FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[ X ]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
[ ]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 June 30, 1996
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 file 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 June 30, 1996
Common stock, par value $1.00 per share 14,464,175 shares
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AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Independent Accountants' Report
Consolidated Balance Sheets -
December 31, 1995 and June 30, 1996
Consolidated Statements of Operations -
Quarters and Six Months Ended June 30, 1995 and 1996
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1996
Notes to Consolidated Financial Statements
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
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 June 30, 1996 and for the three-month and
six-month periods ended June 30, 1996 and 1995. 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, 1995, 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 January 19, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance
sheet as of December 31, 1995 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it
has been derived.
DELOITTE & TOUCHE LLP
August 2, 1996
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(UNAUDITED)
December 31, June 30,
1995 1996
------------ ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 38,524 $ 58,394
Restricted short-term investments 383
Receivables (Note 2):
Accounts receivable 39,753 13,355
Contracts in progress 53,431 70,310
Inventories:
Goods held for sale 7,409 6,962
Materials and supplies 7,880 8,014
Deferred tax assets (Note 5) 23,650 17,850
Prepaid expenses 2,563 2,419
------- -------
Total current assets 173,593 177,304
------- -------
Property, Plant and Equipment:
Land 9,161 8,733
Construction in progress 4,665 11,021
Buildings and improvements 55,326 55,195
Machinery and equipment 182,547 183,648
------- -------
Total 251,699 258,597
Less accumulated depreciation (121,661) (126,687)
------- -------
Property, plant and equipment - net 130,038 131,910
------- -------
Goodwill - net 8,637 8,355
Deferred tax assets (Note 5) -- 9,007
Other assets 4,459 4,228
------- -------
Total assets $ 316,727 $ 330,804
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(UNAUDITED)
December 31, June 30,
1995 1996
------------ ---------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 5,062 $ 4,067
Accounts payable 65,517 61,857
Accrued employee compensation 10,777 11,676
Other 11,249 12,338
------- -------
Total current liabilities 92,605 89,938
Long-term debt 60,593 56,737
Other liabilities and deferred credits 12,471 14,045
------- -------
Total liabilities 165,669 160,720
------- -------
Commitments and contingencies (Note 4)
Shareholders' Equity:
Common stock, $1.00 par value, authorized
30,000,000 shares; issued - 15,927,191
shares in 1995 and 1996 . 15,927 15,927
Additional paid-in capital 373,911 373,911
Accumulated deficit (226,924) (207,898)
------- -------
Total 162,914 181,940
Treasury stock (common: 1,463,016 shares
in 1995 and 1996) at cost.. (11,856) (11,856)
------- -------
Total shareholders' equity 151,058 170,084
------- -------
Total $ 316,727 $ 330,804
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
Quarters Ended Six Months Ended
June 30, June 30,
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $152,788 $152,577 $286,363 $309,073
Cost of sales 138,968 134,411 259,139 273,621
------- ------- ------- -------
Gross profit 13,820 18,166 27,224 35,452
Selling, general and
administrative expenses 7,598 9,292 15,261 18,325
------- ------- ------- -------
Income from operations 6,222 8,874 11,963 17,127
Interest expense (1,278) (1,262) (2,557) (2,648)
Other - net 499 778 831 1,347
------- ------- ------- -------
Income before income taxes 5,443 8,390 10,237 15,826
Income tax benefit (Note 5) 3,050 5,900 1,300 3,200
------- ------- ------- -------
Net income $ 8,493 $ 14,290 $ 11,537 $ 19,026
======= ======= ======= =======
Net income per share of
common stock $ 0.59 $ 0.99 $ 0.80 $ 1.32
======= ======= ======= =======
Weighted average number of
shares outstanding 14,464 14,464 14,464 14,464
======= ======= ======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(In thousands)
(UNAUDITED)
1995 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,537 $ 19,026
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,873 5,436
Deferred income taxes (1,300) (3,200)
Changes in operating assets and
liabilities, net of dispositions:
Receivables 2,495 9,519
Inventories 132 313
Prepaid expenses 2,745 144
Accounts payable 1,912 (3,660)
Accrued employee compensation (284) 899
Other - net 3,546 3,384
------- -------
Net Cash Provided by
Operating Activities 25,656 31,861
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (12,974) (7,523)
Change in restricted short-term
investments - net ( 9,351) 383
Proceeds from sale of assets 3,067
------- -------
Net Cash Used for Investing Activities (19,258) (7,140)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings (5,478) (4,851)
