<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 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 MARCH 31, 1996
--------------
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 1-5483
WHITEHALL CORPORATION
---------------------
(Exact name of registrant as specified in its charter)
DELAWARE 41-0838460
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2659 NOVA DRIVE, DALLAS, TEXAS
Mailing Address: P.O. Box 29709, Dallas, Texas 75229
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 214-247-8747
------------
N/A
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
----- -----
Number of shares outstanding of each of the issuer's classes of common stock,
as of March 31, 1996
--------------
Common Stock, $0.10 par value: 2,741,300
---------
<PAGE> 2
INDEX
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1996
WHITEHALL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 . . . . . . . 1
Condensed Consolidated Statements of Operations
Three months ended March 31, 1996 and 1995 . . . . 2
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995 . . . . 3
Notes to Condensed Consolidated Financial Statements
March 31, 1996 . . . . . . . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 7
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 8
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
WHITEHALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
- ------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,736,000 $ 7,382,000
Accounts receivable, net 22,169,000 17,397,000
Inventories:
Finished products 2,601,000 2,849,000
Products in process 578,000 75,000
Materials and supplies 4,947,000 4,213,000
------------ ------------
8,126,000 7,137,000
Prepaid expenses and other 566,000 397,000
------------ ------------
TOTAL CURRENT ASSETS 35,597,000 32,313,000
PROPERTY, PLANT AND EQUIPMENT 25,733,000 25,181,000
Less allowances for depreciation and amortization (18,557,000) (18,312,000)
------------ ------------
7,176,000 6,869,000
NOTES RECEIVABLE 2,000,000 2,000,000
------------ ------------
TOTAL ASSETS $ 44,773,000 $ 41,182,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 12,055,000 $ 9,104,000
Accrued environmental costs 573,000 625,000
Federal income tax liability 573,000 1,186,000
------------ ------------
TOTAL CURRENT LIABILITIES 13,201,000 10,915,000
NON-CURRENT LIABILITIES 152,000 168,000
SHAREHOLDERS' EQUITY
Common stock, $.10 par value:
Authorized shares - 5,000,000
Issued shares (1996 - 3,821,956; 1995 - 3,800,556) 382,000 380,000
Additional paid-in capital 1,616,000 1,360,000
Retained earnings 45,567,000 44,504,000
------------ ------------
47,565,000 46,244,000
Less treasury shares at cost
(1996 and 1995- 1,080,656) (16,145,000) (16,145,000)
------------ ------------
31,420,000 30,099,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 44,773,000 $ 41,182,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
WHITEHALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - (UNAUDITED)
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net Sales
Products $ 2,513,000 $ 3,887,000
Services 17,674,000 10,412,000
------------ ------------
20,187,000 14,299,000
Cost of Sales
Products 1,947,000 3,172,000
Services 15,148,000 9,299,000
------------ ------------
17,095,000 12,471,000
------------ ------------
GROSS PROFIT 3,092,000 1,828,000
Operating expenses:
Selling, general and administrative 1,497,000 1,258,000
Research and development 37,000 4,000
------------ ------------
Total operating expenses 1,534,000 1,262,000
INCOME FROM OPERATIONS 1,558,000 566,000
Other income, net 52,000 189,000
------------ ------------
INCOME BEFORE INCOME TAXES 1,610,000 755,000
Income tax (547,000) (187,000)
------------ ------------
NET INCOME $ 1,063,000 $ 568,000
============ ============
NET INCOME PER SHARE $0.37 $0.21
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
WHITEHALL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
<TABLE>
<CAPTION>
For the
Three Months Ended
March 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,063,000 $ 568,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 245,000 259,000
Gain on sale of fixed assets 0 (290,000)
Accounts receivable, net (4,772,000) (3,769,000)
Inventories (989,000) 5,000
Prepaid expenses and other (169,000) 80,000
Accounts payable and accrued liabilities 2,338,000 3,304,000
Accrued environmental costs (52,000) (170,000)
Non-current liabilities (16,000) 240,000
------------ ------------
Total adjustments (3,415,000) (341,000)
------------ ------------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (2,352,000) 227,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (552,000) (580,000)
Notes receivable 0 (921,000)
Proceeds from sale of fixed assets 0 374,000
------------ ------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (552,000) (1,127,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock from exercise of stock options 258,000 12,000
------------ ------------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 258,000 12,000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,646,000) (888,000)
------------ ------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 7,382,000 $ 9,456,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,736,000 $ 8,568,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
WHITEHALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
MARCH 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
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. 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 month
period ending March 31, 1996, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995.
