Page 1 of 12 Pages
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For Quarter Ended September 30, 1995
Commission File Number 1-3985
EDO CORPORATION
(Exact name of registrant as specified in its charter)
New York No. 11-0707740
(State or other jurisdiction (I.R.S Employer
of incorporation or organization) Identification No.)
14-04 111th Street, College Point, New York 11356-1434
(Address of principal executive offices) (Zip Code)
Telephone Number (718) 321-4000
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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding at Sept. 30, 1995
Common shares, par value $1 per share 5,805,263
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EDO CORPORATION
INDEX
Page No.
Face Sheet 1
Index 2
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
Sept. 30, 1995 and
December 31, 1994 3
Consolidated Statements of
Operations - Three Months Ended
Sept. 30, 1995 and
Sept. 24, 1994 4
Consolidated Statements of
Operations - Nine Months Ended
Sept. 30, 1995 and
Sept. 24, 1994 5
Consolidated Statements of Cash Flows -
Nine Months Ended
Sept. 30, 1995 and
Sept. 24, 1994 6
Other Financial Information 7
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8-10
Part II Other Information 11
Signature 12
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PART I - FINANCIAL INFORMATION
Item I. Financial Statements
EDO Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands)
Assets Sept.30, 1995 Dec. 31, 1994
(unaudited)
Current assets:
Cash and cash equivalents $ 19,291 $ 18,076
Recoverable Federal income taxes 264 3,649
Accounts receivable 29,314 24,175
Inventory 9,693 11,607
Prepayments 1,460 1,623
---------- ----------
Total current assets 60,022 59,130
Property, plant and equipment, at cost 87,694 87,467
Less accumulated depreciation and
amortization 64,122 61,622
---------- ----------
Net property, plant and equipment 23,572 25,845
Cost in excess of fair value of net
assets acquired 10,403 10,837
Other assets 6,029 6,265
---------- ----------
Total assets $ 100,026 $ 102,077
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable & accrued
liabilities $ 19,639 $ 23,502
Contract advances and deposits 6,522 4,478
---------- ----------
Total current liabilities 26,161 27,980
Long-term debt 29,317 29,317
ESOT loan obligation 13,167 14,007
Postretirement obligation 13,000 13,465
Environmental Obligation 3,895 4,405
Minority interest 1,978 2,153
Shareholders' Equity
Preferred shares, par value $1 per share,
authorized 500,000 shares, issued 71,008
shares at 9/30/95 and 75,292 shares at
12/31/94 71 75
Common shares, par value $1 per share,
authorized 25,000,000 shares,
issued 8,453,902 shares (both periods) 8,454 8,454
Additional paid-in capital 37,080 39,330
Retained earnings 18,564 17,695
---------- ----------
64,169 65,554
Less: Treasury shares at cost
(2,648,639 shares at 9/30/95 and
2,809,965 shares at 12/31/94) <37,644> <39,937>
Translation adjustment <850> <860>
ESOT loan obligation <13,167> <14,007>
---------- ----------
Total shareholders' equity 12,508 10,750
---------- ----------
Total liabilities & shareholders' equity $ 100,026 $ 102,077
========== ==========
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EDO Corporation and Subsidiaries
Consolidated Statements of Earnings
(in thousands except per share amounts)
For the three months ended
Sept.30, 1995 Sept.24, 1994
(unaudited)
Income
Net sales $ 21,899 $ 22,677
Other 168 179
---------- ----------
22,067 22,856
Costs and Expenses
Cost of sales 17,120 26,714
Selling, general and administrative 3,598 3,583
Research and development 292 795
---------- ----------
21,010 31,092
---------- ----------
Operating Earnings (loss) 1,057 <8,236>
---------- ----------
Non-Operating Income (Expense)
Interest income 250 41
Interest expense <562> <588>
Other, net <25> <42>
---------- ----------
<337> <589>
---------- ----------
Earnings (loss) before Federal
income taxes 720 <8,825>
Provision for (Recovery of) Federal
income taxes - <2,322>
---------- ----------
Net earnings (loss) before
minority interest 720 <6,503>
Minority interest 64 <241>
---------- ----------
Net earnings (loss) 784 <6,744>
Dividends on preferred shares 307 327
---------- ----------
Net earnings (loss) available
for Common Shares $ 477 $ <7,071>
========== ==========
Earnings (loss) per Common Share:
Primary $ 0.08 $ <1.26>
Fully diluted $ 0.07 $ (*)
Average shares outstanding 5,845 5,600
========== ==========
Cash dividends per Common Share $ -0- $ -0-
========== ==========
(*) Anti-Dilutive in 1994.
