Page 1 of 11 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 March 30, 1996
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 30, 1996
Common shares, par value $1 per share 5,942,539
<PAGE>
Page 2
EDO CORPORATION
INDEX
Page No.
Face Sheet 1
Index 2
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
March 30, 1996 and
December 31, 1995 3
Consolidated Statements of
Operations - Three Months Ended
March 30, 1996 and
March 31, 1995 4
Consolidated Statements of Cash
Flows - Three Months Ended
March 30, 1996 and
March 31, 1995 5
Other Financial Information 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 7-8
Part II Other Information 9
Signature 10
<PAGE>
Page 3
PART I - FINANCIAL INFORMATION
Item I. Financial Statements
EDO Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands)
Assets March 30, 1996 Dec. 31, 1995
(unaudited)
Current assets:
Cash and cash equivalents $ 26,245 $ 25,609
Accounts receivable 26,078 26,786
Inventories 11,911 10,330
Prepayments 3,747 1,381
---------- ----------
Total current assets 67,981 64,106
Property, plant and equipment, net 13,491 14,133
Assets held for sale, net - 8,700
Cost in excess of fair value of net
assets acquired, net 10,114 10,258
Other assets 10,776 6,302
---------- ----------
$102,362 $103,499
========== ==========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable and accrued
liabilities $ 20,466 $ 20,581
Contract advances and deposits 4,425 5,853
---------- ----------
Total current liabilities 24,891 26,434
Long-term debt 29,317 29,317
ESOT loan obligation 12,584 12,887
Postretirement obligation 12,198 12,348
Environmental Obligation 3,769 3,769
Minority interest 4,440 4,582
Shareholders' Equity
- --------------------
Preferred shares, par value $1 per share,
(liquidation preference $213.71 per share),
authorized 500,000 shares (71,001 issued
in both periods) 71 71
Common shares, par value $1 per share,
authorized 25,000,000 shares, (issued
8,453,902 in both periods) 8,454 8,454
Additional paid-in capital 36,681 37,847
Retained earnings 19,766 19,116
---------- ----------
64,972 65,488
Less: Treasury shares at cost
2,511,363 shares in 1996 and
2,645,863 shares in 1995 <35,693> <37,604>
Translation adjustment <832> <835>
ESOT loan obligation <12,584> <12,887>
Deferral under long-term
incentive plan <700> -
---------- ----------
Total shareholders' equity 15,163 14,162
---------- ----------
$102,362 $103,499
========== ==========
<PAGE>
Page 4
EDO Corporation and Subsidiaries
Consolidated Statements of Operations
(in thousands except per share amounts)
For the three months ended
Mar. 30, 1996 Mar. 31, 1995
(unaudited)
Income
Net sales $ 26,281 $ 20,918
Other 41 164
---------- ----------
26,322 21,082
Costs and Expenses
Cost of sales 20,749 15,736
Selling, general and administrative 4,337 4,391
Research and development 266 322
---------- ----------
25,352 20,449
Operating Earnings 970 633
---------- ----------
Non-Operating Income (Expense)
Interest income 418 262
Interest expense <552> <568>
Other, net <25> <25>
---------- ----------
<159> <331>
Earnings before Federal income taxes 811 302
Provision for Federal income taxes - -
---------- ----------
Net earnings before minority
interest 811 302
Minority interest 142 129
---------- ----------
Net earnings 953 431
Dividends on preferred shares 303 322
---------- ----------
Net earnings available for
Common Shares $ 650 $ 109
========== ==========
Net earnings per Common Share $ 0.11 $ 0.02
========== ==========
Average shares outstanding 5,923 5,644
========== ==========
<PAGE>
Page 5
EDO Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the three months ended
Mar. 30, 1996 Mar. 31, 1995
(unaudited)
Operating Activities:
Net earnings $ 953 $ 431
Adjustments to net earnings to arrive
at cash from operations:
Depreciation and amortization 1,509 1,369
Common shares issued for employee benefits 45 -
Changes in:
Accounts receivable 708 <2,534>
Inventories <1,581> 534
Prepayments, other assets and other <429> <509>
Accounts payable and accrued liabilities <115> <1,996>
Contract advances and deposits <1,428> 546
---------- ----------
Cash used by operations <338> <2,159>
Investing Activities:
Purchase of property, plant and equipment <723> <501>
Net proceeds from sale of assets 2,000 -
---------- ----------
Cash provided (used) by investing activities 1,277 <501>
Financing Activities:
Payment of preferred share cash dividends <303> <322>
---------- ----------
Cash used by financing activities <303> <322>
Net increase (decrease) in cash and cash
equivalents 636 <2,982>
Cash and cash equivalents at beginning of period 25,609 18,076
---------- ----------
Cash and cash equivalents at end of period $ 26,245 $ 15,094
========== ==========
Supplemental disclosures:
Cash paid for: Interest $ 5 $ 50
Income taxes $ 7 $ 23
<PAGE>
Page 6
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 30, 1996 and March 31, 1995.
Backlog Data
The dollar amount of backlog of firm orders at March 30, 1996 was $95,760,000
compared to $88,995,000 at March 31, 1995.
Inventories
Inventories are summarized by major classification as follows.