Proceeds from long-term borrowings 17,780
------- -------
Net Cash Provided by (Used for)
Financing Activities 12,302 (4,851)
------- -------
Net increase in cash and cash equivalents 18,700 19,870
Cash and cash equivalents at beginning
of period 15,414 38,524
------- -------
Cash and cash equivalents at end
of period $ 34,114 $ 58,394
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 2,517 $ 2,698
======= =======
Income taxes Paid -- $ 1,360
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<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 wholly-owned
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, 1995 audited financial statements and related
notes filed on Form 10-K for the year ended December 31, 1995 (the
"1995 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
December 31, 1995 and June 30, 1996 (in thousands):
<TABLE>
1995 1996
------- -------
<S> <C> <C>
Long-term contracts:
U.S. Government:
Amounts billed $ 30,151 $ 778
Unbilled costs and estimated
profits on contracts in
progress 41,119 44,460
------- -------
Total 71,270 45,238
Commercial:
Amounts billed 4,364 6,104
Unbilled costs and estimated
profits on contracts in
progress 12,312 25,850
------- -------
Total from long-term contracts 87,946 77,192
Trade and other current receivables 5,238 6,473
------- -------
Total $ 93,184 $ 83,665
======= =======
</TABLE>
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 Company's
Annual Report included in the 1995 Form 10-K, the Company settled in
December, 1995 its Request for Equitable Adjustment ("Minehunter
REA") filed with the U.S. Navy in connection with the Company's
contract to construct four MHC-51 Coastal Minehunters. As a result
of this settlement, the Company in December 1995 submitted to the
<PAGE>
U.S. Navy invoices totaling $30.7 million, the payment of which was
received by the Company in the first quarter of 1996.
3.FINANCING ARRANGEMENTS
In the first quarter of 1996 the Company reached an agreement to
extend to May 1998 the terms of its revolving credit agreement with
various financial institutions. There have been no borrowings in
1996 under the revolving credit agreement.
4.COMMITMENTS AND CONTINGENCIES
Litigation
As discussed in further detail in Note 10 of the Company's Annual
Report included in the 1995 Form 10-K, the Company was advised in
1986 that it was a potentially responsible party ("PRP") with respect
to an oil reclamation site operated by an unaffiliated company in
Walker, Louisiana. To date, the Company and certain of the other
PRPs for the site have funded the cost of the site's remediation
under a preliminary cost-sharing agreement. At June 30, 1996, clean-
up costs totaled $17.7 million, of which the Company has contributed
$3.7 million. Additional work scheduled for the site includes the
completion of studies in 1996, and if required by the results of
these studies, subsequent remediation. Following completion of such
remediation, it will be necessary to obtain Environmental Protection
Agency approval to close the site, which consent may require
subsequent post-closure activities such as groundwater monitoring and
site maintenance for many years. The Company is not able to estimate
the final costs for any such additional remedial work or post-closure
costs that may be required; however, the Company believes that its
proportionate share of expenditures for any additional work will not
have a material adverse effect on the Company's financial statements.
In addition, the Company believes that its proportionate
responsibility for the clean-up costs will not be materially changed.
In 1995, the Federal District Court for the Western District of
Louisiana issued a bench ruling approving the Company's settlement
of a class action lawsuit involving alleged personal injury and
property damage arising from the Walker, La. reclamation site. In
the first quarter of 1996, the Federal District Court issued the
written order confirming its earlier bench ruling. The period for
filing appeals expired on April 7, 1996 and no appeals were filed.
Under the terms of the settlement, the Company paid $4.0 million cash
into a settlement fund in the third quarter of 1995, using cash from
operations, and issued a $2.0 million unsecured note to the plaintiff
class. The note bears interest at 8% per annum and is due on January
28, 1997. The Company had previously recorded an accrual sufficient
to provide for the $6.0 million settlement and has sufficient
liquidity to fund the note. The Company could also be responsible for
payment to the plaintiffs of up to an additional $6.0 million (plus
interest at 8% per annum) if the plaintiffs are unsuccessful in
collecting certain claims under Avondale's insurance policies that
have been assigned to the plaintiff class under the settlement
agreement. With respect to the potential contingent liability of the
Company to pay additional sums under the settlement agreement,
management believes that the eventual resolution of this matter will
not have a material adverse effect on the Company's results of
operations, financial position or cash flows.
