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 29, 1997
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 Employee
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 29, 1997
Common shares, par value $1 per share 6,146,766
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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 29, 1997 and
December 31, 1996 3
Consolidated Statements of
Operations - Three Months Ended
March 29, 1997 and
March 30, 1996 4
Consolidated Statements of
Cash Flows - Three Months Ended
March 29, 1997 and
March 30, 1996 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 29, 1997 Dec. 31, 1996
(unaudited)
Current assets:
Cash and cash equivalents $ 26,124 $ 20,745
Accounts receivable 31,769 32,518
Inventories 7,805 7,994
Prepayments 4,206 2,678
---------- ----------
Total current assets 69,904 63,935
Property, plant and equipment, net 13,140 12,968
Notes Receivable 3,900 3,900
Cost in excess of fair value of net
assets acquired, net 7,067 7,159
Other assets 6,366 6,261
---------- ----------
$100,377 $ 94,223
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 20,789 $ 21,517
Contract advances and deposits 10,574 4,809
Net liabilities of discontinued
operations 156 227
---------- ----------
Total current liabilities 31,519 26,553
Long-term debt 29,317 29,317
ESOT loan obligation 11,349 11,676
Postretirement obligation 3,995 3,995
Environmental Obligation 2,859 2,859
Shareholders' Equity
ESOP Convertible Cumulative Preferred
Shares Series A, par value $1 per share,
(liquidation preference $213.71 per share),
authorized 500,000 shares (67,832
issued in both periods) 68 68
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 34,717 35,438
Retained earnings 23,485 22,368
---------- ----------
66,724 66,328
Less: Treasury shares at cost
2,307,136 shares in 1997 and
2,409,136 shares in 1996 <32,820> <34,240>
ESOT loan obligation <11,349> <11,676>
Deferral under long-term
incentive plan <1,217> <589>
---------- ----------
Total shareholders' equity 21,338 19,823
---------- ----------
$100,377 $ 94,223
========== ==========
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EDO Corporation and Subsidiaries
Consolidated Statements of Operations
(in thousands except per share amounts)
For the three months ended
March 29, 1997 March 30, 1996
(unaudited)
Continuing operations:
Income
Net Sales $ 23,704 $ 23,669
Other 8 80
---------- ----------
23,712 23,749
Costs and expenses
Cost of sales 17,915 18,478
Selling, general and administrative 3,700 3,430
Research and development 313 169
---------- ----------
21,928 22,077
Earnings from continuing operations 1,784 1,672
Non-operating income (expense)
Interest income 325 385
Interest expense <543> <552>
Other, net < 5> < 25>
---------- ----------
<223> <192>
---------- ----------
Earnings from continuing operations
before Federal income taxes 1,561 1,480
Provision for Federal income taxes - -
---------- ----------
Earnings from continuing operations 1,561 1,480
Loss from discontinued operations 0 <527>
---------- ----------
Net earnings 1,561 953
Dividends on ESOP Convertible Cumulative
Preferred Shares Series A 290 303
---------- ----------
Net earnings available for Common Shares $ 1,271 $ 650
========== ==========
Earnings (Loss) per Common Share:
Primary:
Continuing operations $ 0.20 $ 0.20
Discontinued operations 0 <0.09>
---------- ----------
$ 0.20 $ 0.11
========== ==========
Fully Diluted:
Continuing operations $ 0.17 $ 0.17
Discontinued operation 0 <0.07>
---------- ----------
$ 0.17 $ 0.10
========== ==========
Average shares outstanding (Primary) 6,245 5,923
========== ==========
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EDO Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the three months ended
March 29, 1997 March 30, 1996
(unaudited)
Operating activities:
Earnings from continuing operations $ 1,561 $ 953
Adjustments to net earnings to arrive
at cash provided by continuing operations:
Depreciation and amortization 1,660 1,706
Treasury shares used for employee benefits
and payment of Directors' fees 71 45
Changes in:
Accounts receivable 749 649
Inventories 189 <1,251>
Prepayments, other assets and other <2,084> <849>
Accounts payable and accrued liabilities <503> 1,136
Contract advances and deposits 5,765 <1,464>
---------- ----------
Cash provided by continuing operations 7,408 925
Net cash used by discontinued operations <296> <525>
Investing activities:
Purchase of property, plant and equipment <1,377> <672>
Net proceeds from sale of assets - 2,000
---------- ----------
Cash (used) provided by investing activities <1,377> 1,328
Financing activities:
Payments received on notes receivable 88 -
Payment of common share cash dividends <154> -
Payment of ESOP Convertible Cumulative
Preferred Shares Series A cash dividends <290> <303>
---------- ----------
Cash used by financing activities <356> <303>
Increase in cash and cash equivalents 5,379 1,425
Cash and cash equivalents at beginning
of year 20,745 22,918
---------- ----------
Cash and cash equivalents at end of period $ 26,124 $ 24,343
========== ==========
Supplemental disclosures:
Cash paid for: Interest $ 0 $ 5
Income taxes 226 7
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Other Financial Information
Item 1.
