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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
Of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 13, 1999
ENGINEERED SUPPORT SYSTEMS, INC.
MISSOURI 0-13880 43-1313242
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
1270 North Price Road, St. Louis, Missouri 63132
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (314)993-5880
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Item 5. Other Events.
On December 13, 1999, Engineered Support Systems, Inc.
reported its operating results for the quarter and year
ended October 31, 1999 and its financial condition as of
October 31, 1999
Item 7. Financial Statements and Exhibits.
Engineered Support Systems, Inc. earnings release for the
year ended October 31, 1999
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NASDAQ - EASI GARY C. GERHARDT
FOR IMMEDIATE RELEASE (314) 993-5880
ENGINEERED SUPPORT REPORTS RECORD REVENUES AND EARNINGS
FOR FOURTH QUARTER AND FISCAL 1999
HIGHLIGHTS:
* REPORTED REVENUES (UP 78%), OPERATING INCOME (UP 37%) AND
NET INCOME (UP 8%) REPRESENT FOURTH QUARTER RECORDS
* FOURTH QUARTER DILUTED EPS OF $.32 IN 1999 ON 7 MILLION
SHARES VS. $.42 (INCLUDING $.09 GAIN ON ASSET SALE) IN
1998 ON 5 MILLION SHARES
* FUNDED BACKLOG OF DEFENSE ORDERS UP 243% TO $277 MILLION,
BUSINESS POTENTIAL OF $1.1 BILLION INCLUDING OPTIONS
ST. LOUIS, MISSOURI - DECEMBER 13, 1999 - Engineered Support
Systems, Inc. (NASDAQ: EASI) today reported net income of $2.3 million,
or $0.32 per diluted common share, on net revenues of $58.4 million for
the fourth quarter of 1999. This compares with net income of $2.1
million, or $0.42 per diluted common share, on net revenues of $32.8
million for the fourth quarter of 1998. For the year ended October 31,
1999, the Company reported net income of $7.3 million, or $1.20 per
diluted common share, on net revenues of $165.3 million. This compares
with net income of $5.8 million, or $1.16 per diluted common share, on
net revenues of $97.0 million for 1998. Net income for the comparable
periods in 1998 included an after-tax gain of $0.4 million, or $0.09 per
diluted common share, on the sale of a facility previously leased to an
unrelated third party. Per share amounts for 1999 include an additional
2 million shares of common stock the Company issued through a public
offering in April 1999. Outstanding shares of common stock totaled 6.9
million and 4.9 million at October 31, 1999 and 1998, respectively.
The Company's funded backlog of defense orders at October 31, 1999
grew to $277.2 million, or 243%, from $80.8 million in the prior year.
In addition, options on existing defense contracts totaled $850.5
million at October 31, 1999 as compared to $319.6 million in the prior
year. Commenting on the record results, Michael F. Shanahan, Sr.,
Chairman and CEO, said, "We made significant strides in broadening our
base of defense business this year through the Systems & Electronics
acquisition. Our business plan of combining the strength of our existing
operations with strategic acquisitions is proving sound."
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Reported results for the quarter and year ended October 31, 1999
include the impact of the Company's five most recent acquisitions. In
1999, the Company acquired substantially all of the net assets of the
Fermont Division of Dynamics Corporation of America (effective February
22, 1999), the inventory, fixed assets and existing operations of the
Bossier City Division of Engineered Products, Inc. (effective July 1,
1999) and all of the outstanding stock of the Systems & Electronics Inc.
(SEI) defense subsidiary of ESCO Electronics Corporation (effective
September 30, 1999). In the prior year, the Company acquired
substantially all of the net assets of Nuclear Cooling, Inc., d/b/a
Marlo Coil (effective February 1, 1998) and all of the outstanding stock
of Keco Industries, Inc. (effective June 24, 1998). All five
transactions have been accounted for as purchases and the results of
operations for each subsidiary have been included since their respective
acquisition dates.
Net revenues for the fourth quarter and year ended October 31,
1999 increased $25.6 million, or 78.1%, and $68.3 million, or 70.4%,
respectively, over the same periods in the prior year. The increase for
the fourth quarter was primarily a result of the Fermont and SEI
acquisitions occurring during 1999 with the annual increase also
favorably impacted by a full year's operations for Marlo Coil and Keco.
Current annualized revenues project to more than $350 million for fiscal
2000.
Overall gross margins decreased to 17.7% and 19.3% for the fourth
quarter and year ended October 31, 1999, respectively, as compared to
23.8% and 23.3% for the corresponding periods in the prior year. The
expected decline is due to lower gross margins at Fermont as compared to
the Company's historical defense business operations and a volume-driven
decrease in gross margins at the Company's injection molded plastics
operation. Fourth quarter 1999 gross margins compare to 19.2% for the
third quarter of the year.
Operating income for the fourth quarter and year ended October 31,
1999 grew by $1.3 million, or 36.7%, and by $4.4 million, or 43.1%,
respectively, over the same periods in 1998. The increase for the
fourth quarter reflects the acquisition of SEI during the current
quarter coupled with improved results at the Company's existing defense
operations partially offset by decreased operating income at the
Company's plastics operation as compared to the fourth quarter of 1998.
The increase for the year ended October 31, 1999 is primarily due to the
SEI acquisition, year-over-year improvement in the results of the
Company's defense business and the inclusion of a full year's operations
for Marlo Coil and Keco partially offset by decreased operating income
at the Company's plastics operation in 1999.
