SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Quarterly period ended October 31, 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
incorporation or organization) Identification 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.
20,576,257 Shares of Common Stock at December 10, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Index to Financial Statements Page No.
Consolidated Condensed Balance Sheets
October 31, 1997 (unaudited)
and July 31, 1997.............................. 2
Consolidated Condensed Statements
of Earnings (unaudited)
Three Months
Ended October 31, 1997 and 1996................ 3
Consolidated Condensed Statements
of Cash Flows (unaudited) Three Months
Ended October 31, 1997 and 1996................ 4
Notes to Consolidated Condensed Financial
Statements (Unaudited)......................... 5
<PAGE>
<TABLE>
OEA, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
ASSETS
October 31, July 31,
1997 1997
--------- --------
Current Assets: (Unaudited)
<S> <C> <C>
Cash and Cash Equivalents $ 4,554 $ 4,138
Accounts Receivable, Net 46,524 45,099
Unbilled Costs and Accrued Earnings 4,109 4,062
Income Taxes Receivable 1,449 2,568
Inventories
Raw Material and Component Parts 41,861 39,786
Work-in-Process 21,521 21,107
Finished Goods 11,000 9,513
-------- --------
74,382 70,406
Prepaid Expenses and Other 2,007 1,046
-------- --------
Total Current Assets 133,025 127,319
-------- --------
Property, Plant and Equipment 256,882 238,545
Less: Accumulated Depreciation 58,913 54,651
-------- --------
Property, Plant and Equipment, 197,969 183,894
Net
Cash Value of Life Insurance 317 317
Long-Term Receivable 3,000 3,000
Investment in Foreign Joint Venture 2,323 2,323
Deferred Charges --- 13,527
Other Assets 1,201 1,176
-------- --------
Total Assets $ 337,835 $ 331,556
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 17,714 $ 27,043
Interest Payable 1,714 1,431
Dividends Payable 6,800 ---
Accrued Expenses 4,388 6,251
Federal and State Income Taxes 1,306 1,306
-------- --------
Total Current Liabilities 31,922 36,031
Long-term Bank Borrowings 120,000 93,200
Deferred Income Taxes 9,388 14,562
Other 985 985
-------- --------
Total Liabilities 162,295 144,778
-------- --------
Stockholders' Equity:
Common Stock - $.10 par value, Authorized 50,000,000 shares:
Issued - 22,019,700 shares 2,202 2,202
Additional Paid-In Capital 13,030 12,956
Retained Earnings 164,340 176,547
Less: Cost of Treasury Shares, (2,176) (2,164)
1,447,443 and 1,467,531
Equity Adjustment from Translation (1,856) (2,763)
-------- --------
Total Stockholders' Equity 175,540 186,778
-------- --------
Total Liabilities and $ 337,835 $ 331,556
Stockholders' Equity ======== ========
</TABLE>
<PAGE>
<TABLE>
OEA, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited)
(in thousands except share data)
Three Months Ended
October 31,
1997 1996
-------- --------
<S> <C> <C>
Net Sales $ 57,335 $ 45,340
Cost of Sales 47,171 30,825
-------- --------
Gross Profit 10,164 14,515
General and Administrative Expenses 1,885 1,574
Research and Development Expenses 301 1,183
-------- --------
Operating Profit 7,978 11,758
Other Income (Expense):
Interest Income 131 44
Interest Expense (975) (13)
Other, Net 154 (114)
-------- --------
(690) (83)
-------- --------
Earnings Before Income Taxes 7,288 11,675
Federal and State Income Tax Expense 2,656 4,570
-------- --------
Net Earnings Before Cumulative
Effect of a
Change in Accounting Principle $ 4,632 $ 7,105
Cumulative Effect of a Change in Accounting (10,040) ---
Principle
-------- --------
Net Earnings (Loss) $ (5,408) $ 7,105
======== ========
Earnings per Share Before Cumulative
Effect of a
Change in Accounting Principle $ 0.23 $ 0.35
Cumulative Effect of a Change in (0.49) ---
Accounting Principle
-------- --------
Earnings (Loss) per Share $ (0.26) $ 0.35
======== ========
Weighted Average Number of Shares Outstanding 20,557,178 20,520,151
======== ========
</TABLE>
<PAGE>
<TABLE>
OEA, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
Three Months Ended
October 31,
1997 1996
-------- --------
<S> <C> <C>
Operating Activities:
Net Earnings $ (5,408) $ 7,105
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Undistributed earnings of foreign joint --- (50)
venture
Cumulative effect of a change in accounting 10,040 ---
principal
Depreciation and amortization 5,066 3,618
Increase in deferred compensation payable --- 31
Loss on disposal of property, plant and 2 ---
equipment
Changes in operating assets and liabilities:
Accounts receivable (1,099) 1,633
Unbilled costs and accrued earnings (47) (1,412)
Inventories (3,862) (3,556)
Prepaid expenses and other (1,018) (203)
