FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[ X ] Quarterly Report Pursuant to Section 12 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1994
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______________________
to________________________
For Quarter Ended March 31, 1994
Commission File Number 0-16572
AVONDALE INDUSTRIES, INC.
Louisiana 39-1097012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 50280, New Orleans, Louisiana 70150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 504/436-2121
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.
Class
Outstanding at March 31, 1994
Common stock, par value $1.00 per share 14,464,175 shares
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Independent Accountants' Report
Consolidated Balance Sheets -
March 31, 1994 and December 31, 1993
Consolidated Statements of Operations -
Three Months Ended March 31, 1994 and 1993
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1994 and 1993
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
<PAGE>
[LETTERHEAD OF DELOITTE & TOUCHE]
To the Board of Directors and Shareholders of
Avondale Industries, Inc.
We have reviewed the condensed consolidated financial statements of
Avondale Industries, Inc. and subsidiaries, as listed in the
accompanying index, as of March 31, 1994 and for the three-month
periods ended March 31, 1994 and 1993. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and of making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to such condensed consolidated financial statements
for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Avondale
Industries, Inc. and subsidiaries as of December 31, 1993, and the
related consolidated statements of operations, shareholders' equity,
and cash flows for the year then ended (not presented herein); and in
our report dated March 22, 1994, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1993 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it
has been derived.
\s\ DELOITTE & TOUCHE
New Orleans, Louisiana
May 2, 1994
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
March 31, December 31,
1994 1993
-------- --------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents. . . . . . . $ 8,903 $ 3,195
Restricted short-term investments (Note 4) 13,891
Receivables (Note 2):
Accounts receivable. . . . . . . . . 18,731 103,020
Contracts in progress. . . . . . . . 44,446 27,032
Inventories:
Goods held for sale. . . . . . . . . 4,171 4,604
Materials and supplies . . . . . . . 8,813 9,005
Prepaid expenses . . . . . . . . . . . 4,326 4,741
--------- --------
Total current assets . . . . . . . . 103,281 151,597
--------- --------
Property, Plant And Equipment:
Land . . . . . . . . . . . . . . . . . . 9,324 9,324
Buildings and improvements . . . . . . . 46,191 46,162
Machinery and equipment. . . . . . . . . 173,018 173,456
-------- --------
Total. . . . . . . . . . . . . . . . . 228,533 228,942
Less accumulated depreciation. . . . . . (105,634) (103,400)
-------- --------
Property, plant and equipment - net. . 122,899 125,542
-------- --------
Goodwill - net . . . . . . . . . . . . . 17,637 17,892
Other assets . . . . . . . . . . . . . . 6,203 7,108
-------- --------
Total assets . . . . . . . . . . . . $ 250,020 $ 302,139
======== ========
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
March 31, December 31,
1994 1993
-------- --------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable - banks. . . . . . . . . $ 16 $ 38,303
Current portion of long-term debt. . . 776 6,568
Accounts payable . . . . . . . . . . . 51,796 56,797
Accrued employee compensation. . . . . 12,459 12,352
Other. . . . . . . . . . . . . . . . . 8,429 13,012
-------- --------
Total current liabilities. . . . . . 73,476 127,032
Notes payable - banks. . . . . . . . . . 102 107
Long-term debt . . . . . . . . . . . . . 43,353 43,741
Other liabilities and deferred credits . 16,700 16,904
-------- --------
Total liabilities. . . . . . . . . . . 133,631 187,784
-------- --------
Commitments and contingencies (Note 4)
SHAREHOLDERS' EQUITY:
Common stock, $1.00 par value, authorized
30,000,000 shares; issued - 15,927,191 shares
in 1994 and 1993 . . . . . . . . . . . 15,927 15,927
Additional paid-in capital . . . . . . 373,911 373,911
Accumulated deficit. . . . . . . . . . (261,593) (263,627)
-------- --------
Total. . . . . . . . . . . . . . . . 128,245 126,211
Treasury stock (common: 1,463,016 shares in 1994
and 1993) at cost. . . . . . . . . . . ( 11,856) ( 11,856)
-------- --------
