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 October 1, 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.
(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 31, 2000 there were outstanding 10,401,241 shares of the
registrant's common stock, par value $1.00 per share.
1
<PAGE>
PRIMEX TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
October 1, 2000 and December 31, 1999.................................. 3
Condensed Consolidated Statements of Income -
Three Months Ended October 1, 2000 and September 26, 1999;
Nine Months Ended October 1, 2000 and September 26, 1999............... 4
Condensed Consolidated Statements of Cash Flow -
Nine Months Ended October 1, 2000 and September 26, 1999............... 5
Notes to Condensed Consolidated Financial Statements................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 11
Item 3. Quantitative and Qualitative Disclosure of
Market Risk............................................................ 14
Part II. Other Information
Item 1. Legal Proceedings...................................................... 15
Item 6. Exhibits and Reports on Form 8-K....................................... 15
Signatures............................................................. 15
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRIMEX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
October 1, December 31,
2000 1999
----------- -----------
Assets
Current Assets:
Receivables .................................... $ 134,521 $ 120,351
Inventories, Net ............................... 69,366 57,969
Deferred Tax Asset ............................. 9,370 10,803
Other Current Assets ........................... 6,168 3,106
--------- ---------
Total Current Assets ....................... 219,425 192,229
Property, Plant and Equipment ....................... 295,285 288,025
Less: Accumulated Depreciation ...................... (183,690) (171,075)
--------- ---------
111,595 116,950
Goodwill, Net ....................................... 132,239 113,644
Deferred Income Taxes ............................... 9,510 8,129
Other Assets ........................................ 21,314 19,477
--------- ---------
Total Assets ................................... $ 494,083 $ 450,429
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-Term Borrowings and
Current Portion of Long Tem Debt ............ $ 9,800 $ 10,000
Accounts Payable ............................... 48,118 42,836
Contract Advances .............................. 7,297 524
Accrued Liabilities ............................ 46,446 41,620
--------- ---------
Total Current Liabilities .................. 111,661 94,980
Long-Term Debt ...................................... 155,000 140,000
Other Liabilities ................................... 36,225 34,821
--------- ---------
Total Liabilities .............................. 302,886 269,801
Shareholders' Equity
Common Stock; $1.00 par value; 60,000,000 shares
authorized; issued and outstanding 10,399,907
shares at October 1, 2000 and 9,946,525
shares at December 31, 1999 .................. 10,400 9,946
Other Shareholders' Equity ..................... 180,797 170,682
--------- ---------
Total Shareholders' Equity ................. 191,197 180,628
--------- ---------
Total Liabilities and Shareholders' Equity ..... $ 494,083 $ 450,429
========= =========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ----------------------------
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales ............................ $131,515 $129,837 $365,124 $380,494
Operating Expenses:
Cost of Goods Sold ............ 96,817 96,982 269,648 287,765
Selling and Administration .... 18,135 18,765 51,558 53,363
Research and Development ...... 2,381 2,535 7,476 7,571
Restructuring and Other Charges - - 4,052 -
-------- -------- -------- --------
Operating Income ................. 14,182 11,555 32,390 31,795
Interest Expense ................. 3,350 3,185 9,269 8,742
Other Income, Net ................ 382 292 2,246 936
-------- -------- -------- --------
Income Before Income Taxes ....... 11,214 8,662 25,367 23,989
Income Tax Provision ............. 4,377 3,319 9,897 9,450
-------- -------- -------- --------
Net Income ....................... $ 6,837 $ 5,343 $ 15,470 $ 14,539
======== ======== ======== ========
Net Income Per Share:
Basic ....................... $ 0.65 $ 0.53 $ 1.48 $ 1.44
======== ======== ======== ========
Diluted ..................... $ 0.64 $ 0.50 $ 1.46 $ 1.36
======== ======== ======== ========
Dividends Per Share .............. $ 0.075 $ 0.075 $ 0.225 $ 0.225
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