March 30, 1996 Dec. 31, 1995
(in thousands)
Raw material and supplies $ 6,130 $ 6,186
Work in process 4,595 3,023
Finished goods 1,186 1,121
--------- ---------
$ 11,911 $ 10,330
Reclassifications
Certain reclassifications of 1995 amounts have been made to conform with the
1996 presentation.
<PAGE>
Page 7
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 1996 Compared with First Three Months of 1995
- -------------------------------------------------------------------
Sales in the first three months of 1996 were $26.3 million compared with $20.9
million in 1995. Sales in the Defense and Space Systems segment increased 23%
to $15.7 million. Higher sales in the Electro-Optics and Marine and Aircraft
business units were partially offset by lower sales in the Combat Systems
business unit. The Industrial Products segment sales increased 19% to $10.5
million. The higher sales were recorded in the Fiber Science and Ceramics
business units.
Earnings from operations (before general corporate expense allocations) in the
first three months of 1996 were $2.0 million, compared with $1.5 million in
1995, (included in 1995 earnings was a pension plan curtailment gain of
$645,000 resulting from reductions previously made in the Company's work
force). Operating earnings in the Defense and Space Systems segment increased
to $1.7 million in the first quarter of 1996 from $1.1 million for the same
period in 1995. This increase resulted primarily from an improvement at the
Electro-Optics business unit. The Industrial Products segment recorded
operating earnings of $0.3 million in the first three months of 1996, compared
with $0.4 million for the same period in 1995. Operating earnings in the
Industrial Products segment are being adversely affected by the energy business
units where the rate of growth of the related markets is not as fast as
projected. The business units in this area have adjusted their operations in
response to this slower growth rate and the level of investment in these units
continues to be evaluated.
Selling, general and administrative expenses in the first three months of 1996
were $4.3 million, compared with $4.4 million in the first three months of
1995.
Company sponsored research and development expenditures decreased 30% from the
like 1995 period to $0.2 million. This reduction was recorded principally in
the Defense and Space Systems segment and reflects a more selective approach to
development efforts.
Interest expense, net of interest income, declined to $0.2 million in the first
three months of 1996, compared with $0.4 million in the like period of 1995,
resulting from higher interest income in 1996.
<PAGE>
Page 8
The Company reported net earnings available for common shares of $650,000, or
$0.11 per share in the first quarter of 1996, compared to net earnings of
$109,000 or $0.02 per share a year ago. Earnings per share calculations were
based on a weighted average of 5.9 million shares outstanding for the first
quarter of 1996, and 5.6 million shares for the like period in 1995.
Liquidity and Capital Resources
The Company's cash and cash equivalents increased $0.6 million from December
31, 1995 to $26.2 million at March 30, 1996. During the quarter the net
proceeds from the sale of the College Point facilities of approximately $2.0
million, as previously disclosed, was largely offset by cash used by
operations, purchases of equipment and the payment of preferred share
dividends.
The Company has an ESOT loan obligation that is currently $12.6 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 previously acquired
$5.7 million of such debentures. These debentures will be used to satisfy
approximately three years of sinking fund requirements that commence in
December of 1996.
In April 1996, the Company completed negotiations, and has received a
commitment from its bank to extend the maturity date of the $15 million line of
credit agreement for both short term borrowings and letters of credit to June
30, 1997 and to extend the option to cancel or refinance its ESOT borrowing to
April 1, 2000.
Capital expenditures in the first three months of 1996 amounted to $0.7
million. The total expenditures for 1996 is expected to be higher than the $1.9
million spent in 1995.
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.
The Company believes it has adequate liquidity and sufficient capital resources
to fund its plans.
Backlog
The backlog of unfilled orders at March 30, 1996 stood at $95.8 million
compared with $89.0 million a year ago and $89.7 million at December 31, 1995.
The increased backlog occurred primarily in the Company's Defense and Space
Systems segment.
<PAGE>
Page 9
PART II - OTHER INFORMATION
Item 5. Other Information
None
Item 6.(a) Exhibits
10. (a) EDO Corporation 1996 Long-Term Incentive Plan. Incorporated by
reference to Appendix A to the Company's Definitive Proxy Statement dated March
22, 1996.
27 - Financial Data Schedule
<PAGE>
Page 10
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: May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-30-1996
<CASH> 26,245
<SECURITIES> 0
<RECEIVABLES> 26,078
<ALLOWANCES> 493
<INVENTORY> 11,911
<CURRENT-ASSETS> 67,981
<PP&E> 61,622
<DEPRECIATION> 48,131
<TOTAL-ASSETS> 102,362
<CURRENT-LIABILITIES> 24,891
<BONDS> 41,901
<COMMON> 8,454
0
71
<OTHER-SE> 6,638
<TOTAL-LIABILITY-AND-EQUITY> 102,362
<SALES> 26,281
<TOTAL-REVENUES> 26,322
<CGS> 20,749
<TOTAL-COSTS> 25,352
<OTHER-EXPENSES> 25
<LOSS-PROVISION> 22
<INTEREST-EXPENSE> 552
<INCOME-PRETAX> 418
<INCOME-TAX> 0
<INCOME-CONTINUING> 650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 650
<EPS-PRIMARY> .11
<EPS-DILUTED> .09
</TABLE>