Discontinued Operations
In October 1996, the Company announced its decision to discontinue its energy
related businesses, consisting of the Company's 50.4% interest in EDO (Canada)
Limited, EDO Automotive Natural Gas Inc.("EDO ANGI"), and EDO Energy
Corporation.
On April 14, 1997 the Company announced the sale of the EDO Angi business unit
to Hurricane Compressors, Inc., an established manufacturer and supplier of
natural gas fueling stations.
On April 25, 1997 EDO (Canada) Limited filed for protection from creditors
under the Companies' Creditors Arrangement Act of Canada. The terms of EDO-ANGI
sale and the EDO (Canada) Limited filing did not result in a change to the
reserves established in the third quarter of 1996.
The net operating results of these entities have been reported as "Loss from
discontinued operations"; the net assets (liabilities) of these entities have
been reported as "Net assets (liabilities) of discontinued operations"; and the
cash flows of these entities have been reported as "Net cash used by
discontinued operations."
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 29, 1997 and March 30, 1996.
Backlog Data
The dollar amount of backlog of firm orders at March 29, 1997 was $113,320,000
compared to $91,280,000 at March 30, 1996.
Inventories
Inventories are summarized by major classification as follows:
March 29, 1997 Dec. 31, 1996
(in thousands)
Raw material and supplies $ 3,657 $ 4,226
Work in process 3,661 3,380
Finished goods 487 388
--------- ---------
$ 7,805 $ 7,994
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Item 2.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion relates only to the continuing operations of EDO
Corporation in its two business segments: Defense and Space Systems; and
Industrial Products.
Results of Operations
First Three Months of 1997 compared with First Three Months of 1996
Sales in the first three months of 1997 were $23.7 million, the same amount
reported in 1996. Sales in the Defense and Space Systems segment increased 3%
to $16.3 million. Higher sales in the Electro-Optics and Combat Systems
business units were partially offset by lower sales in the Marine and Aircraft
business unit. The Industrial Products segment sales decreased 6% to $7.4
million. Increases in Ceramic business unit sales were offset by lower sales in
the Fiber Science and Acoustics business units.
Earnings from operations (before general corporate expense allocations) in the
first three months of 1997 were $3.0 million, compared with $2.7 million in
1996. Operating earnings in the Defense and Space Systems segment increased to
$1.9 million in the first quarter of 1997 from $1.7 million for the same period
in 1996. This increase resulted primarily from an improvement at the Marine and
Aircraft business unit. The Industrial Products segment recorded operating
earnings of $1.1 million in the first three months of 1997, compared with $1.0
million for the same period in 1996.
Selling, general and administrative expenses in the first three months of 1997
were $3.7 million, compared with $3.4 million in the first three months of
1996.
Company sponsored research and development expenditures increased 85% from the
like 1996 period to $0.3 million. This increase was recorded principally in the
Defense and Space Systems segment. The expenditure for Company sponsored
research and development in 1997 is expected to be higher than what was spent
in 1996.
Interest expense, net of interest income was $0.2 million in the first three
months of 1997, the same as in the like period of 1996.
The Company reported net earnings available for common shares of $1,271,000 or
$0.20 per share in the first quarter of 1997, compared to net earnings of
$650,000, or $0.11 per share a year ago which was negatively impacted by the
losses recorded in the discontinued operations. Earnings per share calculations
were based on a weighted average of 6.2 million shares outstanding for the
first quarter of 1997 and 5.9 million shares for the like period in 1996.
