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 July 2, 2000
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.
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(Exact name of registrant as specified in its charter)
VIRGINIA 06-1458069
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10101 NINTH STREET NORTH, ST. PETERSBURG, FLORIDA 33716-3807
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(Address of principal executive offices) (Zip Code)
(727) 578-8100
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(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
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As of July 31, 2000, there were outstanding 10,409,907 shares of the
registrant's common stock, par value $1.00 per share.
<PAGE>
PRIMEX TECHNOLOGIES, INC.
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
July 2, 2000 and December 31, 1999....................3
Condensed Consolidated Statements of Operations -
Three Months Ended July 2, 2000 and June 27, 1999;
Six Months Ended July 2, 2000 and June 27, 1999 ......4
Condensed Consolidated Statements of Cash Flow -
Six Months Ended July 2, 2000 and June 27, 1999.......5
Notes to Condensed Consolidated Financial Statements..6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........10
Item 3. Quantitative and Qualitative Disclosure of
Market Risk...........................................13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.....................................13
Item 4. Submission of Matters to a Vote of Security Holders...14
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
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JULY 2, DECEMBER 31,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS (UNAUDITED)
------
Current Assets:
Receivables .................................... $ 118,145 $ 120,351
Inventories, Net ............................... 72,772 57,969
Deferred Tax Asset ............................. 9,150 10,803
Other Current Assets ........................... 6,925 3,106
--------- ---------
Total Current Assets ........................ 206,992 192,229
Property, Plant and Equipment ....................... 291,369 288,025
Less: Accumulated Depreciation ...................... (178,843) (171,075)
--------- ---------
112,526 116,950
Goodwill, Net ....................................... 133,546 113,644
Deferred Income Taxes ............................... 8,900 8,129
Other Assets ........................................ 19,827 19,477
--------- ---------
Total Assets ................................... $ 481,791 $ 450,429
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-Term Borrowings and
Current Portion of Long Term Debt ............ $ 5,300 $ 10,000
Accounts Payable ............................... 33,311 42,836
Contract Advances .............................. 6,599 524
Accrued Liabilities ............................ 45,196 41,620
--------- ---------
Total Current Liabilities .................. 90,406 94,980
Long-Term Debt ...................................... 170,000 140,000
Other Liabilities ................................... 36,059 34,821
--------- ---------
Total Liabilities .............................. 296,465 269,801
Shareholders' Equity
Common Stock; $1.00 par value; 60,000,000 shares
authorized; issued and outstanding 10,409,907
shares at July 2, 2000 and 9,946,525
shares at December 31, 1999 .................. 10,410 9,946
Other Shareholders' Equity ..................... 174,916 170,682
--------- ---------
Total Shareholders' Equity ................. 185,326 180,628
--------- ---------
Total Liabilities and Shareholders' Equity ..... $ 481,791 $ 450,429
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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PRIMEX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ----------------------
JULY 2, JUNE 27, JULY 2, JUNE 27,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales ................................. $123,125 $133,285 $233,609 $250,657
Operating Expenses:
Cost of Goods Sold ................. 91,280 102,063 172,831 190,783
Selling and Administration ......... 17,154 17,307 33,423 34,598
Research and Development ........... 2,766 2,927 5,095 5,036
Restructuring and Other Charges .... -- -- 4,052 --
-------- -------- -------- --------
Operating Income ...................... 11,925 10,988 18,208 20,240
Interest Expense ...................... 2,965 2,854 5,919 5,557
Other Income, Net ..................... 352 329 1,864 644
-------- -------- -------- --------
Income Before Income Taxes ............ 9,312 8,463 14,153 15,327
Income Tax Provision .................. 3,632 3,321 5,520 6,131
-------- -------- -------- --------
Net Income ............................ $ 5,680 $ 5,142 $ 8,633 $ 9,196
======== ======== ======== ========
Net Income Per Share:
Basic ............................ $ 0.54 $ 0.51 $ 0.83 $ 0.91
======== ======== ======== ========
Diluted .......................... $ 0.54 $ 0.48 $ 0.82 $ 0.86
======== ======== ======== ========
Dividends Per Share ................... $ 0.075 $ 0.075 $ 0.15 $ 0.15
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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PRIMEX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS, EXCEPT SHARE DATE)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
JULY 2, JUNE 27,
2000 1999
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<S> <C> <C>
OPERATING ACTIVITIES
Net Cash Provided by Operating Activities ........... $ 7,903 $ 17,598
INVESTING ACTIVITIES
Capital Expenditures ..................................... (5,690) (8,795)
Acquisition of Business .................................. (22,161) (440)
-------- --------
Net Cash Used in Investing Activities ............... (27,851) (9,235)
FINANCING ACTIVITIES
Net Short-Term Borrowing (Repayment) ..................... (9,700) 3,400
Net Long-Term Debt Borrowing (Repayment) ................. 35,000 (10,000)
Repurchases of Common Stock .............................. -- (3,501)
Restricted Stock Transactions ............................ (3,847) --
Proceeds From Stock Options Exercised .................... 56 61
Dividends Paid ........................................... (1,561) (1,516)
-------- --------
Net Cash Provided (Used) in Financing Activities .... 19,948 (11,556)
-------- --------
Net Increase (Decrease) in Cash .......................... $ -- $ (3,193)
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(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 six-month periods ended July 2, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements, and
notes thereto, for the year ended December 31, 1999, as presented in the
Company's Annual Report on Form 10-K.