PRIMEX TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
October 1, September 26,
2000 1999
-------- --------
<S> <C> <C>
Operating Activities
Net Cash Provided by Operating Activities ...... $ 23,574 $ 27,720
Investing Activities
Capital Expenditures ................................ (9,841) (12,467)
Acquisitions of Business ............................ (22,161) (6,940)
-------- --------
Net Cash Used in Investing Activities .......... (32,002) (19,407)
Financing Activities
Net Short-Term Debt Repayment ....................... (5,200) (10,800)
Net Long-Term Debt Borrowing ........................ 20,000 5,000
Repurchases of Common Stock ......................... (239) (3,501)
Restricted Stock Transactions ....................... (3,847) -
Proceeds From Stock Options Exercised ............... 56 61
Dividends Paid ...................................... (2,342) (2,266)
-------- --------
Net Cash Provided (Used) in Financing
Activities ................................ 8,428 (11,506)
-------- --------
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 nine-month periods ended October 1,
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
nine-month periods ended October 1, 2000 and September 26, 1999.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ -----------------------------
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Denominator for basic net income per share:
Weighted average shares
outstanding and vested.................. 10,459,707 10,032,180 10,460,494 10,103,201
Effect of dilutive securities:
Employee Stock Options.................... 243,172 78,707 134,534 73,799
Restricted Stock Unit Grants.............. 12,872 527,567 9,946 506,283
----------- ----------- ----------- -----------
Dilutive potential common shares............. 256,044 606,274 144,480 580,082
----------- ----------- ----------- -----------
Denominator for diluted
net income per share...................... 10,715,751 10,638,454 10,604,974 10,683,283
========== ========== ========== ==========
</TABLE>
6
<PAGE>
PRIMEX TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share data)
(Unaudited)
Inventories
October 1, 2000 December 31, 1999
--------------- -----------------
Inventories consist of the following:
Raw materials and work in
progress .................... $68,026 $56,726
Finished goods ................... 8,113 8,516
------- -------
76,139 65,242
Less revaluation to LIFO ......... 6,773 7,273
------- -------
$69,366 $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,
October 1, 2000 balances reflect certain estimates relating to inventory
quantities and costs at December 31, 2000. Inventory balances at October 1, 2000
and December 31, 1999 are net of reductions for progress payments in the amount
of $6,831 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 $6,837 and $5,343 for the three-month periods and
$15,470 and $14,538 for the nine-month periods ended October 1, 2000 and
September 26, 1999, respectively.
Long-Term Incentive Plan
Under the Primex Technologies, Inc. 2000 Long Term Incentive Plan, a
total of 527,000 and 107,500 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 nine months of 2000, a total of 8,250 restricted stock
units with an aggregate value of $171 were granted to certain employees of the
Company. These restricted stock grants vest over a two-year period.
Stock Repurchase
In August 1998, the board of directors authorized the repurchase, at
management's discretion, of up to 500,000 shares of the Company's common stock.
During the nine month period ended October 1, 2000, the Company purchased and
retired 10,000 shares of common stock at an aggregate cost of $239.
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 nine months
ended October 1, 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 nine months
ended October 1, 2000 were $2,475 of which $1,736 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 costs has been included with "Other Liabilities" on the consolidated
balance sheet at October 1, 2000.
Stockholder's Equity
Restricted stock grants vesting during the first quarter of 2000
resulted in the issuance of 458,421 share 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 activity level of a specific contract. Operations of
the acquired business, which has been accounted for using the purchase method of
accounting, are 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 the period of thirty years. The Company's
pro forma operating results, assuming this acquisition has been made at the
beginning of the year, would not be materially different from reported operating
results.
