FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Quarterly period ended April 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For the transition period from to
Commission file number 1-6711
OEA, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2362379
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
P. O. Box 100488, Denver, Colorado 80250
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 693-1248
(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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
20,550,019 Shares of Common Stock at June 6, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Index to Financial Statements Page No.
Consolidated Condensed Balance Sheets
April 30, 1997 (unaudited)
and July 31, 1996............................. 2
Consolidated Condensed Statements
of Earnings (unaudited)
Three Months and Nine Months
Ended April 30, 1997 and 1996................. 3
Consolidated Condensed Statements
of Cash Flows (unaudited) Nine Months
Ended April 30, 1997 and 1996................. 4
Notes to Consolidated Condensed Financial
Statements (Unaudited)........................ 5
<PAGE>
OEA, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
April 30, 1997 July 31, 1996
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 6,423,928 $ 2,560,213
Accounts Receivable, Net 36,448,429 29,960,161
Unbilled Costs and Accrued Earnings 6,898,200 6,845,200
Income Taxes Receivable --- 832,906
Inventories
Raw Material and Component Parts 26,273,427 21,238,135
Work-in-Process 17,339,573 11,751,544
Finished Goods 9,667,423 3,623,341
--------- ---------
53,280,423 36,613,020
Prepaid Expenses and Other Current Assets 372,546 767,952
------- -------
Total Current Assets 103,423,526 77,579,452
----------- ----------
Cash Value of Life Insurance 317,094 317,094
------- -------
Property, Plant and Equipment 211,736,410 154,946,472
Less: Accumulated Depreciation 51,176,431 40,800,194
---------- ----------
Property, Plant and Equipment, Net 160,559,979 114,146,278
Long-Term Receivable 3,000,000 3,000,000
Investment in Foreign Joint Venture 2,322,938 3,402,230
Deferred Charges 10,496,673 3,610,300
Other Assets 1,158,520 1,152,417
--------- ---------
Total Assets $ 281,278,730 $ 203,207,771
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 12,017,936 $ 12,230,628
Bank Borrowings --- 14,000,000
Accrued Expenses 5,040,853 5,630,624
Deferred Income 206,168 206,168
Federal and State Income Taxes 2,537,173 1,456,238
--------- ---------
Total Current Liabilities 19,802,130 33,523,658
Bank Borrowings 75,000,000 ---
Deferred Compensation Payable 1,036,067 944,339
Deferred Income Taxes 8,074,730 8,074,731
Deferred Income 216,735 216,735
------- -------
Total Liabilities 104,129,662 42,759,463
----------- ----------
Stockholders' Equity:
Common Stock - $.10 par value, Authorized 50,000,000 shares:
Issued - 22,019,700 shares 2,201,970 2,201,970
Additional Paid-In Capital 12,680,450 12,467,556
Retained Earnings 166,109,684 147,267,964
Less: Cost of Treasury Shares, 1,469,681 and 1,505,256 (1,945,866) (2,104,218)
Equity Adjustment from Translation (1,897,170) 615,036
---------- -------
Total Stockholders' Equity 177,149,068 160,448,308
----------- -----------
Total Liabilities and Stockholders' Equity $ 281,278,730 $ 203,207,771
============= ===========
</TABLE>
<PAGE>
OEA, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended April 30, Nine Months Ended April 30,
1997 1996 1997 1996
-------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Sales $ 54,396,739 $ 35,907,188 $ 151,222,656 $ 107,214,679
Cost of Sales 39,889,900 21,879,025 107,743,384 67,209,694
---------- ---------- ----------- ----------
Gross Profit 14,506,839 14,028,163 43,479,272 40,004,985
General and Administrative Expenses 1,739,633 1,606,184 5,263,890 5,121,719
Research and Development Expenses 109,395 2,726,124 1,376,018 5,584,395
------- --------- --------- ---------
Operating Profit 12,657,811 9,695,855 36,839,364 29,298,871
Other Income (Expense):
Interest Income 61,855 98,607 169,855 642,821
Interest Expense (93,793) (190) (109,872) (70,253)