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EDO Corporation and Subsidiaries
Consolidated Statements of Earnings
(in thousands except per share amounts)
For the nine months ended
Sept.30, 1995 Sept.24, 1994
(unaudited)
Income
Net sales $ 67,696 $ 68,132
Other 461 278
---------- ----------
68,157 68,410
Costs and Expenses
Cost of sales 52,526 63,723
Selling, general and administrative 12,038 12,071
Research and development 950 3,155
---------- ----------
65,514 78,949
Operating Earnings (loss) 2,643 <10,539>
---------- ----------
Non-Operating Income (Expense)
Interest income 760 147
Interest expense <1,698> <1,774>
Other, net <75> 301
---------- ----------
<1,013> <1,326>
---------- ----------
Earnings (loss) before Federal income taxes 1,630 <11,865>
Provision for (Recovery of) Federal
income taxes - <3,200>
---------- ----------
Net earnings (loss) before minority
interest 1,630 <8,665>
Minority interest 175 -
---------- ----------
Net earnings (loss) 1,805 <8,665>
Dividends on preferred shares 936 1,011
---------- ----------
Net earnings (loss) available for
Common Shares $ 869 $ <9,676>
========== ==========
Earnings (loss) per Common Share:
Primary: $ 0.15 $ <1.75>
Fully diluted $ 0.13 $ (*)
Average shares outstanding 5,733 5,522
========== ==========
Cash dividends per Common Share $ -0- $ 0.14
========== ==========
(*) Anti-Dilutive in 1994.
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EDO Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the nine months ended
Sept.30, 1995 Sept.24, 1994
(unaudited)
Operating Activities:
Net earnings (loss) $ 1,805 $ <8,665>
Adjustments to net earnings (loss) to arrive
at cash from operations:
Gain on sale of building - <427>
Depreciation and amortization 4,326 5,470
<Increase> decrease in recoverable and
deferred income taxes 3,385 <1,917>
Common shares issued for employee benefits - 152
Changes in:
Accounts receivable <5,139> 3,404
Inventories 1,914 5,019
Prepayments, other assets and other <702> 31
Accounts payable and accrued liabilities <3,863> 294
Contract advances and deposits 2,044 <4,233>
---------- ----------
Cash provided (used) by operations 3,770 <872>
Investing Activities:
Purchase of property, plant and equipment <1,619> <1,838>
Proceeds from sale of building - 3,084
---------- ----------
Cash provided (used) by investing activities <1,619> 1,246
Financing Activities:
Payment of Common Share cash dividends - <766>
Payment of preferred share cash dividends <936> <1,011>
---------- ----------
Cash used by financing activities <936> <1,777>
Net increase (decrease)in cash and cash
equivalents 1,215 <1,403>
Cash and cash equivalents at beginning of
period 18,076 9,284
---------- ----------
Cash and cash equivalents at end of period $ 19,291 $ 7,881
========== ==========
Supplemental disclosures:
Cash paid for: Interest $ 1,117 $ 1,131
Income taxes $ 275 $ 290
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Other Financial Information
Unaudited Financial Statements
The accompanying unaudited financial statements and other related financial
information furnished reflect all adjustments which are, in the opinion of
management, necessary to present a fair statement of the operating results for
the nine months ended September 30, 1995 and September 24, 1994.
Backlog Data
The dollar amount of backlog of firm orders at September 30, 1995 was
$92,085,000 compared to $77,738,000 at September 24, 1994.
Inventories
Inventories are summarized by major classification as follows.
Sept. 30, 1995 Dec. 31, 1994
(in thousands)
Raw material and supplies $ 5,042 $ 5,671
Work in process 3,619 4,762
Finished goods 1,032 1,174
--------- ---------
$ 9,693 $ 11,607
========= =========
Reclassifications
Certain reclassifications of 1994 amounts have been made to conform with the
1995 presentation.
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Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion relates to the operations of EDO Corporation in its
two business segments: Defense and Space Systems; and Industrial Products.
Results of Operations
First Nine Months of 1995 Compared with First Nine Months of 1994
Sales in the first nine months of 1995 were $67.7 million compared with $68.1
million in 1994. Sales in the Defense and Space Systems segment decreased by 8%
to $39.1 million as a result of a decrease in airborne mine countermeasure
systems sales which was partially offset by higher command and control systems,
sonar sales, and higher sales of space flight systems. The Industrial Products
segment sales increased 12% to $28.6 million primarily as a result of increased
sales of natural gas refueling stations, fiber composite and acoustic
products.
Earnings from operations (before general corporate expense allocations) in the
first 9 months of 1995 were $5.5 million, compared with a loss of $7.4 million
in the first nine months of 1994. Included in the 1994 nine month results were
charges, net of a pension plan gain of $1.4 million, of approximately $6.8
million related to the Company's restructuring and consolidation plan, as well
as other items. Included in the 1995 nine month results was a similar pension
gain, mentioned above, of $0.6 million. Operating earnings in the Defense and
Space systems segment were $3.2 million in the first nine months of 1995, as
compared to a loss of $2.7 million for the same period in 1994 which included
approximately $3.0 million of the net charges mentioned above. The improvement
in earnings, exclusive of the net charges, results primarily from an
improvement in the Electro-Optics business unit as well as higher margins in
the segment in general. The Industrial Products segment recorded operating
earnings of $2.3 million in the first nine months of 1995, compared with a loss
of $4.7 million for the same period in 1994 which included approximately $3.8
million of the net charges mentioned above. The improvement in earnings,
exclusive of the net charges, results primarily from improved margins on
increased sales of fiber composite and acoustic products.