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
six-month periods ended July 2, 2000 and June 27, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
JULY 2, JUNE 27, JULY 2, JUNE 27,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Denominator for basic net income per share:
Weighted average shares
outstanding and vested .................... 10,462,784 10,077,219 10,460,887 10,138,712
Effect of dilutive securities:
Employee Stock Options ...................... 75,109 59,789 80,216 71,345
Restricted Stock Unit Grants ................ 9,648 509,122 8,483 495,641
---------- ---------- ---------- ----------
Dilutive potential common shares ............... 84,757 568,911 88,699 566,986
---------- ---------- ---------- ----------
Denominator for diluted net
income per share ............................ 10,547,541 10,646,130 10,549,586 10,705,698
========== ========== ========== ==========
</TABLE>
6
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PRIMEX TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
INVENTORIES
JULY 2, 2000 DECEMBER 31, 1999
------------ -----------------
Inventories consist of the following:
Raw materials and work in progress .... $71,909 $56,726
Finished goods ........................ 8,136 8,516
------- -------
80,045 65,242
Less revaluation to LIFO .............. 7,273 7,273
------- -------
$72,772 $57,969
======= =======
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, July
2, 2000 balances reflect certain estimates relating to inventory quantities and
costs at December 31, 2000. Inventory balances at July 2, 2000 and December 31,
1999 are net of reductions for progress payments in the amount of $595 and
$5,283, respectively.
COMPREHENSIVE INCOME
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 $5,680 and $5,139 for the three-month periods and $8,633 and $9,195 for
the six-month periods ended July 2, 2000 and June 27, 1999, respectively.
LONG-TERM INCENTIVE PLAN
Under the Primex Technologies, Inc. 2000 Long Term Incentive Plan, a total
of 527,000 and 97,750 stock options were granted to certain key employees on
February 1, and May 2, 2000, respectively, at exercise prices of $20.94 and
$22.00 per share, respectively, which was the fair market value of the Company's
common stock on the date of the grants. These options generally vest over a
three-year period beginning one year from the date of grant and have a ten-year
term from the date of grant.
During the first six months of 2000, 8,250 restricted stock units with an
aggregate value of $171 were granted to certain employees of the Company. This
restricted stock grant vests over a two-year period.
7
<PAGE>
PRIMEX TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
RESTRUCTURING AND OTHER CHARGES
In January 2000, the Company announced a plan to reduce costs and
streamline its operating structure, which resulted in the Company recording a
one-time pre-tax restructuring charge of $4,052 during the first quarter of
2000. During the second quarter of 2000, the Company recognized a restructuring
credit of $600 to reflect estimated reductions in the ultimate cost of employee
termination benefits resulting from such restructuring. The resulting
restructuring charge of $3,452 included in operating results for the six months
ended July 2, 2000 includes approximately $3,307 of cash charges, of which
$2,528 relates to employee termination benefits and other personnel-related
costs. The balance of the charge is generally associated with facility
consolidation costs. Total restructuring cash outlays during the six months
ended July 2, 2000 were $2,181, of which $1,474 was related to workforce
reductions. The Company anticipates substantial completion of this restructuring
during 2000.
During the second quarter of 2000, the Company recognized a pre-tax charge
of $600 for potential environmental liability at a Superfund site. This
estimated cost has been included with "Other Liabilities" on the consolidated
balance sheet at July 2, 2000.