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Liquidity and Capital Resources
The Company's cash and cash equivalents increased $5.4 million from December
31, 1996 to $26.1 million at March 29, 1997, due primarly to the receipt of a
contract advance payment from a foreign customer.
The Company has an ESOT loan obligation that is currently $11.3 million. The
repayment of this obligation is funded principally through dividends on the
Company's ESOP Convertible Cumulative Preferred Shares Series A. 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 commenced in December of 1996.
The Company maintains a $15.0 million secured line of credit with a bank for
short-term borrowing and letters of credit. The agreement expires on June 30,
1997 and limits the cash portion of potential borrowing to $5.0 million. There
have been no borrowings under this agreement.
Capital expenditures in the first three months of 1997 amounted to $1.4 million
as compared to $0.7 million in the comparable period. The total expenditures
for 1997 is not expected to be significantly higher than the $4.2 million spent
in 1996.
In the third quarter of 1994, the Board of Directors suspended cash dividends
on the Company's common shares due to the financial circumstances at that time.
In January 1997, the Company announced that the Board of Directors declared a
first quarter cash dividend of $0.025 per common share.
The Company believes it has adequate liquidity and sufficient capital resources
to fund its plans.
Backlog
The backlog of unfilled orders at March 29, 1997 stood at $113.3 million
compared with $91.3 million a year ago and $103.0 million at December 31, 1996.
The increased backlog occurred primarily in the Company's Defense and Space
Systems segment.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
The statements in this Quarterly Report on Form 10-Q and in oral statements
which may be made by representatives of the Company relating to plans,
strategies, economic performance and trends and other statements that are not
descriptions of historical facts may be forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1993 and Section 21E of the Securities Exchange Act of
1934. Forward-looking
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information is inherently subject to risks and uncertainties, and actual
results could differ materially from those currently anticipated due to a
number of factors, which include, but are not limited to the following for each
of the types of information noted.
U.S. and international military program sales, follow-on procurement, contract
continuance, future program awards and upgrades and spares support are subject
to:
U.S. and international military budget constraints and determinations;
U.S. congressional and international legislative body discretion;
U.S. and international government administration policies and priorities;
changing world military threats, strategies and missions;
changes in U.S. and international government procurement timing, strategies
and practices; and
the general state of world military readiness and deployment.
Commercial satellite programs and equipment sales, follow-on procurement,
contract continuance and future program awards are subject to:
establishment and continuance of various consortiums for satellite
constellation programs;
delay in launch dates due to equipment, weather, or other factors beyond the
control of the Company;
development of sufficient customer base to support a particular satellite
constellation program;
Other commercial product sales are subject to:
success of product development programs currently underway or planned;
competitiveness of current and future product production costs and prices;
market and customer base development for new product programs;
Achievement of margins on sales, earnings and cash flow can be affected by
unanticipated technical problems, government termination of contracts for
convenience, decline in expected levels of revenues and underestimation of
anticipated costs on specific programs.
The Company has no obligation to update any forward-looking statements.
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PART II - OTHER INFORMATION
Item 5. Other Information
None
Item 6.(a) Exhibits
10.(a) EDO Corporation 1997 Non-Employee Director Stock Option Plan.
Incorporated by reference to Appendix A to the Company's Definitive Proxy
Statement dated March 21, 1997.
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
-------------------------------
K. A. Paladino - Vice President
Finance and Treasurer
(Principal Financial Officer)
Dated: May 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-29-1997
<CASH> 26,124
<SECURITIES> 0
<RECEIVABLES> 31,769
<ALLOWANCES> 360
<INVENTORY> 7,805
<CURRENT-ASSETS> 69,904
<PP&E> 59,965
<DEPRECIATION> 46,825
<TOTAL-ASSETS> 100,377
<CURRENT-LIABILITIES> 31,519
<BONDS> 40,666
<COMMON> 8,454
0
68
<OTHER-SE> 12,816
<TOTAL-LIABILITY-AND-EQUITY> 100,377
<SALES> 23,704
<TOTAL-REVENUES> 23,712
<CGS> 17,915
<TOTAL-COSTS> 21,928
<OTHER-EXPENSES> 5
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 543
<INCOME-PRETAX> 1,561
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,271
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,271
<EPS-PRIMARY> .20
<EPS-DILUTED> .17
</TABLE>