NOTE B - NOTES RECEIVABLE
During 1994, the Company obtained 40% ownership of a joint venture
involved in the development of aircraft- related technology and advanced the
venture $2 million. The Company obtained a promissory note for the advance. The
principal balance of the promissory note accrues interest at a maximum rate of
5%, and the principal balance together with accrued interest are due January 5,
1999. The note is secured by certain assets of the joint venture. During 1995
the Company advanced the joint venture an additional $1,020,000. This amount is
included in accounts receivable.
NOTE C - COMMITMENTS AND CONTINGENCIES
On May 10, 1991, an action was filed in the District Court of Dallas
County, Texas, by Lee D. Webster, former Chairman, Chief Executive Officer and
President of Whitehall, against the Company, each of its directors (other than
Mr. Webster) and Cambridge Capital Fund, L.P., alleging, among other things,
that (i) the defendants' actions, both individually and in concert, constituted
willful interference with Mr. Webster's employment relationship with the
Company and were the direct cause of Mr. Webster's termination as its President
and Chairman of the Board, and (ii) the defendants' actions forced Mr. Webster
into retirement without providing Mr. Webster with retirement benefits which
Mr. Webster was purportedly promised. On August 17, 1994, the defendants were
granted a partial summary judgment. On October 24, 1994, Mr. Webster filed a
third amended petition and alleged the following causes of action: tortious
interference with contractual relations against Cambridge Capital Fund, L.P.,
and directors George F. Baker and John J. McAtee; intentional infliction of
emotional distress; and breach of oral contracts. The third amended petition
sought compensatory and punitive damages in excess of $35 million. On January
12, 1995, the Court entered an abatement on one of the breach of oral contract
claims against the Company and entered a summary judgment in the defendants'
favor on all remaining claims alleged by Mr. Webster. On February 26, 1996, the
Court granted a summary judgment in favor of the defendants on Mr. Webster's
remaining claim and entered a take nothing final judgment which dismissed all
of Mr. Webster's claims with prejudice to refiling. On March 26, 1996, Mr.
Webster appealed the final judgment to the Dallas Court of Appeals. Management
intends to vigorously defend the appeal.
On September 22, 1992, Mr. Webster filed an action in the District Court
of Dallas County, Texas, against First City, Texas-Dallas ("First City"), the
Company and a former employee of the Company. As receiver for First City, the
Federal Deposit Insurance Corporation has intervened and removed this case to
the U.S. District Court for the Northern District of Texas. The petition
alleged, among other things, that ( i ) the Company interfered with Mr.
Webster's existing and prospective contractual relationship with the former
employee and First City, a national
4
<PAGE> 7
NOTE C - COMMITMENTS AND CONTINGENCIES - (CONTINUED)
banking institution; (ii) the Company has converted to its own use the former
employee's Company stock which allegedly was owned by Mr. Webster; (iii) the
Company, First City and the former employee conspired to commit fraud against
Mr. Webster; and (iv) the actions of the Company, First City, and the former
employee were intentionally done to cause Mr. Webster emotional distress. The
petition sought, among other things, not less than $1 million in compensatory
damages, not less than $5 million in exemplary damages and not less than $1
million as damages for emotional distress. By orders dated June 2, 1994 and
June 20, 1994, the Company was granted a summary judgment on all claims alleged
by Mr. Webster. On July 31, 1995, the Court entered a final judgment disposing
of all claims alleged against all parties. Mr. Webster has appealed the final
judgment to the United States Court of Appeals for the Fifth Circuit.
Management intends to vigorously defend the appeal.
Aero is taking remedial action pursuant to Environmental Protection Agency
("EPA") regulations at the Lake City, Florida facility. The Company does not
anticipate any material direct effects upon the capital expenditures, earnings
and competitive position of the Company from compliance with present Federal,
State and local provisions which have been enacted or adopted regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment. The Company does expect, however, that
compliance with such regulations will require, from time to time, both
increased operating costs and capital expenditures which may be substantial. As
of March 31, 1996 and December 31, 1995, the Company had reserved approximately
$573,000 and $625,000 respectively for anticipated environmental remediation
costs at the Aero facility. The decrease in accrued environmental remediation
costs was due to expenditures. Other remaining costs to be incurred will
include testing and monitoring to be performed over a 20 to 30 year period.