"Clearly, our increased revenue base and continuing earnings
improvement will deliver significant value to our shareholders,
customers and employees," said Shanahan. "We are very pleased with our
prospects."
Through its various defense-operating units, Engineered Support
Systems, Inc. specializes in the engineering, fabrication and assembly
of military support and electronics equipment for various branches of
the U.S. military and other commercial customers. The Company's
military support products include aircraft load management equipment,
heaters and air conditioners, military trailers, water purification
units, chemical and biological defense systems, coils and air handling
units, bridging systems and other multipurpose military support
equipment. Electronics equipment manufactured by the Company includes
airborne radar systems, automatic test equipment, fire support/control
systems, and generator sets. For commercial and industrial markets, the
Company also
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engineers and manufactures air handling and heat transfer equipment,
material handling equipment, custom molded plastics products and a
proprietary line of plastic faucets.
Statements contained herein, which are not historical facts, are
forward looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
and Exchange Act of 1934, as amended, which are intended to be covered
by the safe harbors created thereby. Important factors which could
cause the Company's actual results to differ materially from those
projected in, or inferred by, forward looking statements include, but
are not limited to, the following: the decision of any of the Company's
key customers, including the U.S. government, to reduce or terminate
orders with the Company; cutbacks in defense spending by the U.S.
government; increased competition in the Company's markets; the
Company's ability to achieve and integrate acquisitions; and other risks
discussed in the Company's reports filed with the Securities and
Exchange Commission from time to time.
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ENGINEERED SUPPORT SYSTEMS, INC.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
OCTOBER 31 OCTOBER 31
-------------------- --------------------
1999 1998 1999 1998
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net Revenues $58,422 $32,796 $165,256 $96,973
======= ======= ======== =======
Operating Income $ 4,791 $ 3,504 $ 14,656 $10,242
======= ======= ======== =======
Net Income $ 2,261 $ 2,099 $ 7,309 $ 5,789
======= ======= ======== =======
Earnings per Share:
Basic $0.33 $0.43 $1.23 $1.21
======= ======= ======== =======
Diluted $0.32 $0.42 $1.20 $1.16
======= ======= ======== =======
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Funded Backlog of Defense
Orders at October 31 $ 277,156 $ 80,801
Options on Existing Defense
Contracts at October 31 850,479 319,575
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$1,127,635 $400,376
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ENGINEERED SUPPORT SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXPECT PER SHARE AMOUNTS)
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
OCTOBER 31 OCTOBER 31
---------------------- -----------------------
1999 1998 1999 1998
------- ------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues $58,422 $32,796 $165,256 $96,973
Cost of revenues 48,100 24,998 133,377 74,343
------- ------- -------- -------
Gross profit 10,322 7,798 31,879 22,630
Selling, general and administrative
expense 5,531 4,294 17,223 12,388
------- ------- -------- -------
Income from operations 4,791 3,504 14,656 10,242
Interest income (expense) (1,022) (731) (2,600) (1,474)
Gain on sale of assets 5 728 124 879
------- ------- -------- -------
Income before income taxes 3,774 3,501 12,180 9,647
Income tax provision 1,513 1,402 4,871 3,858
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Net income $2,261 $2,099 $7,309 $5,789
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Earnings per share: <F1><F2>
Basic $.33 $.43 $1.23 $1.21
======= ======= ======== =======
Diluted $.32 $.42 $1.20 $1.16
======= ======= ======== =======
Average common shares outstanding: <F1><F2>
Basic 6,889 4,840 5,926 4,785
======= ======= ======== =======
Diluted 7,035 5,008 6,082 4,991
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<FN>
<F1>All share and per share amounts reflect a 3-for-2- stock split
effected June 26, 1998.
<F2>All 1999 share and per share amounts reflect the issuance on April
23, 1999 of an additional 2 million shares of common stock through a
public offering.
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ENGINEERED SUPPORT SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
OCTOBER 31, OCTOBER 31,
1999 1998
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 310 $ 5,774
Accounts receivable 23,577 14,036
Contracts in process and inventories 68,351 18,687
Deferred income taxes 3,516 113
Other current assets 4,397 1,429
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Total current assets 100,151 40,039
Property, plant and equipment, net 60,015 25,065
Goodwill, net 74,354 25,836
Deferred income taxes 386 -
Other assets 4,092 1,220
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Total Assets $238,998 $92,160
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 23,900 $ -
Current maturities of long-term debt 10,038 7,204
Accounts payable 27,478 7,285
Other current liabilities 24,430 7,341
-------- -------
Total current liabilities 85,846 21,830
Long-term debt 80,075 36,779
Other liabilities 9,077 -
Deferred income taxes - 2,660
ESOP guaranteed bank loan 578 725
Shareholders' Equity
Common stock, par value $.01 per share; 10,000
shares authorized; 7,504 and 5,491 shares issued 75 55
Additional paid-in capital 37,032 11,082
Retained earnings 30,781 23,683
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67,888 34,820
Less ESOP guaranteed bank loan 578 725
Less treasury stock at cost, 615 and 639 shares 3,888 3,929
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63,422 30,166
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Total Liabilities and Shareholders' Equity $238,998 $92,160
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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 hereunto duly authorized.
ENGINEERED SUPPORT SYSTEMS, INC.
Date: December 13, 1999 BY: Gary C. Gerhardt
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Gary C. Gerhardt
Vice Chairman-Administration and
Chief Financial Officer