STOCKHOLDER'S EQUITY
Restricted stock grants vesting during the first quarter of 2000 resulted
in the issuance of 458,421 shares of common stock. The value of shares withheld
from issuance to satisfy minimum tax withholdings of $3,847 was charged to
additional paid-in capital and the tax benefit resulting from the differences
between compensation expense for financial statement and corporate income tax
purposes of $1,288 was credited to additional paid-in-capital.
ACQUISITION
Effective May 27, 2000, the Company acquired certain assets and assumed
certain liabilities of the Kaiser Marquardt, Inc. bi-propellant rocket engine
and turbo-products business. The purchase price for the acquired business was
$22,161 ($21,406 in cash and $755 of transaction costs). The terms of the Asset
Purchase Agreement ("APA") provide for the payment of $2,500 in additional
consideration (placed in escrow at closing) contingent on certain future events.
The APA further provides for additional contingent payments or receipts of up to
$900 based on the future performance of a specific contract. Operations of the
acquired business, which has been accounted for using the purchase method of
accounting, is included in the Company's results of operations and financial
position subsequent to the date of acquisition. The aggregate purchase price,
excluding future contingent consideration, has been allocated to the net assets
of the acquired business based upon their respective fair market values. Future
contingent consideration will be recorded as additional purchase price when
paid. Goodwill is being amortized over a period of thirty years. The Company's
pro forma operating results, assuming this acquisition had been made at the
beginning of the year, would not be materially different from reported operating
results.
8
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PRIMEX TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
SEGMENT INFORMATION
The Company's operations are classified into two reportable segments, which
reflect management's organization of operations around business units that offer
different products and services. Each reportable segment is managed separately
and requires different technology and marketing strategies. The Ordnance and
Tactical Systems segment ("Ordnance") includes the development and production of
ammunition, propellant, shaped charged warheads and precision metal assemblies.
Additionally, Ordnance provides explosive load assemble and pack services. The
Aerospace and Electronics segment ("Aerospace") includes the design, development
and manufacturing of space, electronic, and solid propellant products and
systems.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ -------------------------
JULY 2, JUNE 27, JULY 2, JUNE 27,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales to external customers:
Ordnance ...................................... $ 99,740 $ 106,093 $ 190,751 $ 199,949
Aerospace ..................................... 23,385 27,192 42,858 50,708
--------- --------- --------- ---------
Total consolidated sales ........................... 123,125 133,285 233,609 250,657
Segment profit:
Ordnance ...................................... 7,234 6,795 13,195 12,493
Aerospace ..................................... 2,078 1,668 5,010 2,834
--------- --------- --------- ---------
Total segment profit ............................... 9,312 8,463 18,205 15,327
Reconciling item:
Restructuring and other charges ............... -- -- (4,052) --
--------- --------- --------- ---------
Total consolidated income before income taxes ...... $ 9,312 $ 8,463 $ 14,153 $ 15,327
========= ========= ========= =========
</TABLE>
9
<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-month and six-month periods ended July 2, 2000 and June 27, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- -------------------
JULY 2, JUNE 27, JULY 2, JUNE 27,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales:
Tank and other large caliber ammunition ................ 27.6% 29.2% 28.8% 30.7%
Tactical missile and rocket components and services .... 19.9% 19.1% 18.6% 18.6%
Medium caliber ammunition .............................. 13.3% 15.9% 12.3% 14.3%
Ball Powder(R) propellant .............................. 10.3% 9.1% 10.8% 8.9%
Electronic products .................................... 8.2% 9.9% 8.4% 10.3%
Space products ......................................... 7.5% 5.7% 6.1% 5.4%
Other products and services ............................ 13.2% 11.1% 15.0% 11.8%
------- ------- ------- -------
100.0% 100.0% 100.0% 100.0%
Cost of goods sold .......................................... 74.1% 76.6% 74.0% 76.1%
------- ------- ------- -------
Gross profit ................................................ 25.9% 23.4% 26.0% 23.9%
Selling and administration expense .......................... 13.9% 13.0% 14.3% 13.8%
Research and development expense ............................ 2.3% 2.2% 2.2% 2.0%
Restructuring and other charges ............................. -- -- 1.7% --
------- ------- ------- -------
Operating income ............................................ 9.7% 8.2% 7.8% 8.1%
Interest expense ............................................ 2.4% 2.1% 2.5% 2.2%
Other income ................................................ 0.3% 0.2% 0.8% 0.2%
------- ------- ------- -------
Income before income taxes .................................. 7.6% 6.3% 6.1% 6.1%
Income tax provision ........................................ 3.0% 2.4% 2.4% 2.4%
------- ------- ------- -------
Net income .................................................. 4.6% 3.9% 3.7% 3.7%
======= ======= ======= =======
</TABLE>
RESULTS OF OPERATIONS
The Company's sales of $123.1 million during the second quarter of 2000
decreased by $10.2 million or 8% compared to the second quarter of 1999. Sales
of $233.6 million for the first six months of 2000 were 7% or $17.0 million
lower than the corresponding period in 1999.