Gain on Sale of Pyrospace S.A. 3,243,758 ---- 3,243,758 ----
Other, Net 209,562 222,059 269,767 10,506
------- ------- ------- ------
Total Other Income (Expense) 3,421,382 320,476 3,573,508 583,074
--------- ------- --------- -------
Earnings Before Minority Interest and Income Taxes 16,079,193 10,016,331 40,412,872 29,881,945
Minority Interest in Net Loss of Consolidated Subsidiary --- --- --- 24,594
--------- ---------- ---------- ----------
Earnings Before Income Taxes 16,079,193 10,016,331 40,412,872 29,906,539
Federal and State Income Tax Expense 5,984,830 3,434,587 15,408,951 11,079,325
--------- --------- ---------- ----------
Net Earnings $ 10,094,363 $ 6,581,744 $ 25,003,921 $ 18,827,214
=============== ============= ================ ===============
Earnings Per Share $ 0.49 $ 0.32 $ 1.22 $ 0.92
=============== ============= ================ ===============
Weighted Average Number of Shares Outstanding 20,545,595 20,502,645 20,536,284 20,495,394
========== ========== ========== ==========
</TABLE>
<PAGE>
OEA, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended April 30,
1997 1996
--------------- ---------------
<S> <C> <C>
Operating Activities:
Net Earnings $ 25,003,921 $ 18,827,214
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Undistributed earnings of foreign joint venture (301,271) (210,916)
Depreciation and amortization 11,246,377 7,521,176
Increase in deferred compensation payable 91,728 ---
Loss on disposal of property, plant and equipment --- 146,549
Changes in operating assets and liabilities:
Accounts receivable (7,018,168) 6,023
Unbilled costs and accrued earnings (53,000) (3,002,500)
Inventories (16,884,367) (10,111,766)
Prepaid expenses and other 790,922 161,244
Accounts payable and accrued expenses (651,509) (2,189,098)
Minority interest in loss of consolidated subsidiary --- (24,594)
Income taxes payable 1,913,842 1,224,877
--------- --------
Net cash provided by operating activities 14,138,475 12,348,209
Investing activities:
Additions/(reductions) to investments in
and advances to affiliates 4,624,323 (1,324,010)
Capital expenditures (58,855,885) (24,218,149)
Gain on Sale of Pyrospace S.A. (3,243,758) ---
Proceeds from sale of property, plant, and equipment --- 36,000
Increase in deferred charges (7,427,919) ---
Increase in cash value of life insurance --- (37,481)
Increase in other assets, net (6,103) (713,425)
------ --------
Net cash used in investing activities (64,909,342) (26,257,065)
Financing activities:
Purchases of common stock for treasury (116,875) (275,310)
Proceeds from issuance of treasury stock 488,121 431,003
Payment of dividends (6,162,208) (5,124,289)
Increase in borrowings, net 61,000,000 1,000,000
---------- ----------
Net cash provided by financing activities 55,209,038 (3,968,596)
Effect of exchange rate changes on cash (574,456) (259,752)
-------- --------
Net increase/(decrease) in cash and cash equivalents 3,863,715 (18,137,204)
Cash and cash equivalents at beginning of period 2,560,213 19,342,034
--------- ----------
Cash and cash equivalents at end of period $ 6,423,928 $ 1,204,830
=========== ============
</TABLE>
<PAGE>
Notes to Consolidated Condensed Financial Statements (Unaudited)
Note 1 - Basis of Presentation
The unaudited financial statements furnished above reflect all adjustments
(consisting primarily of normal recurring accruals) which are, in the opinion of
OEA's management, necessary for a fair statement of the results for the
three-month and the nine-month periods ended April 30, 1997.
Refer to the Company's annual financial statements for the year ended July 31,
1996, for a description of the accounting policies, which have been continued
without change. Also, refer to the footnotes with those financial statements for
additional details of the Company's financial condition, results of operations,
and changes in financial position. The details in those notes have not changed
except as a result of normal transactions in the interim.
Note 2 - Earnings per Share
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share is not expected to be material.
