SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 3, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-5075
EG&G, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2052042
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
45 William Street, Wellesley, Massachusetts 02181
(Address of principal executive offices)(Zip Code)
(617) 237-5100
(Registrant's telephone number, including area code)
NONE
(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
Number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
Class Outstanding at May 1, 1994
Common Stock, $1 par value 55,121,000
(Excluding treasury shares)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
EG&G, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the Three Months Ended April 3, 1994 and April 4, 1993
(Unaudited)
(In Thousands Except Per Share Data)
----------------------------------
Three Months Ended
-----------------------
April 3, April 4,
1994 1993
--------- ---------
Sales:
Products $381,313 $377,911
Services 295,173 271,015
-------- --------
Total Sales 676,486 648,926
-------- --------
Costs and Expenses:
Cost of sales:
Products 324,249 321,209
Services 271,425 241,224
-------- --------
Total cost of sales 595,674 562,433
Selling, general and administrative expenses 58,878 57,111
-------- --------
Total Costs and Expenses 654,552 619,544
-------- --------
Income From Operations 21,934 29,382
Other income (expense), net (Note 2) (21) (650)
-------- --------
Income Before Income Taxes 21,913 28,732
Provision for Federal and non-U.S. income taxes 7,560 9,625
-------- --------
Income Before Cumulative Effect of
Accounting Changes 14,353 19,107
Cumulative Effect of Accounting Changes:
Income taxes (Note 3) - (7,300)
Postretirement benefits other than
pensions (Note 4) - (13,200)
-------- --------
Net Income (Loss) $ 14,353 $ (1,393)
======== ========
EG&G, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Continued)
For the Three Months Ended April 3, 1994 and April 4, 1993
Earnings Per Share:
Income Before Cumulative Effect of
Accounting Changes $.26 $ .34
Cumulative Effect of Accounting Changes:
Income taxes - (.13)
Postretirement benefits other than pensions - (.23)
---- -----
Net Income (Loss) $.26 $(.02)
==== =====
Cash Dividends Per Common Share $.14 $ .13
==== =====
Weighted Average Shares of Common Stock Outstanding 55,721 56,722
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
EG&G, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As of April 3, 1994 and January 2, 1994
(Dollars in Thousands)
--------------------
April 3, January 2,
1994 1994
--------- ----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 47,306 $ 72,185
Accounts receivable (including unbilled
receivables of $62,100 as of April 3, 1994
and $67,800 as of January 2, 1994), less reserves 236,073 237,609
Inventories (Note 5) 130,279 121,581
Other 41,461 33,657
-------- --------
Total Current Assets 455,119 465,032
-------- --------
Property, Plant and Equipment:
At cost (Note 6) 334,023 327,416
Less - Accumulated depreciation and amortization 227,724 221,320
-------- --------
Net Property, Plant and Equipment 106,299 106,096
-------- --------
Investments (Note 7) 30,138 25,920
-------- --------
Intangible and Other Assets (Note 8) 180,751 171,760
-------- --------
Total Assets $772,307 $768,808
======== ========
EG&G, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
As of April 3, 1994 and January 2, 1994
(Dollars in Thousands)
--------------------
Current Liabilities:
Short-term debt $ 53,458 $ 43,589
Accounts payable 59,361 60,794
Accrued expenses (Note 9) 131,699 132,714
-------- --------
Total Current Liabilities 244,518 237,097
-------- --------
Long-Term Liabilities 55,839 54,177
Contingencies - -
Stockholders' Equity:
Preferred stock - $1 par value, authorized
1,000,000 shares; none outstanding - -
Common stock - $1 par value, authorized
100,000,000 shares; issued 60,102,000 shares 60,102 60,102
Capital in excess of par value - -
Retained earnings 502,655 496,063
Cumulative translation adjustments (5,809) (8,287)
Unrealized gain on marketable investments (Note 7) 3,654 -
-------- --------
560,602 547,878
Less - Cost of shares held in treasury;
4,981,000 shares at April 3, 1994 and
3,970,000 shares at January 2, 1994 88,652 70,344
-------- --------
Total Stockholders' Equity 471,950 477,534
-------- --------
Total Liabilities and Stockholders' Equity $772,307 $768,808
======== ========
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
EG&G, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended April 3, 1994 and April 4, 1993
(Unaudited)
(In Thousands)
------------
Three Months Ended
-----------------------
April 3, April 4,
1994 1993
-------- --------
Cash Flows From Operating Activities:
Net income (loss) $ 14,353 $ (1,393)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Cumulative effect of accounting changes - 20,500
Depreciation and amortization 8,815 9,290
Changes in assets and liabilities:
Decrease in accounts receivable 2,046 14,954
Increase in inventories (8,275) (3,092)
Decrease in accounts payable and accrued expenses (2,898) (597)
Other (17,545) (15,563)
-------- --------
Net Cash Provided by (Used in) Operating Activities (3,504) 24,099
-------- --------
Cash Flows From Investing Activities:
Capital expenditures (6,977) (5,972)
Other 1,927 (611)
-------- --------
Net Cash Used in Investing Activities (5,050) (6,583)
-------- --------
Cash Flows From Financing Activities:
Changes in commercial paper 7,960 (2,988)
Other changes in debt 1,616 (1,506)
Proceeds from issuing common stock 925 3,028
Purchases of common stock (19,139) (8,688)
Cash dividends (7,855) (7,388)
-------- --------
Net Cash Used in Financing Activities (16,493) (17,542)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents 168 (75)
-------- --------
Net Decrease in Cash and Cash Equivalents (24,879) (101)
Cash and cash equivalents at beginning of period 72,185 69,752
-------- --------
Cash and cash equivalents at end of period $ 47,306 $ 69,651
======== ========
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
EG&G, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Principles of Consolidation
- - --------------------------------
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The
Company believes, however, that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K. The balance sheet amounts as of
January 2, 1994 in this report were extracted from the Company's audited
1993 financial statements included in the latest annual report on
Form 10-K.