<PAGE>
Furthermore, 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 remediation of the site referred to
above. 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. After consultation with counsel, the Company is unable to
predict the eventual outcome of this litigation or the degree to
which such potential liability would be indemnified by its insurance
carrier.
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.
The Company has established accruals as appropriate for certain of
the matters discussed above. While the ultimate outcome of lawsuits
and proceedings against the Company cannot be predicted with
certainty, management believes, based on current facts and
circumstances and after review with counsel, that the eventual
resolution of these matters will not have a material adverse effect
on the Company's financial statements.
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 obligations, other insurance obligations and to
provide a debt service reserve related to $36.3 million of Series
1994 industrial revenue bonds. Additionally, under certain contracts
the Company may be required to provide letters of credit to secure
certain performance obligations of the Company thereunder.
Outstanding letters of credit relating to these business activities
amounted to approximately $11.0 million and $25.4 million at June 30,
1996 and December 31, 1995, respectively.
5. INCOME TAXES
During the second quarter of 1996 and 1995 the deferred tax valuation
allowance decreased by $9.0 million and $10.0 million, respectively,
based on current evaluations of the Company's expectations of the
likelihood of future operating income related to its existing
backlog. The first $5.0 million of the 1995 decrease was recorded as
a reduction in goodwill in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". The
remaining $5.0 million for 1995 and the entire $9.0 million for 1996
were recorded as a reduction of income tax expense. Such benefits in
the current and prior year periods recognized for financial reporting
purposes the availability of net operating loss carry forwards to
offset estimated future earnings. At June 30, 1996, the benefits
related to substantially all of the Company's net operating loss
carry forwards have been recognized for financial reporting purposes.
<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 June 30, 1996 and 1995 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, 1995 (the "1995 Form 10-K").
Overview
The Company continued the trend of improvement in its operating
results by recording significant increases compared to the same
periods in the prior year. Income before income taxes increased by
54% for the second quarter of 1996 and by 55% for the first six
months of 1996 compared to the same periods in the prior year.
Further, net income increased 68% for the second quarter of 1996 and
65% for the first six months of 1996 over the same periods in 1995.
Net income in both the current and prior year periods include the
effects of deferred income tax benefits as discussed below.
The Company's firm backlog at June 30, 1996 was approximately $1.1
billion. During the first six months of 1996, the Company delivered
a double-hulled T-AO Oiler, representing the last of 16 built by the
Company, a third Landing Ship Dock - Cargo Variant ("LSD-CV") and the
second of four MHC-51 Class Coastal Minehunters ("MHC") to the U.S.
Navy. Shortly after the end of the second quarter the Company
delivered the third MHC. The fourth MHC is scheduled for delivery
later in 1996 and represents the last vessel to be delivered to the
U.S. Navy for the remainder of 1996. Commercial deliveries for the
second half of 1996 are expected to include two of the four double-
hulled forebodies the Company is retro-fitting to product carriers
and river hopper barges.
The Company continues to pursue the U.S. Navy's program for the LPD
17, the Navy's new class of amphibious transport dock vessel, through
its previously disclosed alliance formed with Bath Iron Works
Corporation, Hughes Aircraft Company and Intergraph Corporation. The
contract for the design and construction of the first ship, in what
is anticipated to be a multi-ship project, is expected during the
third quarter of 1996. If the alliance is successful in securing the
contract, Avondale would be the prime contractor with ships
constructed in both the Avondale and Bath yards. Hughes Aircraft
will be responsible for the total ship system integration while the
team will utilize Intergraph equipment for the design and manufacture
of the ship. The alliance will be further strengthened by the
technical staff of the Electric Boat Division of General Dynamics
Corporation which recently acquired Bath Iron Works. The proposal
<PAGE>
was submitted on June 28, 1996.
With a substantial portion of Avondale's current firm backlog
scheduled for completion by 1998, it is important that Avondale be a
successful bidder for all or a substantial portion of the LPD-17
vessels or other U.S. Navy or commercial work if it is to maintain
its current level of shipbuilding activity beyond 1998. Other U.S.