Second quarter 2000 Ordnance segment sales decreased to $99.7 million
compared to $106.1 million in the corresponding period of 1999. This decrease
reflects lower sales of tactical tank ammunition and medium caliber ammunition
to the U.S. Army. Ordnance segment sales decreases in the second quarter of 2000
were partially offset by increased sales of tactical tank ammunition to
international customers and increases in the sales of other products and
services.
Second quarter Aerospace segment sales decreased to $23.4 million compared
to $27.2 million in the corresponding period of 1999. This decrease primarily
reflects a lower level of electronic system product sales related to a U.S. Air
Force contract that was completed during 1999. Aerospace segment sales decreases
in the second quarter of 2000, were partially offset by bi-propellant rocket
engine sales associated with a business that was acquired during the quarter.
10
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Ordnance segment sales for the first six months of 2000 decreased to $190.8
million compared to $199.9 million in the corresponding period of 1999. This
decrease reflects lower sales of large and medium caliber ammunition to the U.S.
Army. This decrease was offset in part by increases in sales of propellant and
other products and services during the first six months of 2000.
Aerospace segment sales for the first six months of 2000 decreased to $42.9
million compared to $50.7 million in the corresponding period of 1999. This
decrease primarily reflects a lower level of electronic system product sales
related to a U.S. Air Force contract that was completed during 1999.
Gross margins as a percentage of sales increased to 26% during the second
quarter of 2000 from 23% for the corresponding period of 1999. For the first six
months of 2000, gross margins as a percentage of sales increased to 26% compared
to 24% during the first six months of 1999. The gross margin improvement for the
first six months of 2000, compared to 1999, reflects a combination of improved
program performance in both the large and medium caliber ammunition business
units as well as operational improvements associated with the Company's
restructuring activities that commenced during the first quarter of 2000.
Selling and administration expense as a percentage of sales increased to
14% during both the second quarter and first six months of 2000 compared to 13%
and 14%, respectively, for the corresponding periods of 1999. The percentage
increase during the second quarter of 2000 compared to the corresponding period
of 1999 is directly associated with the sales decrease during that period.
Research and development expenses, during both the second quarter and first
six months of 2000, were comparable to the corresponding periods of 1999.
In January 2000, the Company announced a plan to reduce costs and
streamline its operating structure, which resulted in the Company recording a
one-time pre-tax restructuring charge of $4.1 million during the first quarter
of 2000. During the second quarter of 2000 the Company recognized a
restructuring credit of $0.6 million to reflect estimated reductions in the
ultimate cost of employee termination benefits resulting form such
restructuring. The resulting restructuring charge of $3.5 million included in
operating results for the six months ended July 2, 2000 includes approximately
$3.3 million of cash charges, of which $2.5 million relates to employee
termination benefits and other personnel-related costs. The balance of the
charge is generally associated with facility consolidation costs.
During the second quarter of 2000, the Company recognized a pretax charge
of $0.6 million for potential environmental liability at a Superfund site.
Interest expense of $3.0 million for the second quarter of 2000 and $5.9
million for the first six months of 2000 compared to $2.9 million and $5.6
million, respectively, for the corresponding period of 1999 reflect the higher
cost of borrowing currently being experienced by the Company.
Non-operating income for the first six months of 2000 includes $1.2 million
of non-recurring fees received in connection with the licensing of product
technology. There was no comparable income during the first six months of 1999.
11
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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 $5.7 million for the second quarter and $11.0 million
(excluding the $2.4 million after tax effect of restructuring and other
non-recurring charges) for the first six months of 2000 reflect an increase of
$0.5 million and $1.8 million, respectively, over the corresponding periods of
1999. This improvement is primarily due to higher gross margins and lower
selling and administration expense offset by increased financing costs.