Actual costs to be incurred in future periods may vary from the estimate, given
the inherent uncertainties in evaluating environmental exposures. These
uncertainties include the extent of required remediation based on testing and
evaluation not yet completed and the varying costs and effectiveness of
remediation methods.
The Company is also involved in certain legal proceedings in the normal
course of its business.
After consultation with counsel, management is of the opinion that the
outcome of the above-mentioned proceedings will not have a material effect on
the financial position or results of operations of the Company.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OPERATING RESULTS
Whitehall Corporation's consolidated sales for the three months ended
March 31, 1996 were $20,187,000, a 41% increase over the sales reported in the
first quarter of 1995. Sales for the first quarter of 1996 increased by 70% in
the Aircraft Maintenance segment, decreased by 42% in the Ocean Systems segment
and decreased by 7% in the Electronics segment. Aircraft Maintenance sales
reflect additional commercial aircraft maintenance work. The decrease in sales
in the Ocean Systems segment is primarily attributable to contract completions
and the lack of follow-on contracts. Since the Company has decided to focus its
resources in the Aircraft Maintenance segment, expenditures in the Ocean System
segment will be minimized while the Company seeks a buyer or joint venture
partner for Hydroscience, Inc.
The Company recorded income from operations of $1,558,000 in the first
quarter of 1996, an increase of 175% compared to $566,000 in the same period of
1995. The Aircraft Maintenance segment reported operating income of $2,018,000
for the first quarter of 1996 compared to operating income of $753,000 for the
same period of 1995. The improvement in the Aircraft Maintenance segment
resulted primarily from the increase in sales volume. The Ocean Systems segment
recorded operating income of $80,000 for the first quarter of 1996 compared to
operating income of $196,000 for the same period of 1995. The Ocean System
segment's profitability declined as result of the reduction in sales. The
Electronics segment's operating income totaled $131,000 for the first quarter
of 1996 compared to operating income of $184,000 for the same period of 1995.
Corporate office expense totaled $671,000 for the first quarter of 1996
compared to $567,000 for the same period of 1995.
Other income totaled $52,000 in the first quarter of 1996 compared to
$189,000 in the same period of 1995. Other income for the first quarter of 1996
consists primarily of interest earned on invested cash offset by other
expenses. The same period of 1995 included interest on invested cash and gain
on sale of idle assets offset by other expenses.
FINANCIAL CONDITION
Cash and cash equivalents decreased during the first quarter of 1996 by
$2,646,000, primarily as a result of the cash used by operations and capital
expenditures.
During the first quarter of 1996, cash used in operations totaled
$2,352,000, as compared to cash provided by operations of $227,000 in the same
period of 1995. The cash used in operations was a result of the increase in
accounts receivable. Accounts receivable increased by $4,772,000 during the
first quarter of 1996 as a result of the increase in sales volume in the
Aircraft Maintenance segment. Inventory and accounts payable also increased as
a result of the increased activity. The Company's capital expenditures totaled
$552,000 during the first quarter of 1996 compared to $580,000 during the same
period of 1995.
The Company believes its cash balances and line of credit facility are
sufficient to meet its short and long-term capital requirements.
During the first quarter of 1996 the Company did not acquire any
additional shares of its common stock. At March 31, 1996 there were
approximately 121,100 additional shares available for repurchase under the
Company's current repurchase authorization. The Company may continue to acquire
stock as market conditions warrant.
At March 31, 1996 the Company's consolidated firm backlog totaled
$56,196,000 compared to $65,800,000 at December 31, 1995. This backlog is not
indicative of sales for the coming year as some portion of the backlog relates
to work to be performed beyond 1996. In addition, the backlog is based on
management's estimate of work to be performed in accordance with customer
supplied aircraft input dates and does not include any drop-in aircraft nor
contracts for which the Company is curently bidding.
6
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information contained in Item 3 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995, is incorporated herein by
reference.