Total shareholders' equity . . . . . . . 116,389 114,355
-------- --------
Total. . . . . . . . . . . . . . . . . $ 250,020 $ 302,139
======== ========
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1994 1993
-------- --------
Net sales. . . . . . . . . . . . . . . . $ 105,034 $ 139,353
Cost of sales. . . . . . . . . . . . . . 95,151 129,167
-------- --------
Gross profit . . . . . . . . . . . . . . 9,883 10,186
Selling, general and administrative expenses 6,765 7,426
-------- --------
Income from operations . . . . . . . . . 3,118 2,760
Interest expense . . . . . . . . . . . . ( 1,220) ( 2,452)
Other - net. . . . . . . . . . . . . . . 136 40
-------- --------
Income before income taxes . . . . . . . 2,034 348
Income taxes (Note 5). . . . . . . . . . -- --
-------- --------
Net income . . . . . . . . . . . . . . . $ 2,034 $ 348
======== ========
Income per share of common stock (Note 6) $ 0.14 $ 0.02
======== ========
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(In thousands)
(UNAUDITED)
1994 1993
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . $ 2,034 $ 348
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization. . . . 2,878 3,001
Changes in operating assets and liabilities,
net of dispositions:
Receivables. . . . . . . . . . . . 66,875 (8,705)
Inventories. . . . . . . . . . . . 625 1,864
Prepaid expenses . . . . . . . . . 415 1,465
Accounts payable . . . . . . . . . (5,001) (6,863)
Accrued employee compensation. . . 107 3,905
Other - net. . . . . . . . . . . . (3,099) 1,063
-------- --------
Net Cash Provided By (Used For)
Operating Activities . . . . . . . . 64,834 (3,922)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . (763) (341)
Proceeds from sale of assets . . . . . 7,428
Purchase of restricted short-term investments (13,891)
-------- --------
Net Cash Provided By (Used For)
Investing Activities . . . . . . . . (14,654) 7,087
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES -
Payment of long-term borrowings. . . . (44,472) (6,944)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS. . . . . . . . . . . . 5,708 (3,779)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD . . . . . . . . . . 3,195 7,613
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD . . . . . . . . . . . . . . . $ 8,903 $ 3,834
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ 761 $ 2,007
======== ========
See Notes to Consolidated Financial Statements.
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include the accounts of Avondale Industries, Inc. and its
subsidiaries ("Avondale" or the "Company"). In the opinion of the
management of the Company, all adjustments (such adjustments
consisting only of a normal recurring nature) necessary for a fair
presentation of the operating results for the interim periods
presented have been included in the interim financial statements.
These interim financial statements should be read in conjunction
with the December 31, 1993 audited financial statements and
related notes filed on Form 10-K for the year ended December 31,
1993 (the "1993 Form 10-K").
The financial statements required by Rule 10-01 of Regulation S-X
have been reviewed by independent public accountants as stated in
their report included herein.
2. RECEIVABLES
The following information presents the elements of receivables at
March 31, 1994 and December 31, 1993 (in thousands):
1994 1993
-------- --------
(Unaudited)
Long-term contracts:
U.S. Government:
Amounts billed . . . . . . . . . $ 8,916 $ 90,867
Unbilled costs and estimated
profits on contracts in
progress . . . . . . . . . . . 27,487 16,813
-------- --------
Total. . . . . . . . . . . . . . 36,403 107,680
Commercial:
Amounts billed . . . . . . . . . 6,381 8,820
Unbilled costs and estimated
profits on contracts in
progress . . . . . . . . . . . 16,959 10,219
-------- --------
Total from long-term contracts . . 59,743 126,719
Trade and other current receivables. . 3,434 3,333
-------- --------
Total. . . . . . . . . . . . . . . . . $ 63,177 $ 130,052
======== ========
Unbilled costs and estimated profits on contracts in progress were
not billable to customers at the balance sheet dates under terms
of the respective contracts. As discussed in Note 2 of the
<PAGE>
Company's Annual Report on the 1993 Form 10-K, as a result of the
Company's settlement with the U.S. Navy of its Requests for
Equitable Adjustments ("REAs"), in December 1993, the Company
invoiced approximately $90.0 million of the settlement amount, all
of which was received by April 18, 1994.