Accounts payable and accrued expenses (11,266) (8,813)
Income taxes payable 1,902 3,782
-------- --------
Net cash provided by/(used in) (5,690) 2,135
operating activities
Investing activities:
Capital expenditures (20,587) (7,077)
Proceeds from sale of property, plant, and --- ---
equipment
Increase in deferred charges --- (752)
Increase in other assets, net (35) (8)
-------- --------
Net cash used in investing (20,622) (7,837)
activities
Financing activities:
Purchases of common stock for treasury (43) ---
Proceeds from issuance of treasury stock 105 210
Increase in borrowings, net 26,800 8,000
-------- -------
Net cash provided by financing 26,862 8,210
activities
Effect of exchange rate changes (134) 16
on cash
-------- --------
Net increase/(decrease) in cash 416 2,524
and cash equivalents
Cash and cash equivalents at beginning of 4,138 2,560
period
-------- --------
Cash and cash equivalents at end of period $ 4,554 $ 5,084
======== ========
</TABLE>
<PAGE>
Notes to Consolidated Condensed Financial Statements (Unaudited)
Note 1 - Basis of Presentation
The unaudited financial statements furnished above have been restated to reflect
the early adoption of the AICPA's Statement of Position 98-5 "Reporting on the
Costs of Start-up Activities" (see Note 3 below). Additionally, the unaudited
financial statements reflect all other 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 period ended
October 31, 1997.
Refer to the Company's annual financial statements
for the year ended July 31, 1997, for a description of the accounting policies,
which have been continued without change, except for the company's policy with
respect to deferred start-up costs, as discussed at Note 3 below. 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
Earnings per share of common stock is computed on the basis of the weighted
average number of shares outstanding during the year. The effect on reported
earnings per share from the assumed exercise of stock options outstanding during
the three months ended October 31, 1997 and 1996 would be insignificant.
In February 1997, the FASB issued Statement No. 128, Earnings per Share. The
statement simplifies the standards for computing earnings per share ("EPS"), and
requires the presentation of both basic and diluted EPS on the face of the
statement of earnings with supplementary disclosures. Statement No. 128 will be
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. The Company will adopt Statement No. 128 in the
second quarter of fiscal 1998 and does not expect the impact on the calculation
of primary earnings per share and fully diluted earnings per share to be
material.
Note 3 - Start-up Costs
In April 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities." This Statement requires entities to expense costs of start-up
activities as they are incurred and to report the initial adoption as a
cumulative effect of a change in accounting principle as described in Accounting
Principles Board Opinion No. 20, "Accounting Changes." Statement of Position No.
98-5 is effective for fiscal years beginning after December 15, 1998. However,
in July 1998, the Company elected to adopt Statement of Position 98-5
retroactively to the first quarter of fiscal 1998. This election required the
restatement of fiscal 1998 quarterly financial statements to reflect a $10
million cumulative effect of a change in accounting principle in the first
quarter and to expense start-up costs previously capitalized during the year.
Note 4 - Recently Issued Pronouncements
In June 1997, the FASB issued Statement No. 130, Reporting
Comprehensive Income. The Statement establishes standards for
reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. Statement
No. 130 will be effective for fiscal years beginning after
December 15, 1997. The Company will adopt Statement No. 130
during the first quarter of fiscal year 1999, and does not expect
the impact to be material.
In June 1997, the FASB issued Statement No. 131, Disclosures about Segments of
an Enterprise and Related Information. The Statement requires public business
enterprises to report certain information about operating segments in complete
sets of financial statements of the enterprise and in condensed financial
statements of interim periods issued to shareholders. It also requires that
public business enterprises report certain information about their products and
services, the geographic areas in which they operate, and their major customers.
Statement No. 131 will be effective for fiscal years beginning after December
15, 1997. The Company will adopt Statement No. 131 in its fiscal year 1999.
