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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 March 31, 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 March 31, 1995
Common shares, par value $1 per share 5,643,937
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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 -
March 31, 1995 and
December 31, 1994 3
Consolidated Statements of
Operations - Three Months Ended
March 31, 1995 and
March 26, 1994 4
Consolidated Statements of Cash
Flows - Three Months Ended
March 31, 1995 and
March 26, 1994 5
Other Financial Information 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 7-9
Part II Other Information 10
Signature 11
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PART I - FINANCIAL INFORMATION
Item I. Financial Statements
EDO Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands)
Assets March 31, 1995 Dec. 31, 1994
(unaudited)
Current assets:
Cash and cash equivalents $ 15,094 $ 18,076
Recoverable Federal income taxes 2,989 3,649
Accounts receivable 26,709 24,175
Inventory 11,073 11,607
Prepayments 1,993 1,623
-------- --------
Total current assets 57,858 59,130
Property, plant and equipment, at cost 87,305 87,467
Less accumulated depreciation and
amortization 62,183 61,622
-------- --------
Net property, plant and equipment 25,122 25,845
Cost in excess of fair value of net
assets acquired 10,692 10,837
Other assets 6,818 6,265
-------- --------
Total assets $100,490 $102,077
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable & accrued
liabilities $ 21,506 $ 23,502
Contract advances and deposits 5,024 4,478
-------- --------
Total current liabilities 26,530 27,980
Long-term debt 29,317 29,317
ESOT loan obligation 13,727 14,007
Postretirement obligation 13,465 13,465
Environmental Obligation 4,285 4,405
Minority interest 2,024 2,153
Shareholders' Equity
Preferred shares, par value $1 per share,
authorized 500,000 shares, issued 75,292
shares (both periods) 75 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 39,330 39,330
Retained earnings 17,804 17,695
-------- --------
65,663 65,554
Less: Treasury shares at cost
2,809,965 shares (both periods) <39,937> <39,937>
Translation adjustment <857> <860>
ESOT loan obligation <13,727> <14,007>
-------- --------
Total shareholders' equity 11,142 10,750
-------- --------
Total liabilities & shareholders' equity $100,490 $102,077
======== ========
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EDO Corporation and Subsidiaries
Consolidated Statements of Operations
(in thousands except per share amounts)
For the three months ended
Mar. 31, 1995 Mar. 26, 1994
(unaudited)
Income
Net sales $ 20,918 $ 21,250
Other 164 80
-------- --------
21,082 21,330
Costs and Expenses
Cost of sales 15,736 16,232
Selling, general and administrative 4,391 3,817
Research and development 322 1,170
-------- --------
20,449 21,219
Operating Earnings 633 111
-------- --------
Non-Operating Income (Expense)
Interest income 262 56
Interest expense <568> <591>
Other, net <25> 385
-------- --------
<331> <150>
Earnings (loss) before Federal income taxes 302 <39>
Provision for Federal income taxes - 56
-------- --------
Net earnings (loss) before minority interest 302 <95>
Minority interest 129 111
-------- --------
Net earnings 431 16
Dividends on preferred shares 322 342
-------- --------
Net earnings (loss)available for
Common Shares $ 109 $ <326>
======== ========
Net earnings (loss) per Common Share $ 0.02 $ <0.06>
======== ========
Average shares outstanding 5,644 5,477
======== ========
Cash dividends per Common Share $ -0- $ 0.07
======== ========
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EDO Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the three months ended
Mar. 31, 1995 Mar. 26, 1994
(unaudited)
Operating Activities:
Net earnings $ 431 $ 16
Adjustments to net earnings to arrive
at cash from operations:
Gain on sale of building - <427>
Depreciation and amortization 1,369 1,628
Decrease in recoverable and deferred
income taxes 660 296
Common shares issued for employee benefits - 50
Changes in:
Accounts receivable <2,534> 1,330
Inventories 534 <1,614>
Prepayments, other assets and other <1,169> <2,088>
Accounts payable and accrued liabilities <1,996> 355
Contract advances and deposits 546 <2,119>
-------- --------
Cash used by operations <2,159> <2,573>
Investing Activities:
Purchase of property, plant and equipment <501> <561>
Proceeds from sale of building - 3,084
-------- --------
Cash provided (used) by investing activities <501> 2,523
Financing Activities:
Payment of common share cash dividends - <382>
Payment of preferred share cash dividends <322> <342>
Tax benefit associated with dividends paid
on unallocated ESOP preferred shares - 81
-------- --------
Cash used by financing activities <322> <643>
Net decrease in cash and cash equivalents <2,982> <693>
Cash and cash equivalents at beginning of period 18,076 9,284
-------- --------
Cash and cash equivalents at end of period $ 15,094 $ 8,591
======== ========
Supplemental disclosures:
Cash paid for: Interest $ 50 $ 75
Income taxes $ 23 $ 27
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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 three months ended March 31, 1995 and March 26, 1994.