3. FINANCING ARRANGEMENTS
Avondale is finalizing a $35.0 million revolving credit facility
which will be secured principally by working capital assets and
the Company's 900 foot-long drydock. Among other things, the
credit facility includes the right of Avondale to call upon the
bank group to post letters of credit on Avondale's behalf up to an
aggregate limit of $25.0 million (of the $35.0 million total) in
support of its operations. The credit facility will replace an
existing credit facility under which $13.9 million of letters of
credit were outstanding at March 31, 1994. The current letters of
credit are cash collaterized with $13.9 million of restricted
short-term investments which, with the execution of the new
revolving credit facility, will be released to the Company.
At the beginning of May, Avondale also called for redemption on
June 1, 1994 of $36.25 million of its Series 1983 Industrial
Revenue Bonds which were due June 2001. Avondale intends to
refinance the Bonds through the issuance of refunding bonds to
mature no earlier than 2004. Avondale is currently negotiating
the terms under which the refunding bonds will be issued.
4. COMMITMENTS AND CONTINGENCIES
Litigation
In January 1986, the Louisiana Department of Environmental Quality
advised the Company that it may be a responsible party with
respect to an oil reclamation site operated by an unaffiliated
company. The Company supplied a portion of the waste oil that was
processed at the reclamation site during the period 1978 through
1982. Potential liability, if any, for clean-up of this site
typically would be apportioned among the responsible parties based
on the volume of material sent by each to the waste site. The
Company and certain of the other potentially responsible parties
for the site have entered into a preliminary agreement to fund the
site's remediation. Pursuant to that agreement, the Company has
agreed to contribute up to $3.5 million to the total clean-up
costs which are expected to approximate $15 million in the
aggregate. At March 31, 1994 the Company has contributed $3.3
million of the $3.5 million. Following completion of the
remediation, a final determination will be made as to the proper
allocation of the remediation responsibility among the various
parties. The Company's share of the clean-up costs could be
lower, or higher, than the $3.5 million that it will have
contributed, but the Company does not expect its remediation costs
to vary materially from this amount.
Additionally, since July 1986, a number of toxic tort suits have
been filed seeking substantial damages against the Company and
numerous other defendants alleging various claims in connection
with this oil reclamation site. The Company has initiated
litigation against its insurer for a declaration of coverage of
the liability, if any, that may arise in connection with the
<PAGE>
remediation of the site referred to in the preceding paragraph or
the related tort litigation. The court has ruled that the insurer
has the duty to defend the Company, but has not yet ruled on
whether the carrier has a duty to indemnify the Company if any
liability is ultimately assessed against it.
In addition to the above, the Company is also named as a defendant
in numerous other lawsuits and proceedings arising in the ordinary
course of business, some of which involve substantial damage
claims. While the outcome of these lawsuits and proceedings
against the Company cannot be predicted with certainty, management
does not expect these matters to have a material adverse effect on
the financial condition or results of operations of the Company.
The Company has established accruals for certain of the litigation
discussed above, and in the opinion of management, after review
with counsel, the eventual disposition of these matters will not
have a material adverse effect on its financial condition or
results of operations.