Note 5 - Bank Borrowings
On December 18, 1996, the Company entered into an unsecured, four-year, $100
million Revolving Credit Agreement with a group of four banks. This agreement
was amended on September 10, 1997 to increase the revolving credit facility to
$130 million. The interest rate is .625% above the federal funds rate when total
indebtedness is equal to or less than 30% of total capitalization and increases
to .7% above the federal funds rate when total indebtedness exceeds 30% of total
capitalization. Additionally, the Company pays an annual fee equal to .125% of
the banks' total commitment. At the Company's discretion, it may convert all or
part of the total debt to Eurodollar or Alternate Base Rate loan(s). The credit
facility expires on December 18, 2000, and provides for annual twelve-month
extensions to the termination date. At October 31, 1997, the total debt
outstanding related to the revolving credit facility was $120 million. All debt
relating to this facility is classified as long-term since no portion is either
due or expected to be permanently repaid within the next twelve-month period.
<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>
Comparisons of
Three Months
Ended October 31, 1997 and 1996
Increase (Decrease)
(in thousands)
<S> <C> <C>
Net Sales 11,995 26.5%
Cost of Sales 16,346 53.0%
General and
Administrative Expenses 311 19.8%
Research and
Development Expenses (882) (74.6%)
Net Earnings Before Cumulative Effect
of a Change in Accounting Principle (2,473) (34.8%)
Net Earnings (12,513) (176.1%)
</TABLE>
<PAGE>
NET SALES
The 26.5% increase in sales for the three months ended October 31, 1997,
as compared to the prior-year period, was due to increased sales in both
the automotive and nonautomotive segments. The automotive segment sales
increased 23.7% ($8.6 million) to $45.0 million primarily due to 1)
increased sales of OEA's first generation passenger side inflator, 2)
sales of OEA's driver side, side-impact and second generation passenger
side inflators, which began high-volume production late in the fourth
quarter of fiscal year 1997, and partially offset by 3) a temporary
reduction in initiator sales due to the timing of customer releases. This
reflects continued strong customer acceptance of the Company's inflator
program and increased demand for air bags from both domestic and foreign
automobile manufacturers. The nonautomotive segment sales increased by
37.4% ($3.4 million) to $12.3 million for the first quarter, as compared
to the prior-year period, primarily due to increases in engineering
development contracts, the Delta satellite launcher program and the V-22
Osprey (tiltrotor aircraft) program.
COST OF SALES
Cost of sales increased by 53.0% for the three months ended October 31,
1997, as compared to the prior-year period. Gross margins were $10.2
million, or 17.7% of sales, for the first quarter as compared to the
prior-year margin of $14.5 million, or 32.0% of sales. Gross margins in
both initiators and inflators were below prior-year levels in the
automotive segment. Initiator margins were down due to scheduled price
reductions and lower leverage of fixed costs as a result of lower volume.
Inflator costs were higher than in the prior-year period due to the
ramp-up of four new production lines. The new lines will increase the
annual production capacity for the Company's first generation passenger
side inflator from 3 million to 5 million units and will add three new
inflator product lines with an annual production capacity of 10 million
units. These new product lines are 1) the driver's side inflator, 2) the
side-impact inflator, and 3) the second-generation passenger side
inflator. Production of the new inflator lines began late in the fourth
quarter of fiscal 1997 and the production ramp-up will continue through
the second quarter of fiscal 1998. Margins were further impacted by the
continuing shift in product mix from initiators to inflators. In the first
quarter of fiscal year 1997, initiator sales represented 46.2% of total
automotive segment sales, whereas they represented only 26.3% of total
automotive segment sales in the first quarter of fiscal year 1998.
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.
Additionally, inflator costs were higher than in the prior-year period due
to the adoption of the AICPA's Statement of Position 98-5, "Reporting the
Costs of Start-up Activities," which required that $2.6 million of
previously capitalized start-up costs be expensed in the first quarter of
fiscal 1998. This was partially offset by the reversal of $.3 million of
capitalized start-up cost amortization, which previously had been expensed
in the first quarter of fiscal 1998.
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by $0.3 million for the
three months ended October 31, 1997, as compared to the prior-year period.
This increase is primarily attributed to the increased activity in the
Company's inflator division. The expenses, as a percentage of sales, were
3.3% in the first quarter of fiscal 1998 as compared to 3.5% for the
prior-year period.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs decreased by $0.9 million for the three
months ended October 31, 1997, as compared to the prior-year period. The
Company has shifted its resources from product research and development to
product launch for its driver side, side-impact, and second-generation
passenger side inflators. Development costs are not expected to increase
significantly for the remainder of fiscal year 1998.