LIQUIDITY AND SOURCES OF CAPITAL
Cash flow provided by operations was $7.9 million during the first six
months of 2000 compared to $17.6 million during the first six months of 1999.
Investing activities during the first six months of 2000 reflect a decrease
in planned capital expenditures to $5.7 million from $8.8 million during the
first six months 1999. Additionally, investing activities during the first six
months of 1999 included an expenditure of $0.4 for the acquisition of a new
product line.
Effective May 27, 2000, the Company acquired the certain assets and assumed
certain liabilities of the Kaiser Marquardt, Inc. bi-propellant rocket engine
and turbo-products business for $21.4 million cash plus additional payments of
up to $3.4 million that are contingent on certain future events. Operations of
the acquired business, accounted for using the purchase method of accounting,
are included in the Company's results of operations and financial position in
periods subsequent to the acquisition date.
Financing activities during the first six months of 2000 included the
payment of $3.8 million in minimum tax withholdings in connection with the
vesting of restricted stock grants. During the first six months of 1999, the
Company repurchased and retired 173,858 shares of its common stock at an
aggregate cost of $3.5 million. There were no comparable expenditures during the
first six months of 2000.
Cash dividends of $0.075 per share were paid during both the first and
second quarters of both 2000 and 1999.
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. To
facilitate short-term borrowing flexibility, certain RCA participating banks
have agreed to provide the Company uncommitted and unsecured short-term lines of
credit at interest rates similar to those under the RCA. Aggregate borrowings
under the RCA and short-term credit lines are limited to the committed RCA
maximum. Outstanding borrowings under the RCA and short-term credit lines at
July 2, 2000 were $115.3.
The Company's RCA and 7.5% Senior Notes ("Term Notes") both contain a
number of financial covenants including requirements 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
contain certain minimum net worth requirements. Management believes that the
Company is currently in compliance with all covenants and
12
<PAGE>
requirements of the RCA and Term Notes. Under the terms of these financial
covenants the Company has up to an additional $38.0 million available for
borrowings at July 2, 2000.
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 and short-term credit lines are adequate to
meet the Company's anticipated cash requirements in the foreseeable future.
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; 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; unforeseen difficulties
associated with the integration of acquired businesses; and costs and effects of
legal and administrative cases, proceedings, settlements and investigations
involving the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
There have been no material changes in the Company's market risk during the
six months ended July 2, 2000. Refer to page 18 of the Company's Annual Report
on Form 10-K for the year ended December 31, 1999, for additional information
regarding market risk and risk management policies.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to a number of pending or threatened investigations,
claims and proceedings. The Company believes that all such investigations,
claims, and proceedings are immaterial to the Company or routine and incidental
to the Company's business. While the Company cannot predict the ultimate outcome
of the pending or threatened proceedings, including matters arising under
provisions relating to the protection of the environment, it does not believe
that the consequences will be materially adverse to its results of operation or
financial position or that the Company's liability with respect thereto will
exceed the amounts which have previously been charged to operations.
13
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 2, 2000, the Company held its Annual Meeting of Shareholders (the
"Annual Meeting"). The matters submitted to a vote by the shareholders were the
election of two directors, and the appointment of independent accountants for
the Company.
Votes cast for or withheld regarding the election of two directors were as
follows:
FOR WITHHELD
--- --------
Robert H. Rau - Term expiring 2003 ...................... 8,294,712 135,612
Leon E. Salomon - Term expiring 2003 .................... 8,244,573 185,751
There were no broker non-votes.
The foregoing represents two of the Company's eight Directors. The other
six directors, whose terms of office as directors continued after the Annual
Meeting, are as follows:
TERM EXPIRING IN 2001 TERM EXPIRING IN 2002
--------------------- ---------------------
J. Douglas DeMaire James G. Hascall
Bob Martinez David Lasky
Anthony W. Ruggiero William B. Mitchell
At the Annual Meeting, the shareholders also ratified the appointment of
Ernst & Young LLP as independent public accountants for the Company. The holders
of 8,341,640 shares of common stock voted in favor; 53,590 voted against; 35,094
abstained from voting. There were no broker non-votes.
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 July 2, 2000, 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: August 7, 2000 /s/ GEORGE H. PAIN
-----------------------------------
Vice President, General Counsel and
Secretary
Date: August 7, 2000 /s/ JOHN E. FISCHER
-----------------------------------
Vice President, Chief Financial and
Accounting Officer
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