Navy programs that may offer shipbuilding opportunities to Avondale
include the possible construction of two additional Sealift vessels;
a class of prepositioning vessels for the U.S. Marine Corps; up to
six of the U.S. Navy's planned Arsenal Ship (a new concept of warship
which could act as a floating remote-controlled missile launcher by
utilizing integrated communications and electronics); up to 14 ADC(X)
vessels (a class of auxiliary vessels designed to deliver fuel,
ammunition and other supplies to the U.S. Navy fleet with
capabilities similar to the T-AOs constructed at Avondale); and the
SC-21, which represents the next generation of surface combatant
vessels. Commercial opportunities include the retro-fitting of
existing tankers and construction of new double-hulled tankers in
response to the Oil Pollution Act of 1990 which required the phased-
in transition of single-hulled tankers and product carriers to
double-hulled vessels beginning January 1, 1995. As noted above, the
Company is currently retro-fitting four double-hulled forebodies to
product carriers. In addition, the Company announced in the fourth
quarter of 1995 a contract for the construction of four 42,000 DWT
double-hulled product carriers. The contract is subject to the
receipt of a Title XI financing guarantee from the U.S. Maritime
Administration and to the satisfaction of certain other conditions.
In the second quarter of 1996 the Company announced that at the
request of the customer the delivery date was extended from 1998 to
the year 2000. This contract is not included in the Company's
backlog at June 30, 1996.
As previously disclosed, certain of the Company's operations were
closed in 1994 upon the completion of their respective contracts.
Two of these facilities are currently offered for sale while the
Company continues to seek alternative uses for these facilities.
With respect to environmental matters, the Company currently is not
aware of any material liabilities to be incurred for site
restoration, post closure, monitoring commitments, or other exit
costs that may occur or result from the sale, disposal or abandonment
of any of these properties.
Results of Operations
The Company recorded net income of $14.3 million, or $0.99 per share,
for the second quarter of 1996 compared to $8.5 million, or $0.59 per
share, for the second quarter of 1995, representing a 68% increase in
net income over the prior year period. For the first six months of
1996 the Company recorded net income of $19.0 million, or $1.32 per
share, compared to $11.5 million, or $0.80 per share, for the same
period in 1995, or 65% higher than the prior year period.
Additionally, the Company recorded income from operations of $8.9
million in the current quarter and $17.1 million for the first six
months of 1996, representing an increase of 43% for both current year
periods over the same periods in the prior year.
The increase in the Company's operating results in the second quarter
and first six months of 1996 primarily reflect operating profits
<PAGE>
recognized on the seven T-AO contract and a partial reversal of a
previously recognized loss which was recorded in prior years on the
contract to construct three LSD-CVs. A $4.5 million provision for a
loss on the contract to construct river hopper barges, representing
costs incurred in connection with the Company's entry into this
competitive market, was recognized in the first three months of 1996.
The Company experienced a higher than expected level of cost at the
inception of this contract, and, as a result, recorded the foregoing
provision. Also contributing to the 1996 operating results were
profits recorded by the Company's marine repair, wholesale steel and
modular steel construction operations.
Net sales for the second quarter of 1996 were consistent with the
second quarter of 1995 while net sales for the first six months of
1996 reflected an increase of $22.7 million, or 8%, compared to the
same period in the prior year. The increase in the first six months
of 1996 was primarily due to increased net sales revenues recorded on
the contracts to construct the Strategic Sealift ships, the
forebodies for the four product carriers, the Coast Guard Icebreaker
ship and the contract to construct the river hopper barges. These
increases were partially offset by reduced net sales revenues
recorded on the contracts to construct the LSD-CV 52, three LSD-CVs,
seven T-AOs and four MHCs as these contracts are near completion, and
by reduced net sales revenues recorded on paddle-wheeled gaming
vessels (the last of which was delivered in the second quarter of
1995).
Gross profit for the second quarter and first six months of 1996
increased $4.3 million, or 31%, and $8.2 million, or 30%,
respectively, compared to the same periods in 1995. The increase is
due primarily to profits recognized on the contract to construct the
seven T-AOs.
Selling, general and administrative ("SG&A") expenses increased $1.7
million, or 22%, in the second quarter of 1996 and $3.1 million, or
20%, for the first six months of 1996 compared to the same periods in
the prior year. The increases in SG&A expenses were due primarily to
expenses incurred in association with the preparation of the LPD-17
proposal (discussed above).