Selling, general and administrative expenses in the first nine months of 1995
were $12.0 million, essentially the same as the $12.1 million for the same
period in 1994.
Company sponsored research and development expenditures decreased 70% from the
like 1994 period to $1.0 million. This reduction was approximately the same in
each segment and resulted from the termination in 1994 of research and
development at EDO Sports, a shift from Company sponsored to customer sponsored
research and development at the Marine and Aircraft Systems unit, and a more
selective approach to development efforts at all business units.
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Interest expense, net of interest income, declined to $0.9 million in the first
nine months of 1995 compared with $1.6 million in the like period of 1994 due
to an increase in interest income in 1995 as a result of higher investible
funds. The Company reported net earnings available to common shares of
$869,000, or $0.15 per share in the first nine months of 1995, compared to a
net loss of $9,676,000 or $(1.75) per share a year ago. Earnings per share
calculations were based on weighted average of 5.7 million shares outstanding
for the first nine months of 1995, and 5.5 million shares for the like period
in 1994.
Liquidity and Capital Resources
The Company's cash and cash equivalents increased $1.2 million from December
31, 1994 to $19.3 million at September 30, 1995
The Company has an ESOT loan obligation that is currently $13.2 million. The
repayment of this obligation is funded principally through dividends on the
Company's preferred shares. The Company also has outstanding $29.3 million of
7% Convertible Subordinated Debentures Due 2011. In accordance with
authorization from the Board of Directors, the Company has acquired $5.7
million of such debentures through September 30, 1995 at prevailing market
prices. These debentures will be used to satisfy approximately three years of
sinking fund requirements that commence in 1996.
In February 1995, the Company renegotiated its ESOT obligation agreement with a
bank to waive and or amend the covenants with which the Company was
non-compliant at December 31, 1994, extend the effective date of the option to
cancel or refinance the obligation to April 1, 1996, and secure the debt with
its accounts receivable, inventory, machinery and equipment. In addition, the
bank provided the Company a $5 million secured line of credit. In June 1995,
the Company further renegotiated the effective date of the option mentioned
above to April 1, 1997. In November 1995, the Company negotiated an increase in
its $5 million secured line of credit to $15 million for short-term borrowings
and letters of credit.
Capital expenditures in the first nine months of 1995 amounted to $1.6 million.
The total expenditure for 1995 is expected to be approximately $2.0 million.
In August 1994, the Board of Directors of the Company suspended payment of cash
dividends on its common shares to preserve cash and to facilitate funding of
the Company's strategic business plan.
As explained in the Company's 1994 Annual Report, the Company is involved in an
environmental matter for which management believes it is covered by liability
insurance for all of the unreimbursed costs it incurs. The liability of the
Company at September 30, 1995 associated with this matter is $6.3 million. The
majority of such costs will be expended over the next two years.
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The Company modified its post retirement health care benefit plan in 1995, has
an unrecognized net gain from 1994, and has adjusted the discount rate used to
calculate the obligation. The net effect of these changes will be to reduce its
post retirement liability in the future by approximately $8.0 million.
The Company believes it has adequate liquidity and sufficient capital resources
to fund its current operating plans.
Backlog
The backlog of unfilled orders at September 30, 1995 stood at $92.1 million
compared with $77.7 million a year ago and $79.6 million at December 31, 1994.
The increased backlog occurred primarily in the Company's Defense and Space
Systems segment.
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PART II - OTHER INFORMATION
Item 5. Other Information
None
Item 6(a). Exhibits
27 - Financial Data Schedule.
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SIGNATURE
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.
EDO Corporation
(Registrant)
by: K. A. Paladino
-----------------------------
Vice President-Finance
and Treasurer
(Principal Financial Officer)
Dated: November 14, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 19,291
<SECURITIES> 0
<RECEIVABLES> 29,578
<ALLOWANCES> 658
<INVENTORY> 9,693
<CURRENT-ASSETS> 60,022
<PP&E> 87,694
<DEPRECIATION> 64,122
<TOTAL-ASSETS> 100,026
<CURRENT-LIABILITIES> 26,161
<BONDS> 42,484
<COMMON> 8,454
0
71
<OTHER-SE> 3,983
<TOTAL-LIABILITY-AND-EQUITY> 100,026
<SALES> 67,696
<TOTAL-REVENUES> 68,157
<CGS> 52,526
<TOTAL-COSTS> 65,514
<OTHER-EXPENSES> 75
<LOSS-PROVISION> 102
<INTEREST-EXPENSE> 1,698
<INCOME-PRETAX> 1,630
<INCOME-TAX> 0
<INCOME-CONTINUING> 869
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 869
<EPS-PRIMARY> .15
<EPS-DILUTED> .13
</TABLE>