Ogden
Under the terms of certain agreements entered into between the
Company and its former parent, Ogden Corporation ("Ogden"), the
Company may be required to issue to Ogden approximately $25
million of preferred stock or subordinated debt upon the final
resolution of certain significant litigation or tax matters that
arose while it was a subsidiary of Ogden. The issuance, to the
extent required, of substantially all of this preferred stock or
subordinated debt would be accounted for as an adjustment to the
purchase price incurred in connection with Ogden's sale of the
Avondale Common Stock to Avondale's Employee Stock Ownership Plan
("the Spin-Off"), which adjustment would ordinarily result in a
concurrent increase to the Company's goodwill. The Company will
have to assess the appropriate carrying value of any goodwill
recorded and, to the extent it is determined that all or any
portion of such goodwill is impaired, there would be a charge to
operations.
In addition, should Ogden pay any amounts on behalf of the Company
in its capacity as guarantor of the Company's $36.25 million
Industrial Revenue Bonds (see Note 6 of the Company's Annual
Report on the 1993 Form 10-K), the Company may be required to
issue additional shares of preferred stock or subordinated debt to
Ogden equal to the amount of such payments.
The Company and Ogden have entered into a letter agreement
providing for the termination of these agreements. Under the
terms of the new agreement, the previous agreements will terminate
upon payment by the Company to Ogden of $13.0 million to settle
any potential tax matters (including interest). The payment will
consist of $5.0 million cash on June 1, 1994 and a two-year
unsecured note in the principal amount of $8.0 million, bearing
interest at 10% per annum and payable in $5.0 million and $3.0
million installments in 1995 and 1996, respectively. In addition,
the Company is required to successfully complete the refunding of
the $36.25 million Industrial Revenue Bonds without the Ogden
guarantee and to secure by September 30, 1994 Ogden's release from
its other guarantees of the Company's obligations (see Note 3
herein).
<PAGE>
Letters of Credit
In the normal course of its business activities, the Company is
required to provide letters of credit to secure the payment of
workers' compensation and insurance obligations. Additionally,
under certain contracts the Company may be required to provide
letters of credit which may be drawn down in the event of the
Company's failure to perform under the contracts. Outstanding
letters of credit relating to these business activities amounted
to $13.9 million and $13.0 million at March 31, 1994 and December
31, 1993, respectively. The outstanding letters of credit at
March 31, 1994 are cash collateralized by $13.9 million of
restricted short-term investments. As discussed under "Ogden"
above, the Company has agreed to secure Ogden's release from
certain guarantees of the Company's obligations. The Company
anticipates that it will be necessary to post approximately $7.0
million of additional letters of credit to satisfy this
obligation.
5. INCOME TAXES
No provision for income taxes is reflected in the accompanying
financial statements due to the availability of net operating loss
carryforwards, the benefits of which have not been fully
recognized in the Company's financial statements (see Note 8 of
the Company's Annual Report on the 1993 Form 10-K).
6. INCOME PER SHARE
The weighted average number of shares used in the computation of
income per share was 14,480,000 and 14,464,000 for the quarters
ended March 31, 1994 and 1993, respectively.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with the
Company's unaudited consolidated financial statements for the
periods ended March 31, 1994 and 1993 and Management's Discussion
and Analysis of Financial Condition and Results of Operations
included under Item 7 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1993 (the "1993 Form 10-K").
Results of Operations
The Company recorded net income of approximately $2.0 million, or
$0.14 per share, for the first quarter ended March 31, 1994
compared to $348,000, or $0.02 per share, for the first quarter
of 1993. The improvement in the Company's first-quarter 1994 net
income resulted from several factors, primarily the Company's
success in reducing operating expenses and a reduction in
interest expense.
Net sales for the first quarter ended March 31, 1994 decreased
approximately $34.3 million, or 24.6%, from the same period in
1993. The decrease in net sales is consistent with a declining
level of activity in the Company's shipbuilding operations, with
most of the Company's net sales attributable to shipbuilding
contracts with the U.S. Navy to build seven T-AO Oilers (three of
which remain to be completed), three Landing Ship Docks - Cargo
Variant (LSD-CV) and four MHC-51 Class Coastal Minehunters
(MHCs)(all of which remain to be completed).