Backlog Data
The dollar amount of backlog of firm orders at March 31, 1995 was $88,995,000
compared to $76,897,000 at March 26, 1994.
Inventories
Inventories are summarized by major classification as follows.
March 31, 1995 Dec. 31, 1994
(in thousands)
Raw material and supplies $ 5,723 $ 5,671
Work in process 4,221 4,762
Finished goods 1,129 1,174
-------- --------
$ 11,073 $ 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 Three Months of 1995 Compared with First Three Months of 1994
Sales in the first three months of 1995 were $20.9 million compared with $21.3
million in 1994. Sales in the Defense and Space Systems segment decreased by 8%
to $12.1 million. A decrease in airborne mine countermeasure systems sales in
the Marine and Aircraft unit and lower sales in our Electro Optics unit were
partially offset by higher command and control systems and sonar sales in the
Combat Systems unit. The Industrial Products segment sales increased 8% to $8.8
million. The higher sales were recorded in the EDO Energy product lines at EDO
Canada and EDO Angi.
Earnings from operations (before general corporate expense allocations) in the
first three months of 1995 were $1.5 million, compared with $1.3 million in the
first three months of 1994. Included in the first quarter results were pension
plan curtailment gains of $645,000 and $352,000 for 1995 and 1994,
respectively, resulting from the Company's smaller consolidated work force.
Operating earnings in the Defense and Space Systems segment declined to $1.1
million in the first quarter of 1995 from $1.7 million for the same period in
1994. This decrease resulted from losses on certain development activities at
our Electro-Optics unit, partially offset by higher margins at both the Marine
and Aircraft unit and Combat Systems unit. The Industrial Products segment
recorded operating earnings of $0.4 million in the first three months of 1995,
compared with a loss of $0.4 million for the same period in 1994. The increase
was due primarily to higher margins in the Acoustic Products unit.
Selling, general and administrative expenses in the first three months of 1995
were $4.4 million, compared with $3.8 million in the first three months of
1994. This increase is primarily attributable to a reduction in such costs
allocated to long term contracts where costs were inventoried.
Company sponsored research and development expenditures decreased 72% from the
like 1994 period to $0.3 million. This reduction was the same in each segment
and reflects a more selective approach to development efforts.
Interest expense, net of interest income, declined to $0.3 million in the first
three months of 1995, compared with $0.5 million in the like period of 1994,
resulting from higher interest income in 1995.
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The Company reported net earnings available to common shares of $109,000, or
$0.02 per share in the first quarter of 1995, compared to a net loss of
$326,000 or $0.06 per share a year ago. Results in the 1994 first quarter
period included a gain on the sale of real estate, which is included in "Other,
net" in the Consolidated Statement of Earnings, the pro forma after tax effect
of which was equal to $282,000 or $0.05 per share. Earnings per share
calculations were based on a weighted average of 5.6 million shares
outstanding for the first quarter of 1995, and 5.5 million shares for the like
period in 1994.
Liquidity and Capital Resources
The Company's cash and cash equivalents decreased $3.0 million from December
31, 1994 to $15.1 million at March 31, 1995. The decrease was primarily
attributable to an increase in accounts receivable.
The Company has an ESOT loan obligation that is currently $13.7 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 March 31, 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 will provide the Company a $5 million secured line of credit.
Capital expenditures in the first three months of 1995 amounted to $0.5
million. The total expenditure for 1995 is expected to be about the same as
1994.
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 should recover all
remediation costs it incurs. The liability of the Company at March 31, 1995
associated with this matter is $6.7 million. The majority of such costs will be
expended over the next two years.
The Company modified its post retirement health care benefit plan in 1995. The
effect of these changes will be to reduce its post retirement liability in the
future by approximately $8.0 million.
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The Company believes it has adequate liquidity and sufficient capital resources
to fund its plans.
Backlog
The backlog of unfilled orders at March 31, 1995 stood at $89.0 million
compared with $76.9 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: M. J. Hegarty
------------------------------------
Vice President-Finance and Treasurer
(Principal Financial Officer)
Dated: May 10, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 15,094
<SECURITIES> 0
<RECEIVABLES> 29,698
<ALLOWANCES> 1,634
<INVENTORY> 11,073
<CURRENT-ASSETS> 57,858
<PP&E> 87,305
<DEPRECIATION> 62,183
<TOTAL-ASSETS> 100,490
<CURRENT-LIABILITIES> 26,530
<BONDS> 43,044
<COMMON> 8,454
0
75
<OTHER-SE> 2,613
<TOTAL-LIABILITY-AND-EQUITY> 100,490
<SALES> 20,918
<TOTAL-REVENUES> 21,082
<CGS> 15,736
<TOTAL-COSTS> 20,449
<OTHER-EXPENSES> 25
<LOSS-PROVISION> 230
<INTEREST-EXPENSE> 568
<INCOME-PRETAX> 302
<INCOME-TAX> 0
<INCOME-CONTINUING> 109
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