On May 10, 1991, an action was filed in the District Court of Dallas
County, Texas, by Lee D. Webster, former Chairman, Chief Executive Officer and
President of Whitehall, against the Company, each of its directors (other than
Mr. Webster) and Cambridge Capital Fund, L.P., alleging, among other things,
that (i) the defendants' actions, both individually and in concert, constituted
willful interference with Mr. Webster's employment relationship with the
Company and were the direct cause of Mr. Webster's termination as its President
and Chairman of the Board, and (ii) the defendants' actions forced Mr. Webster
into retirement without providing Mr. Webster with retirement benefits which
Mr. Webster was purportedly promised. On August 17, 1994, the defendants were
granted a partial summary judgment. On October 24, 1994, Mr. Webster filed a
third amended petition and alleged the following causes of action: tortious
interference with contractual relations against Cambridge Capital Fund, L.P.,
and directors George F. Baker and John J. McAtee; intentional infliction of
emotional distress; and breach of oral contracts. The third amended petition
sought compensatory and punitive damages in excess of $35 million. On January
12, 1995, the Court entered an abatement on one of the breach of oral contract
claims against the Company and entered a summary judgment in the defendants'
favor on all remaining claims alleged by Mr. Webster. On February 26, 1996, the
Court granted a summary judgment in favor of the defendants on Mr. Webster's
remaining claim and entered a take nothing final judgment which dismissed all
of Mr. Webster's claims with prejudice to refiling. On March 26, 1996, Mr.
Webster appealed the final judgment to the Dallas Court of Appeals. Management
intends to vigorously defend the appeal.
On September 22, 1992, Mr. Webster filed an action in the District Court
of Dallas County, Texas, against First City, Texas-Dallas ("First City"), the
Company and a former employee of the Company. As receiver for First City, the
Federal Deposit Insurance Corporation has intervened and removed this case to
the U.S. District Court for the Northern District of Texas. The petition
alleged, among other things, that ( i ) the Company interfered with Mr.
Webster's existing and prospective contractual relationship with the former
employee and First City, a national banking institution; (ii) the Company has
converted to its own use the former employee's Company stock which allegedly
was owned by Mr. Webster; (iii) the Company, First City and the former employee
conspired to commit fraud against Mr. Webster; and (iv) the actions of the
Company, First City, and the former employee were intentionally done to cause
Mr. Webster emotional distress. The petition sought, among other things, not
less than $1 million in compensatory damages, not less than $5 million in
exemplary damages and not less than $1 million as damages for emotional
distress. By orders dated June 2, 1994 and June 20, 1994, the Company was
granted a summary judgment on all claims alleged by Mr. Webster. On July 31,
1995, the Court entered a final judgment disposing of all claims alleged
against all parties. Mr. Webster has appealed the final judgment to the United
States Court of Appeals for the Fifth Circuit. Management intends to vigorously
defend the appeal.
7
<PAGE> 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following Exhibits are included herein:
(11) Statement re: computation of earnings per share
(27) Financial Data Schedule
The Registrant did not file any reports on Form 8-K during the three
months ended March 31, 1996.
8
<PAGE> 11
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.
WHITEHALL CORPORATION
Date May 13, 1996 By /s/ John H. Wilson
-------------------------- -------------------------------------
John H. Wilson, President
Date May 13, 1996 By /s/ E. F. Campbell, III
-------------------------- -------------------------------------
E. Forrest Campbell, III, Treasurer
9
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
(11) Statement re: computation of earnings per share
(27) Financial Data Schedule
</TABLE>
<PAGE> 1
(11)--STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the
Three Months Ended
March 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Average shares outstanding 2,837,842 2,707,122
============ ============
Net Income/(Loss) $1,063,000 $568,000
============ ============
Net Income/(Loss) per share $0.37 $0.21
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,736,000
<SECURITIES> 0
<RECEIVABLES> 22,169,000
<ALLOWANCES> 0
<INVENTORY> 8,126,000
<CURRENT-ASSETS> 35,597,000
<PP&E> 25,733,000
<DEPRECIATION> 18,557,000
<TOTAL-ASSETS> 44,773,000
<CURRENT-LIABILITIES> 13,201,000
<BONDS> 0
<COMMON> 382,000
0
0
<OTHER-SE> 47,183,000
<TOTAL-LIABILITY-AND-EQUITY> 44,773,000
<SALES> 20,187,000
<TOTAL-REVENUES> 20,187,000
<CGS> 15,148,000
<TOTAL-COSTS> 1,534,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,610,000
<INCOME-TAX> (547,000)
<INCOME-CONTINUING> 1,063,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,063,000
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