Gross profit of $9.9 million for the current quarter is
consistent with the $10.2 million gross profit reported for the
same period in the prior year. Contributing to the 1994 gross
profit were profits currently being recognized as work progresses
on the two gaming vessels scheduled for delivery in the third
quarter of 1994 and on the contract to construct the seven T-AOs.
The Company's work on the contracts to construct the three LSD-
CVs and the four MHCs, which accounted for approximately 38% of
first quarter 1994 revenues, are being performed on a break-even
basis since reserves for contract losses were recorded as part of
the overall resolution of the Company's Requests for Equitable
Adjustments ("REAs"). The Company's other major shipbuilding
contracts are long-term contracts and profits will only be taken
as work progresses satisfactorily.
Selling, general and administrative ("SG&A") expenses decreased
approximately $661,000, or 8.9%, for the first quarter ended
March 31, 1994, as compared to 1993. The decrease in SG&A
expenses reflects the general decline in activity, primarily at
Avondale Gulfport Marine, Inc. which completed the Landing Craft
Air Cushion ("LCAC") contract when it delivered the final LCAC
vessel in June 1993.
Interest expense decreased by $1.2 million, or 50%, at March 31,
1994 as compared to the same period in 1993. The decrease is
principally due to the reduction in the Company's overall level
<PAGE>
of debt, which decreased by $65.4 million at March 31, 1994 as
compared to March 31, 1993 (see "Liquidity and Capital Resources"
below).
There is no provision for income taxes for 1994 and 1993 due to
the availability of net operating loss carryforwards, the
benefits of which have not been fully recognized in the Company's
financial statements.
During the first three months of 1994 the Company delivered the
fourth ship of the seven T-AO Oiler contract. The Company
plans to deliver the first ship of the three LSD-CV contract in
the fourth quarter of 1994 and the two gaming vessels in third
quarter of 1994, as noted above. Currently, the Company is under
consideration for a contract for the construction of up to four
vessels that are in response to the Oil Pollution Act of 1990
("OPA'90") and has submitted a bid for the construction of four
double-hulled forebodies for a contract which is expected to be
awarded in late-1994, also in response to OPA'90. The Company
has also received expressions of interest from several other ship
owners who wish to retro-fit their vessels to comply with the
OPA'90 requirements.
Liquidity and Capital Resources
As discussed in the 1993 Form 10-K, the December 1993 settlement
of the Company's REAs substantially improved the Company's
liquidity. At the end of 1993, the Company invoiced
approximately $90.0 million of the $145.0 million REA settlement
amount, all of which was received by April 18, 1994. The
remaining $55.0 million will be billed by the Company as work
progresses on the contracts that were the subject of the REAs.
The cash received by the Company to date has permitted the
Company to retire its approximately $6.0 million of senior notes
and the approximately $38.0 million balance of outstanding loans
under its two credit facilities.
Avondale is finalizing a $35.0 million revolving credit facility
which will be secured principally by working capital assets and
the Company's 900 foot-long drydock. Among other things, the
credit facility includes the right of Avondale to call upon the
bank group to post letters of credit on Avondale's behalf up to
an aggregate limit of $25.0 million (of the $35.0 million total)
in support of its operations. The credit facility replaces an
earlier credit facility of which only $13.9 million of letters of
credit are currently outstanding. The current letters of credit
are cash collaterized with $13.9 of restricted short-term
investments which, with the execution of the new revolving credit
facility, will be released to the Company.
At the beginning of May, Avondale also called for redemption on
June 1, 1994, of $36.25 million of its Series 1983 Industrial
Revenue Bonds which were due June 2001. Avondale intends to
refinance the Bonds through the issuance of refunding bonds to
mature no earlier than 2004. Avondale is currently negotiating
the terms under which the refunding bonds will be issued.
<PAGE>
Avondale also has agreed with Ogden Corporation, its former
corporate parent, to terminate certain arrangements between
Avondale and Ogden which have existed since the Spin-off in 1985.