Interest expense for the second quarter of 1996 was consistent with
the same period in 1995. Interest expense for the first six months
of 1996 increased $91,000, or 4%, compared to the same period in the
prior year. The increase for the 1996 six month period was due
primarily to interest costs associated with the $17.8 million Title
XI financing completed in February 1995, interest costs associated
with a note issued in 1995 as part of a litigation settlement and
less interest being capitalized on assets under construction due to
the completion of the yard-wide modernization program. These
increases were partially offset by a decrease in interest expense
associated with a note issued in 1994 to the Company's former
corporate parent, the terms of which required partial payment of the
note in June 1995 and a final payment which was made in June 1996.
The operating results for the second quarter and first six months of
1996 included a deferred income tax benefit of $9.0 million compared
to a deferred income tax benefit of $5.0 million in the comparable
year earlier periods. Such deferred income tax benefits in the
current and prior year's periods recognized for financial reporting
<PAGE>
purposes the availability of net operating loss carry forwards to
offset estimated future earnings. At June 30, 1996, the benefits
related to substantially all of the Company's net operating loss
carry forwards have been recognized for financial reporting purposes.
Liquidity and Capital Resources
The Company's cash and cash equivalents totaled $58.4 million at June
30, 1996 as compared to $38.5 million at December 31, 1995. Included
in the cash balance at June 30, 1996 are amounts collected as a
result of the settlement of the Company's Request for Equitable
Adjustment ("Minehunter REA") filed with the U.S. Navy related to the
four MHCs currently under contract (as discussed in further detail in
Note 2 of the Company's Annual Report included in the 1995 Form 10-
K). The Company's sources of cash thus far in 1996 consisted of
$31.9 million of funds provided by operations (including the amounts
collected under the Minehunter REA discussed above) while the
Company's primary uses of cash in the current year consisted of
capital expenditures of $7.5 million and payment of long term
borrowings of $4.9 million.
In the first quarter of 1996, the terms of the Company's $42.5
million revolving credit agreement were extended to May, 1998. At
June 30, 1996, there were approximately $11.0 million of letters of
credit issued against the credit facility leaving approximately $31.5
million of liquidity available to Avondale for operations and other
purposes. Continuing access to the credit facility is conditioned
upon the Company remaining in compliance with the covenants of
certain financial ratios. At June 30, 1996 the Company was in
compliance with the covenants contained therein. The Company
believes that its capital resources will be sufficient to finance
current and projected operations.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of the shareholders of Avondale Industries,
Inc. held on April 2, 1996 , 11,496,648 shares of the 14,464,175
shares outstanding were present in person or by proxy at the meeting.
The voting tabulation follows:
(a)The election of the following to the Board of Directors:
Anthony J. Correro, III, 10,929,064 votes for, 567,584 votes withheld
and Kenneth B. Dupont, 11,063,682 votes for, 432,966 votes withheld.
The following is a list of each other director whose term of office
as a director continued after the meeting:
Albert L. Bossier, Jr., Francis R. Donovan, William A. Harmeyer,
Thomas M. Kitchen and Hugh A. Thompson.
(b)A proposal to urge the Board of Directors to redeem the rights
issued under the Shareholder Protection Rights Plan: 5,837,513
against, 3,968,663 for, 99,330 abstained and zero broker nonvote.
(c)A proposal to urge the Board of Directors to implement
confidential voting by shareholders: 6,741,432 against, 3,075,787
for, 98,287 abstained and zero broker nonvotes.
(d)A proposal related to declassification of the Board of Directors:
4,999,672 against, 4,793,167 for, 112,667 abstained and zero broker
nonvotes.
(e)A proposal regarding the process of articles of incorporation and
bylaw adoption, amendment or repeal: 6,861,325 against, 2,891,261
for, 152,920 abstained and zero broker nonvotes.
The directors were elected by plurality vote, proposals (c) and (d)
required the affirmative vote of 80% of the total outstanding Common
Stock and proposals (b) and (e) required the approval of a majority
of the shares of Common Stock present or represented at the Annual
Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Company(1).
3.2 Bylaws of the Company(2).
10.3 Employee Benefit Plans
(d) The Company's Pension Plan as Amended and Restated
(3) as further amended by Amendment No. 1 adopted
June 16, 1995(4) and as further amended by Amendment
No. 2 adopted April 19, 1996.
<PAGE>
(j) The Company's 401(k) Plan and related Trust effective
January 1, 1996(5) as amended by Amendment No. 1
adopted April 19, 1996.
15 Letter re: unaudited interim financial information.
27 Financial Data Schedule
(b) Reports on Form 8-K:
Not applicable.