Note 3 - Bank Borrowings
On December 18, 1996, the Company entered into a four-year, $100,000,000
unsecured revolving credit agreement with a group of four banks with an interest
rate equal to .625% per annum above the federal funds rate. At the Company's
sole discretion, it may convert the loan , or any part thereof, to a Eurodollar
Loan with an interest rate equal to .625% per annum above the LIBOR rate. The
Company is required to pay an annual commitment fee equal to .125 of 1% on the
total amount of the commitment. At April 30, 1997, the long-term debt
outstanding relating to this credit facility was $75,000,000. Interest costs
incurred during the nine months ended April 30, 1997 were $2,203,733, including
capitalized interest costs of $2,093,861. The weighted average interest rate on
bank borrowings during the first nine months of fiscal year 1997 was 6%.
Note 4 - Pyrospace Merger/Sale
The Company's French aerospace affiliate, Pyrospace S.A. (45% ownership), merged
with another French aerospace company, Pyromeca S.A., effective December 31,
1996, creating a new entity, Pyroalliance S.A. OEA sold its 45% share of the
original Pyrospace to SNPE (owner of Pyromeca) for 25 million French francs
($4.8 million) and 10% ownership in Pyroalliance. This transaction was
finalized and the resulting $3.2 million gain was recorded in April 1997.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
A summary of the period to period changes in the principal items included in the
consolidated statements of earnings is shown below:
<TABLE>
<CAPTION>
Comparisons of
----------------------------------------------------------------------
Three Months Nine Months
Ended April 30, Ended April 30,
1997 and 1996 1997 and 1996
Increase (Decrease) Increase(Decrease)
--------------------------- -----------------------
<S> <C> <C> <C> <C>
Net Sales $18,489,551 51.5% 44,007,977 41.0%
Cost of Sales 18,010,875 82.3% 40,533,690 60.3%
General and
Administrative
Expenses 133,449 8.3% 142,171 2.8%
Research and
Development
Expenses (2,616,729) (96.0%) (4,208,377) (75.4%)
Net Earnings 3,512,619 53.4% 6,176,707 32.8%
</TABLE>
<PAGE>
NET SALES
The 51.5% increase in sales for the three months ended April 30, 1997, and the
41.0% increase for the nine months ended April 30, 1997, as compared to
prior-year periods, were primarily due to the sales of OEA's first generation
inflator for passenger side air bags, which began high-volume production in the
third quarter of fiscal year 1996. Automotive segment sales increased by 53.6%
for the third quarter and by 51.3% for the first nine months due to strong
customer acceptance of the Company's inflator program and to increased demand
for air bags from both domestic and foreign automobile manufacturers.
Nonautomotive segment sales increased by 42.6% and 9.8% for the third quarter
and the nine months, respectively, as compared to the prior-year periods.
COST OF SALES
Cost of sales increased by 82.3% for the three months ended April 30, 1997, and
by 60.3% for the nine months ended April 30, 1997, as compared to the prior-year
periods. Gross margins were $14,506,800, or 26.7% of sales, for the third
quarter and $43,479,300, or 28.8% of sales, for the first nine months of fiscal
year 1997 as compared to prior-year margins of $14,028,200, or 39.1% of sales,
for the third quarter and $40,005,000, or 37.3% of sales, for the first nine
months. This reflects a major shift in product mix in the automotive segment. In
the fiscal year 1996 period, initiator sales represented a significantly higher
percentage of total automotive segment sales than for the nine months ended
April 30, 1997. This decrease was directly related to increased inflator sales.
Initiators represent a more mature, higher margin product line, whereas
inflators are in the early production and start-up stages of the products' life
cycle. As production increases and the products mature, inflator margins are
expected to improve. The three new major product lines currently in the start-up
stage are: 1)the driver's side inflator, 2)the side-impact inflator, and 3)the
second generation passenger side inflator. The Company is currently in a
low-volume production mode for these three products. This further reduces
margins because low-volume production has significantly higher costs per unit
than high-volume production; however, it is an essential bridge in the Company's
rapid ramp-up to high-volume production of inflators. Initial high-volume
production of these inflators is scheduled for the fourth quarter of fiscal year
1997.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by $133,400 for the three months
ended April 30, 1997 and by $142,200 for the nine months ended April 30, 1997,
as compared to the prior-year periods. These increases are primarily attributed
to the increased activity in the Company's inflator division. The expenses, as a
percentage of sales, were as follows:
Three Months ended April 30, 1996 and 1997 4.5% to 3.2%
Nine Months ended April 30, 1996 and 1997 4.8% to 3.5%
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs decreased by $2,616,700 for the three months
ended April 30, 1997, and $4,208,400 for the nine months ended April 30, 1997,
as compared to the prior-year periods. The Company has temporarily shifted its
resources from product research and development to product launch for its
driver's side, side-impact, and second generation passenger side inflators.