Under these arrangements, Avondale could have been required to
issue to Ogden approximately $25.0 million of preferred stock or
subordinated debt upon the final resolution of certain
significant litigation and 1985 and prior years' potential tax
liabilities. The 1985 agreements also required Ogden to continue
to guarantee the Series 1983 Bonds as well as guarantee certain
other Avondale obligations.
Under the terms of the new agreement, the previous agreements
will terminate upon the payment by Avondale to Ogden of $13.0
million to settle any potential tax matters (including interest).
The payment will consist of $5.0 million cash on June 1, 1994 and
a two-year unsecured note in the principal amount of $8.0
million, bearing interest at 10% per annum and payable in $5.0
million and $3.0 million installments in 1995 and 1996,
respectively. In addition, Avondale is required to successfully
complete the refunding of the Series 1983 Bonds by June 1, 1994
and to secure by September 30, 1994 Ogden's release from its
other guarantees of Avondale obligations.
Further, in order to improve liquidity and to permit management
to focus on marine construction, repair and conversion
opportunities, the Company is exploring the possible sale of its
non-core assets. As previously disclosed, in March 1993, the
Company sold the assets of its Harvey Quick Repair business with
the majority of the net proceeds applied to the restructured
debt. The Company is in the process of marketing several other
facilities. Any such sales would only be made for amounts that
are not less than management's estimate of the fair value of the
assets.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.9 Avondale/Ogden Letter Agreement
15 Letter re: unaudited interim financial information
(b) Reports on Form 8-K:
Not applicable.
<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.
AVONDALE INDUSTRIES, INC.
Date: May 9, 1994 By:/s/ THOMAS M. KITCHEN
Thomas M. Kitchen
Vice President &
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Number Description Page Number
4.9 Avondale/Ogden Letter Agreement
15 Letter re: unaudited interim financial information
<PAGE>
[LETTERHEAD OF AVONDALE INDUSTRIES, INC.]
April 29, 1994
Mr. Philip G. Husby
Senior Vice President &
Chief Financial Officer
Ogden Corporation
Two Pennsylvania Plaza
New York, New York 10121
Dear Phil:
Regarding your letter of March 18, 1994, I prefer to restate our understandings
as follows:
A. Avondale will refund the existing IRB debt on June 1, 1994 without Ogden as
guarantor or provider of credit support of any kind. Ogden's credit
support obligations with respect to this Avondale indebtedness will end no
later than June 1, 1994. Ogden and Avondale expect to cooperate with each
other in connection with this refunding process. Avondale will advise
Ogden of its plan of refunding immediately and keep Ogden informed
throughout the refunding process.
B. Avondale and Ogden will resolve all outstanding tax issues between them.
As part of this resolution, the Tax Sharing Agreement (as amended) (TSA)
will be terminated and Avondale will pay no later than June 1, 1994,
$5.0 million cash to Ogden plus a $8.0 million senior unsecured note
(subject to reasonable terms and conditions acceptable to the Company's
lenders under its principal credit facilities), payable to Ogden in two
annual installments of $5.0 million and $3.0 million due June 1, 1995
and 1996, respectively, and bearing interest on the unpaid balances at the
rate of 10% per annum. The total payment of $13.0 million represents
principally the reimbursement of taxes due pursuant to the tax sharing
agreement; remaining monies will be considered reimbursement, partial or
otherwise, of interest due under the tax sharing agreement.
C. Avondale and Ogden will terminate any litigation support currently
provided by Ogden pursuant to the Amended and Restated Preferred Stock
Purchase Agreement (PSPA) on June 1, 1994.
D. Avondale will use its best efforts to post satisfactory collateral with the
U. S. Department of Labor as a substitute for all of the performance bonds
and other similar collateral currently provided by Ogden on Avondale's
behalf. It is our understanding that such collateral totals $16.6 million.
While we may be unable to obtain the release of all Ogden-backed collateral
we expect to be able to reduce the amount for which Ogden is responsible to
no more than $5 million by September 30, 1994. We will keep Ogden informed
regarding the resolution of these matters.