NET EARNINGS BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE
Net earnings before cumulative effect of a change in accounting principle
decreased by $2.5 million, or 34.8%, for the three months ended October
31, 1997, as compared to the prior-year period. This reflects the higher
costs associated with the product launch of the Company's three new
inflator product lines, the expensing of inflator start-up costs incurred
in the current period due to the adoption of the AICPA's Statement of
Position 98-5 and the effects of the Company's changing product mix.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities" (SOP 98-5). This Statement requires entities to
expense costs of start-up activities as they are incurred and to report
the initial adoption as a cumulative effect of a change in accounting
principle as described in Accounting Principles Board Opinion No. 20,
"Accounting Changes." Start-up activities are defined broadly as those
one-time activities related to opening a new facility, introducing a new
product or service, conducting business in a new territory, conducting
business with a new class of customer or beneficiary, initiating a new
process in an existing facility, or commencing some new operation.
SOP 98-5 is effective for fiscal years beginning after December 15, 1998.
However, in July 1998 the Company elected to adopt it retroactively to the
first quarter of fiscal 1998. Accordingly, the fiscal 1998 first quarter
financial statements have been restated to expense start-up costs in the
net amount of $2.3 million (see "Cost of Sales" above). Additionally, the
Company wrote off the net book value ($10.0 million) of its start-up and
related costs included in the scope of SOP 98-5 as a one-time adjustment
referred to as a Cumulative Effect of a Change in Accounting Principle.
The total after-tax amount of these adjustments for the quarter is $11.5
million.
<PAGE>
NET EARNINGS
Net earnings decreased by $12.5 million, or 176.1%, for the three months
ended October 31, 1997, as compared to the prior-year period. This
primarily reflects the adoption of SOP 98-5, "Reporting the Costs of
Start-up Activities," and the operational and product mix issues discussed
above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased during the quarter to $101.1
million. During the three-month period ended October 31, 1997, the Company
made capital expenditures totaling approximately $20.6 million, which were
funded from bank borrowings. On December 18, 1996, the Company entered
into a four-year, $100 million Revolving Credit Agreement with a group of
four banks. The Company's principal bank is acting as agent for this
agreement. On September 10, 1997, the agreement was amended to increase
the revolving credit facility to $130 million. The Company had $120
million of long-term debt against this credit facility at October 31,
1997. Anticipated working capital requirements, capital expenditures, and
facility expansions are expected to be met through bank borrowings under
the revolving credit agreement and from internally generated funds.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements with respect to
the Company's sales, earnings, market penetration, 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 and elsewhere herein, may cause
the Company's actual results to differ materially from those contemplated
by these forward-looking statements.
The Company's future sales in the automotive segment are expected to
consist increasingly of passenger, driver and side-impact inflators that
are being produced by the Company in new manufacturing facilities. These
facilities are currently in operation and will have the ability to run at
full capacity by the end of the fiscal year 1998. The Company's future
inflator sales and market penetration will depend on its continued success
in manufacturing inflators which meet the expectations of its customers in
1998 and beyond.
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 and inflators, the Company believes
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>
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)
October 27, 1998 /s/ J Thompson McConathy
Date J. Thompson McConathy
Vice President Finance
(Principal Financialand Accounting Officer)
October 27, 1998 /s/ Charles B Kafadar
Date Charles B. Kafadar
Chief Executive Officer
(Principal Executive Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000073864
<NAME> OEA, INC./DE/
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1.00
<CASH> 4,554,000
<SECURITIES> 0
<RECEIVABLES> 46,524,000
<ALLOWANCES> 0
<INVENTORY> 74,382,000
<CURRENT-ASSETS> 133,025,000
<PP&E> 256,882,000
<DEPRECIATION> 58,913,000
<TOTAL-ASSETS> 337,835,000
<CURRENT-LIABILITIES> 31,922,000
<BONDS> 0
0
0
<COMMON> 2,202,000
<OTHER-SE> 173,338,000
<TOTAL-LIABILITY-AND-EQUITY> 337,835,000
<SALES> 57,335,000
<TOTAL-REVENUES> 57,335,000
<CGS> 47,171,000
<TOTAL-COSTS> 49,357,000
<OTHER-EXPENSES> 690,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 975,000
<INCOME-PRETAX> 7,288,000
<INCOME-TAX> 2,656,000
<INCOME-CONTINUING> 4,632,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (10,040,000)
<NET-INCOME> (5,408,000)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