Development costs are expected to remain at a low level for the remainder of
fiscal year 1997.
NET EARNINGS
Net earnings increased by $3,512,600, or 53.4%, for the three months ended April
30, 1997, and by $6,176,700, or 32.8%, for the nine months ended April 30, 1997,
as compared to prior-year periods. Approximately half of the third quarter
increase relates to a gain, net of taxes, on the sale of a portion of OEA's 45%
interest in its French joint venture, Pyrospace. Pyrospace and another French
aerospace company, Pyromeca, were merged to create a new company, Pyroalliance.
OEA retains a 10% ownership interest in Pyroalliance. The remainder of these
increases were primarily due to the increased sales of the automotive segment,
partially offset by the effects of its changing product mix. Additionally, the
significant reduction in development costs was partially offset by the
additional costs of running low-volume production lines for OEA's new inflators.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased during the quarter to $83,621,400.
During the nine-month period ended April 30, 1997, the Company made capital
expenditures totaling approximately $58,855,900 which were funded from bank
borrowings. On December 18, 1996, the Company entered into a four-year,
$100,000,000 Revolving Credit Agreement with a group of four banks. The
Company's principal bank is acting as agent for this agreement. The Company had
$75,000,000 of long-term debt against this credit facility at April 30, 1997.
Anticipated working capital requirements, capital expenditures, and facility
expansions are expected to be met through bank borrowings from the agreement
mentioned above and from internally generated funds.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements with respect to the
Company's sales, plans, products, projections and other matters. These
statements are based on assumptions as to future events and are therefore
inherently uncertain. A number of factors, including those discussed below, may
cause the Company's actual results to differ materially from those contemplated
by these forward-looking statements.
The Registrant's automotive safety products have historically consisted of
initiators which were sold to other companies for incorporation into inflators
and ultimately into air bag modules. The Company's future sales in the
automotive segment are expected to consist increasingly of inflators to be
produced by the Company in new manufacturing facilities just completed. The
Company's inflator sales will depend on its continued success in manufacturing
inflators in volume which meet the expectations of its customers and increasing
its penetration of the inflator market over time.
The Company's expectations as to future sales are based upon annual blanket
purchase orders received by customers in the automotive segment and governmental
orders received in the nonautomotive segment. Annual blanket purchase orders are
not binding on the Company's customers and actual quantities will depend upon
weekly releases received from these customers. However, because the customers
have designed the Company's products into their air bag modules, the Company
believes that the actual quantity sold will vary based on its customers sales.
Governmental orders in the nonautomotive segment can be canceled or terminated
for the convenience of the government. In addition, future technological
developments could adversely impact sales of the Company's products.
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
<PAGE>
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.
OEA, INC.
(Registrant)
June 9, 1997 _____________________
Date J. Thompson McConathy
Vice President Finance
June 9, 1997 __________________
Date Charles B. Kafadar
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000073864
<NAME> OEA, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-30-1997
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<CASH> 6,423,928
<SECURITIES> 0
<RECEIVABLES> 36,448,429
<ALLOWANCES> 0
<INVENTORY> 53,280,423
<CURRENT-ASSETS> 103,423,526
<PP&E> 211,736,410
<DEPRECIATION> 51,176,431
<TOTAL-ASSETS> 281,278,730
<CURRENT-LIABILITIES> 19,802,130
<BONDS> 0
0
0
<COMMON> 2,201,970
<OTHER-SE> 174,947,098
<TOTAL-LIABILITY-AND-EQUITY> 281,278,730
<SALES> 151,222,656
<TOTAL-REVENUES> 151,222,656
<CGS> 107,743,384
<TOTAL-COSTS> 114,383,292
<OTHER-EXPENSES> (3,573,508)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109,872
<INCOME-PRETAX> 40,412,872
<INCOME-TAX> 15,408,951
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,003,921
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.22
</TABLE>