8
<PAGE>
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 Nine Months Ended
--------------------------- ----------------------------
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales to external customers:
Ordnance ...................... $106,959 $104,335 $297,710 $304,284
Aerospace ..................... 24,556 25,502 67,414 76,210
-------- -------- -------- --------
Total consolidated sales ......... 131,515 129,837 365,124 380,494
Segment profit:
Ordnance ...................... 10,076 7,596 23,271 20,089
Aerospace ..................... 1,138 1,066 6,148 3,900
-------- -------- -------- --------
Total segment profit ............. 11,214 8,662 29,419 23,989
Reconciling item:
Restructuring and Other
Charges ..................... - - 4,052 -
-------- -------- -------- --------
Total consolidated income before
income taxes ................ $ 11,214 $ 8,662 $ 25,367 $ 23,989
======== ======== ======== ========
</TABLE>
9
<PAGE>
PRIMEX TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share data)
(Unaudited)
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting of Derivative Instruments and Hedging Activities ("Statement
No. 133"), which as amended, is required to be adopted by the Company effective
January 1, 2001. Statement No. 133 will require the Company to recognize all
derivatives on the balance sheet at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivatives and whether it qualifies for hedge accounting.
Historically, the Company has engaged in limited hedging activities to reduce
exposure to exchange risks arising from fluctuations in foreign currency and
uses interest rate swap agreements to fix interest rates on a portion of its
variable rate debt and reduce certain exposures to interest rate fluctuations.
Based on the Company's derivative positions at October 1, 2000, the Company does
not anticipate that the adoption of Statement No. 133 will have a significant
effect on its results of operations or financial position.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB 101"), which as amended, becomes effective for the Company in the fourth
quarter of 2000. SAB 101 summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The Company believes its existing revenue recognition policies and
procedures are in compliance with SAB 101 and therefore does not anticipate the
adoption of SAB 101 will have a significant effect on its results of operations
or financial position.
10
<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
Income for the three-month and nine-month periods ended October 1, 2000 and
September 26, 1999.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ -----------------------------
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales:
Tank and other large caliber
ammunition......................... 30.5% 32.1% 29.5% 31.2%
Tactical missile and rocket components
and services....................... 17.6% 13.5% 17.0% 15.5%
Medium caliber ammunition............... 14.9% 12.7% 13.2% 13.7%
Ball Powder(R) propellant............... 9.5% 8.7% 10.3% 8.8%
Electronic products..................... 7.9% 9.0% 8.2% 9.8%
Space products.......................... 6.9% 5.6% 6.4% 5.5%
Other products and services............. 12.7% 18.4% 15.4% 15.5%
------- ------- ------- -------
100.0% 100.0% 100.0% 100.0%
Cost of goods sold........................... 73.6% 74.7% 73.9% 75.6%
------- ------- ------- -------
Gross profit................................. 26.4% 25.3% 26.1% 24.4%
Selling and administration expense........... 13.8% 14.5% 14.1% 14.0%
Research and development expense............. 1.8% 1.9% 2.0% 2.0%
Restructuring and other charges.............. - % - % 1.1% - %
-------- ------- ------- -------
Operating income............................. 10.8% 8.9% 8.9% 8.4%
Interest expense............................. 2.5% 2.5% 2.5% 2.3%
Other income................................. 0.2% 0.2% 0.5% 0.2%
------- ------- ------- -------
Income before income taxes................... 8.5% 6.6% 6.9% 6.3%
Income tax provision......................... 3.3% 2.7% 2.7% 2.5%
------- ------ ------ -------
Net income................................... 5.2% 3.9% 4.2% 3.8%
======= ====== ====== =======
</TABLE>
Results of Operations
The Company's sales of $131.5 million during the third quarter of 2000
increased by $1.7 million or 1% compared to the third quarter of 1999. Sales of
$365.1 million for the first nine months of 2000 were 4% or $15.4 million lower
than the corresponding period in 1999.
Third quarter 2000 Ordnance segment sales increased to $107.0 million
compared to $104.3 million in the corresponding period of 1999. This increase
reflects higher sales of tactical missile and rocket components and medium
caliber ammunition to the U.S. Army. Ordnance segment sales increases in the
third quarter of 2000 were partially offset by decreased sales of tactical tank
ammunition sold to the U.S. Army.