_______________
(1)Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1993.
(2)Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1995.
(3)Incorporated by reference from the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994.
(4)Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1995.
(5)Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1996.
<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: August 6, 1996 By:/s/ ALBERT L. BOSSIER, JR.
-------------- --------------------------
Albert L. Bossier, Jr.
Chairman, President &
Chief Executive Officer
Date: August 6, 1996 By:/s/ THOMAS M. KITCHEN
-------------- ---------------------
Thomas M. Kitchen
Vice President &
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Number Description
3.1 Articles of Incorporation of the Company(1).
3.2 Bylaws of the Company(2).
10.3 Employee Benefit Plans
(d) The Company's Pension Plan as Amended and Restated(3)
as further amended by Amendment No. 1 adopted June 16,
1995(4) and as further amended by Amendment No. 2 adopted
April 19, 1996.
(j) The Company's 401(k) Plan and related Trust effective
January 1, 1996(5) as amended by Amendment No. 1 adopted
April 19, 1996.
15 Letter re: unaudited interim financial information.
27 Financial Data Schedule
(b) Reports on Form 8-K:
Not applicable.
_______________
(1)Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1993.
(2)Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1995.
(3)Incorporated by reference from the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994.
(4)Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1995.
(5)Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1996.
<PAGE>
AMENDMENT NUMBER TWO
TO
AVONDALE INDUSTRIES, INC.
PENSION PLAN
WHEREAS, Avondale Industries, Inc., a corporation organized
and existing under the laws of the State of Louisiana, adopted
the Avondale Industries, Inc. Pension Plan (the "Plan") effective
September 1, 1985; said Plan has been amended from time to time;
said Plan was amended and restated effective January 1, 1989 and
executed December 28, 1994;
WHEREAS, Avondale Industries, Inc. reserved the right to
amend the Plan by resolution of the Board of Directors;
WHEREAS, it is desirable to amend the Plan to clarify the
calculation of the retirement income under the Pension Plan for
certain Participants who have previously received all or a
portion of their Avondale ESOP Account and to remove the
recordkeeping requirement for leased employees who are excluded
from participation.
NOW, THEREFORE, as authorized by Section 11.1, the Plan is
hereby amended, effective January 1, 1996, unless stated
otherwise, as follows:
I.
Section 1.1, Accrued Benefit, is amended to add the
following at the end of the second paragraph:
If a Participant who was a divisional or
former divisional employee referred to above received an
allocation under the Avondale ESOP, and if any or all of such
Participant's Avondale ESOP Account is distributed to such
Participant prior to the Participant's commencement of benefits
under the Plan, then for purposes of calculating the Accrued
Benefit under the provisions of the Prior Plan the following
provisions apply:
a.the value of the distributed ESOP Account, as
described in (b) below, for purposes of determining the amount of
his Accrued Benefit under the Prior Plan as of his Early or
Normal Retirement Date, will be added to his remaining ESOP
Account before calculating the annuitized value of his ESOP
Account, and
b.The value of the distributed ESOP Account is
determined by using the market price for the shares and other
assets held in such Account as of the close of business on the
last trading day of the month following the month the Participant
received a distribution(s) from his ESOP Account. This initial
value is increased for assumed investment return at the rate of
7% per annum for each year and completed month from the date of
the distribution of all or a portion of the ESOP Account to the
Participant's Early or Normal Retirement Date under the Plan.
<PAGE>
II.
Section 1.17 of Article I, Employee, is amended to delete
the following sentence:
A leased employee as described in Section 414(n)(2) of the Code
shall be considered an Employee but shall not be considered a
Participant under this Plan; provided, however, that any leased
employee who subsequently becomes a Participant shall have his
previous service as a leased employee used in calculating his
Year of Service under the Plan.
III.
Section 2.1 of Article II, Eligible Class, is amended to add
an "and" after the sentence at (d) and to add the following (e):
(e)he is not providing services to a Participating
Employer under a contract with an unrelated employer.
EXECUTED in multiple originals in Avondale, Louisiana, this
19th day of April, 1996.
---- ------
WITNESSES: AVONDALE INDUSTRIES, INC
/s/ JACKIE H. WALKER BY: /s/ THOMAS M. KITCHEN
-------------------- ---------------------
Thomas M. Kitchen,
/s/ B. L. HICKS Secretary
---------------
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF JEFFERSON
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did depose
and state that he signed the foregoing Amendment Number Two to
the Avondale Industries, Inc. Pension Plan as a free act and deed
on behalf of Avondale Industries, Inc. for the purposes therein
set forth.
