000 issue that would materially
impact the Company. However, the Company has no means of ensuring that third
parties will be Year 2000 ready and the effect of non-compliance by third
parties is not determinable by the Company. The Company has material
relationships with the U.S. Government. Year 2000 non-compliance by a U.S.
Government agency, such as the inability to process payments to the Company,
could have a material impact on the Company.
The Company will continue to evaluate the status of its Year 2000
compliance to determine whether a contingency plan is necessary.
The total cost of the Company's internal Year 2000 project is presently
estimated to be less than $1.0 million, which includes the purchase of new
software and equipment which will be capitalized.
The costs of the Company becoming Year 2000 compliant and the timing in
which the Company believes it will complete the necessary Year 2000
modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third party modification plans, and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause
12
<PAGE>
such material differences include, but are not limited to, the success of the
Company in identifying systems and programs having Year 2000 issues, the nature
and amount of programming required to upgrade or replace the affected programs,
the availability and cost of personnel trained in this area, and the extent to
which the company might be adversely impacted by vendors, customers and other
third party service providers failure to remediate their own Year 2000 issues.
Forward-Looking Statements
All statements other than statements of historical fact in this report are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995, and are based on management's current expectations of the
Company's near term results, based on current information available and
pertaining to the Company. The Company assumes no obligation to update publicly
any forward-looking statement. Actual results may differ materially from those
projected in the forward-looking statements. These forward-looking statements
involve risks and uncertainties, including, but not limited to, the following:
demand for commercial powder; international business opportunities; ammunition
lot acceptance; timing of contract funding and continued receipt of
performance-based payments under tank ammunition contracts; changing economic
and political conditions in the United States and in other countries; changes in
governmental laws and regulations surrounding various matters, such as
environmental remediation, contract pricing, and international trading
restrictions; changes in governmental spending and budgetary policies, such as
reductions in the level of defense spending and redirection of Department of
Defense program funding; production and pricing levels of important raw
materials; lower than anticipated levels of plant utilization resulting in
production inefficiencies and higher costs, whether related to the delay of new
product introductions, improved production processes or equipment, or labor
relation issues; difficulties or delays in the development, production, testing
and marketing of products; product margins and customer product acceptance; and
costs and effects of legal and administrative cases, proceedings, settlements
and investigations involving the Company.
PART II. OTHER INFORMATION
- ----------------------------
ITEM 1. LEGAL PROCEEDINGS
- ----------------------------
The Company is engaged primarily in providing products and services under
contracts with the U.S. Government and, to a lesser degree, under foreign
government contracts, some of which are funded by the U.S. Government. All such
contracts are subject to extensive legal and regulatory requirements and, from
time to time, agencies of the U.S. Government review, audit or investigate
whether the Company's operations are being conducted in accordance with these
requirements. If such reviews, audits or investigations were to find
inappropriate activity by the Company, such finding could result in contract
repayments or administrative, civil or criminal liabilities including fines or
penalties being imposed upon the Company, or could lead to suspension or
debarment from future U.S. Government contracting by the Company.
The Company has strict policies requiring its employees to comply with all
applicable legal standards relating to contract procurement and administration.
In addition, the Company requires adherence to high ethical standards by its
employees. The Company has an Ethics and Compliance Program in which each major
facility has an ethics officer who acts as a resource for encouraging and
monitoring compliance with these standards. It is the policy of the Company and
its subsidiaries to cooperate fully with all governmental reviews, audits and
investigations of their affairs.
13
<PAGE>
The Company is a party to a number of pending or threatened
investigations, claims and proceedings. Management believes that all such
investigations, claims and proceedings are routine and incidental to the
Company's business and will not materially adversely affect the Company's
results of operations or financial position.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -------------------------------------------
(a) Exhibits
27. Financial Data Schedule
(b) Reports filed on Form 8-K during this quarter
During the quarterly period ended September 27, 1998, no reports
on Form 8-K were filed by the Company.
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.
PRIMEX TECHNOLOGIES, INC.
(Registrant)
Date: November 5, 1998 /s/ George H. Pain
-------------------------------------
Vice President, General Counsel and
Secretary
Date: November 5, 1998 /s/ John E. Fischer
-------------------------------------
Vice President, Chief Financial and
Accounting Officer
14
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 27, 1998 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDING SEPTEMBER 27,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-27-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 109,230
<ALLOWANCES> 0
<INVENTORY> 53,999
<CURRENT-ASSETS> 171,380
<PP&E> 259,613
<DEPRECIATION> 164,948
<TOTAL-ASSETS> 325,680
<CURRENT-LIABILITIES> 135,021
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0
0
<COMMON> 5,106
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<SALES> 336,072
<TOTAL-REVENUES> 336,072
<CGS> 261,548
<TOTAL-COSTS> 261,548
<OTHER-EXPENSES> 6,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,312
<INCOME-PRETAX> 20,106
<INCOME-TAX> 8,274
<INCOME-CONTINUING> 11,832
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 11,832
<EPS-PRIMARY> 2.30
<EPS-DILUTED> 2.20
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