Third quarter Aerospace segment sales decreased to $24.6 million
compared to $25.5 million in the corresponding period of 1999. This decrease
primarily reflects a lower level of electronic test system sales to the U.S. Air
Force under a contract that was completed during 1999,
11
<PAGE>
partially offset by bi-propellant rocket engine sales associated with a business
that was acquired during the second quarter of 2000.
Ordnance segment sales for the first nine months of 2000 decreased to
$297.7 million compared to $304.3 million in the corresponding period of 1999.
This decrease reflects lower sales of tactical tank and medium caliber
ammunition to the U.S. Army, which was offset in part by increases in sales of
propellant and tactical missile and rocket components during the first nine
months of 2000.
Aerospace segment sales for the first nine months of 2000 decreased to
$67.4 million compared to $76.2 million in the corresponding period of 1999.
This decrease primarily reflects a lower level of electronic test system sales
to the U.S. Air Force under a contract that was completed during 1999, partially
offset by bi-propellant rocket engine sales associated with a business that was
acquired during the second quarter of 2000.
Gross margins as a percentage of sales increased to 26% during the
third quarter of 2000 from 25% for the corresponding period of 1999. For the
first nine months of 2000, gross margins as a percentage of sales increased to
26% compared to 24% during the first nine months of 1999. The gross margin
improvement for the first nine months of 2000, compared to 1999, reflects a
combination of improved program performance in both the large and medium caliber
ammunition business units, the benefit of a higher volume of propellant
production and 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 decreased
to 14% during third quarter of 2000 compared to 15% in the corresponding period
of 1999. Selling and administration expenses for the first nine months of both
2000 and 1999 were 14% of sales. The overall $1.8 million reduction in selling
and administration expense during the first nine months of 2000, compared to the
corresponding period of 1999, is directly associated with decreased spending and
restructuring activities commenced in the first quarter of 2000, partially
offset by increases associated with a business acquired during the second
quarter of 2000.
Research and development expenses, during both the third quarter and
first nine 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 from such
restructuring. The resulting restructuring charge of $3.5 million included in
operating results for the nine months ended October 1, 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 pre-tax
charge of $0.6 million for potential environmental liability at a Superfund
site.
12
<PAGE>
Interest expense of $3.4 million for the third quarter of 2000 and $9.3
million for the first nine months of 2000 compared to $3.2 million and $8.7
million, respectively, for the corresponding periods of 1999 reflect the higher
cost of borrowing currently being experienced by the Company.
Non-operating income for the first nine 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 nine months
of 1999.
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 $6.8 million for the third quarter and $17.9 million
(excluding the $2.4 million after tax effect of restructuring and other
non-recurring charges) for the first nine months of 2000 reflect an increase of
$1.5 million and $3.4 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 $23.6 million during the first
nine months of 2000 compared to $27.7 million during the first nine months of
1999.
Investing activities during the first nine months of 2000 reflect a
decrease in planned capital expenditures to $9.8 million from $12.5 million
during the first nine months 1999. Additionally, investing activities during the
first nine months of 2000 and 1999 included expenditures of $22.2 and $6.9,
respectively, for the acquisition of new product lines.
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 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 nine 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 nine months of 2000 and
1999, the Company repurchased and retired 10,000 and 173,858 shares,
respectively, of its common stock at an aggregate cost of $0.2 and $3.5 million,
respectively.
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
October 1, 2000 were $104.8.
13
<PAGE>
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 requirements of the
RCA and Term Notes. Under the terms of these financial covenants the Company has
up to an additional $55.2 million available for borrowings at October 1, 2000.
Cash dividends of $0.075 per share were paid during the first, second
and third quarters of both 2000 and 1999.
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 nine months ended October 1, 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.
14
<PAGE>
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.
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 October 1, 2000, the Company
filed no reports on Form 8-K.
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 2, 2000 /s/ George H. Pain
------------------------------------------
Vice President, General Counsel and
Secretary
Date: November 2, 2000 /s/ John E. Fischer
------------------------------------------
Vice President, Chief Financial and
Accounting Officer
15