/s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 19th DAY
----
OF April, 1996.
-----
/s/ A. BLOMKALNS
----------------
NOTARY PUBLIC
<PAGE>
AMENDMENT NUMBER ONE
TO
AVONDALE INDUSTRIES, INC.
401(K) SAVINGS PLAN
WHEREAS, Avondale Industries, Inc. ("Employer") is the
sponsor of the Avondale Industries, Inc. 401(k) Savings Plan (the
"Plan") which was adopted effective January 1, 1996;
WHEREAS, the Plan can be amended by the Employer;
WHEREAS, it is desirable to amend the Plan to remove the
recordkeeping requirement for leased employees who are excluded
from participation, to clarify the definition of Year of Service,
to conform procedures to the Plan's operation and to conform the
date of eligibility for purposes of receiving an allocation of an
Employer Discretionary Contribution to the eligibility date in
the Avondale ESOP;
NOW, THEREFORE, the Plan is hereby amended, effective
January 1, 1996, to read as follows:
I.
Section 1.13 of Article I, Employee, of the Plan is amended
and restated to read as follows:
Employee shall mean a person employed by
an Employer, excluding any employee who is
included in a unit of employees covered by a
collective bargaining agreement which does
not provide for his participation in the
Plan. However, any Employee who is providing
services to the Employer under a contract
with an unrelated employer shall not be
considered an Eligible Employee under this
Plan.
II.
The parenthetical phrase of the first sentence of Section
1.42 of Article I, Year of Service, is amended and restated to
read as follows:
(or, for vesting purposes, such Participant's
date of rehire in the case of a Participant
who has incurred five or more consecutive One
Year Breaks in Service; or, for participation
purposes, such Employee's date of rehire in
the case of an Employee who has not completed
a Year of Service and who has incurred a One
Year Break in Service).
II.
The last sentence of the first paragraph of Section 3.1 of
Article III, Employee-Deferrals, is amended and restated to read
as follows:
<PAGE>
An Employee's election under this Section 3.1
can be made when the Employee becomes an
Eligible Employee effective as of the next
payroll period provided the Participant has
given the Committee advance notice of such
change in such form and within such time
period preceding the effective date of the
change as the Committee may prescribe.
III.
Section 3.2 of Article III, Delivery of Employee-Deferral
Contributions, is amended and restated to read as follows:
The Employee-Deferral made by the
Employer on behalf of any Participant shall
be transmitted to the Trustee by the Employer
as soon as practicable; provided, however,
that no Employee-Deferral for any portion of
a Plan Year shall be delivered to the Trustee
later than 90 days after the close of the
month in which the amount was deducted from
Participant's Plan Compensation.
IV.
Section 5.2 of Article V, Allocation of Employer Discretion
Contributions, is amended to add the following:
Notwithstanding any other provision, each
Employee shall become an Eligible Employee,
for purposes of receiving an allocation of an
Employer Discretionary Contribution, as of
the day the Employee has both (a) attained
age 21 and (b) completed one Year of Service.
EXECUTED in multiple originals in Avondale,
--------
Louisiana, effective as of the 19th day of April,
---- -----
1996.
WITNESSES: AVONDALE INDUSTRIES, INC
/s/ JACKIE H. WALKER BY: /s/ THOMAS M. KITCHEN
-------------------- ---------------------
Thomas M. Kitchen
/s/ B. L. HICKS
---------------
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF JEFFERSON
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did
-----------------
depose and state that he signed the foregoing Amendment Number
One to the Avondale Industries, Inc. 401(k) Savings Plan as a
free act and deed on behalf of Avondale Industries, Inc. for the
purposes therein set forth.
/s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 19th DAY
----
OF April, 1996.
-----
/s/ A. BLOMKALNS
----------------
NOTARY PUBLIC
August 2, 1996
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 June 30, 1996 and 1995, as
indicated in our report dated August 2, 1996; 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 June 30,
1996, is incorporated by reference in Registration Statement No. 33-
31984 on Forms S-8 and S-3.
We also are 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 LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVONDALE
INDUSTRIES, INC.'S QUARTERLY REPORT FILED ON FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
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<CURRENT-ASSETS> 177,304
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<DEPRECIATION> (126,687)
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0
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<SALES> 309,073
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