E. All payments of $982,219.00 made by Ogden to date in connection with
Avondale insurance matters will be repaid fully. If Ogden receives a
credit or reimbursement for any such payment, then a refund of such credit
or reimbursement shall be made by Ogden to Avondale promptly.
All of the foregoing matters must be implemented, resolved or otherwise settled
in the manner as described above, in which case the Amended and Restated
Preferred Stock Purchase Agreement and the Tax Sharing Agreement as amended will
terminate. In the event Avondale is able to fully resolve the matters referred
to in A, B, C and E above, but despite its best efforts is unable to fully
<PAGE>
resolve the matters referred to in D above by September 30, 1994, then Avondale
will issue to Ogden Series B Preferred Stock for an amount of the unresolved
matters noted in D subject to an overall limit of $7.0 of Series B Preferred
Stock in which case the PSPA and TSA will terminate, but Avondale will continue
to be responsible for fully resolving matters in D above and for reimbursing
Ogden for any losses, costs or claims in connection therewith. Ogden shall
return promptly all of such Preferred Stock to Avondale (subject to the right of
Ogden to retain any dividends paid or accrued thereon by Avondale prior to such
return) if the matters referred to in D are fully resolved prior to January 1,
1995. If such matters are not resolved prior to December 31, 1994 but are
resolved by May 31, 1995 Ogden shall return 66 2/3% of such Preferred Stock
and Avondale will purchase the remaining 33 1/3% of Preferred Stock for its face
amount plus all accrued but unpaid dividends. If such matters are not fully
resolved by June 1, 1995 Avondale shall purchase this Preferred Stock on June 1,
1995 for its face amount plus all accrued but unpaid dividends and will continue
to be responsible for fully resolving matters in D and reimbursing Ogden for any
losses, costs or claims in connection therewith. Ogden agrees to not transfer
ownership of any Series B Preferred Stock for a one-year period from date of
issuance.
In the event Avondale is unable to refund the existing IRB debt by June 1, 1994,
then the relative rights and obligations of the parties shall continue to be
governed by the arrangements and agreements as they existed prior to the
execution of this letter.
Avondale agrees to provide Ogden with periodic information concerning certain
retrospective insurance polices.
Definitive agreements will be prepared and executed by both parties promptly
following execution of this letter of intent.
If the above is consistent with your understanding of these matters please sign
below in the space provided for you.
Very truly yours,
AVONDALE INDUSTRIES, INC.
\s\ Thomas M. Kitchen
Thomas M. Kitchen
Vice President &
Chief Financial Officer
TMK/jhw
Agreed to by:
OGDEN CORPORATION
\s\ Philip G. Husby
Philip G. Husby
Senior Vice President &
Chief Financial Officer
<PAGE>
[LETTERHEAD OF DELOITTE & TOUCEH]
May 2, 1994
Avondale Industries, Inc.
Post Office Box 50280
New Orleans, Louisiana 70150
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of the
unaudited interim financial information of Avondale Industries,
Inc. and subsidiaries for the periods ended March 31, 1994 and
1993 as indicated in our report dated May 2, 1994; because we did
not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included
in your Quarterly Report on Form 10-Q for the quarter ended March
31, 1994, is incorporated by reference in Registration Statement
No. 33-31984 on Forms S-8 and S-3.
We are also aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered
a part of the Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE
New Orleans, Louisiana
<PAGE>
[LETTERHEAD OF AVONDALE INDUSTRIES, INC.]
May 9, 1994
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
Please accept for filing, via a direct transmission to the EDGAR System, the
Form 10-Q of Avondale Industries, Inc. for the quarter ended September 30, 1994.
We are also mailing the required number of copies of this report to the National
Association of Securities Dealers, Inc.
Should you have any questions, please contact me at 504/436-5238.
Very truly yours,
\s\ Bruce L. Hicks