In the opinion of management, the unaudited consolidated financial
statements included herein contain all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the financial
position as of April 3, 1994 and the results of operations for the three
months ended April 3, 1994 and April 4, 1993 and the cash flows for the
three months then ended. The results of operations are not necessarily
to be considered indicative of the results for the entire year.
Effective January 3, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 112 on accounting for postemployment
benefits. This new standard requires that benefits paid for former or
inactive employees after employment but prior to retirement must be
accrued if certain criteria are met. Adoption of the statement did not
have a material impact on the Company's financial position or results of
operations.
(2) Other Income (Expense), Net
- - --------------------------------
Other income (expense), net consisted of the following:
(In Thousands)
------------
Three Months Ended
-------------------
April 3, April 4,
1994 1993
-------- --------
Interest and dividend income $ 839 $ 854
Interest expense (965) (1,501)
Other 105 (3)
----- -------
$ (21) $ (650)
===== =======
EG&G, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(3) Accounting for Income Taxes
- - --------------------------------
Effective January 4, 1993, the Company adopted SFAS No. 109 on
accounting for income taxes. As part of adopting the new standard,
the Company recorded a one-time, non-cash charge against earnings of
$7.3 million ($.13 per share) in the first quarter of 1993.
(4) Postretirement Benefits Other Than Pensions
- - ------------------------------------------------
Effective January 4, 1993, the Company adopted SFAS No. 106 on
accounting for postretirement benefits other than pensions for its U.S.
retiree health benefits. As part of adopting the new standard, the
Company recorded a one-time, non-cash charge against earnings of
$20 million before taxes, or $13.2 million after income taxes ($.23
per share), in the first quarter of 1993.
(5) Inventories
- - ----------------
Inventories consisted of the following:
(In Thousands)
------------
April 3, January 2,
1994 1994
-------- ----------
Finished goods $ 32,737 $ 30,864
Work in process 33,840 30,393
Raw materials 63,702 60,324
-------- --------
$130,279 $121,581
======== ========
(6) Property, Plant and Equipment, at Cost
- - -------------------------------------------
Property, plant and equipment consisted of the following:
(In Thousands)
------------
April 3, January 2,
1994 1994
-------- ----------
Land $ 14,367 $ 14,327
Buildings and leasehold improvements 90,813 91,280
Machinery and equipment 228,843 221,809
-------- --------
$334,023 $327,416
======== ========
EG&G, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(7) Investments
- - ----------------
Investments consisted of the following:
(In Thousands)
------------
April 3, January 2,
1994 1994
-------- ----------
Marketable investments $12,411 $ 6,838
Other investments 12,766 13,426
Joint venture investments 4,961 5,656
------- -------
$30,138 $25,920
======= =======
Effective January 3, 1994, the Company adopted SFAS No. 115 on accounting
for certain investments in debt and equity securities. This new standard
requires that available-for-sale investments in equity securities that
have readily determinable fair values be measured at fair value in the
balance sheet and that unrealized holding gains and losses for these
investments be reported in a separate component of stockholders' equity
until realized. At April 3, 1994, marketable investments classified as
available-for-sale had an aggregate market value of $12.4 million and
gross unrealized holding gains of $5.6 million. At April 3, 1994,
$3.7 million was reported as a separate component of stockholders'
equity, representing the unrealized holding gains, net of deferred
federal income taxes.
(8) Intangible and Other Assets
- - --------------------------------
Intangible and other assets consisted of the following:
(In Thousands)
------------
April 3, January 2,
1994 1994
-------- ----------
Intangible assets $138,987 $139,205
Other assets 41,764 32,555
-------- --------
$180,751 $171,760
======== ========
The majority of the increase in other assets was due to an increase in
prepaid pension expense.
EG&G, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(9) Accrued Expenses
- - ---------------------
Accrued expenses consisted of the following:
(In Thousands)
------------
April 3, January 2,
1994 1994
-------- ----------
Payroll $ 11,398 $ 13,375
Employee benefits 43,077 46,121
Federal, non-U.S. and state
income taxes 29,690 26,119
Other 47,534 47,099
-------- --------
$131,699 $132,714
======== ========
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
EG&G, INC. AND SUBSIDIARIES
Results of Operations
---------------------
The following industry segment information is presented as an aid to a
better understanding of the operating results:
(In Thousands)
------------
Three Months Ended
------------------------------
April 3, April 4, Increase
1994 1993 (Decrease)
--------- --------- --------
Sales:
Technical Services $156,421 $158,091 $(1,670)
DOE Support 350,739 329,362 21,377
Instruments 62,855 47,222 15,633
Mechanical Components 56,039 63,641 (7,602)
Optoelectronics 50,432 50,610 (178)
-------- -------- -------
Total $676,486 $648,926 $27,560
======== ======== =======
Income From Operations:
Technical Services $ 11,841 $ 15,951 $(4,110)
DOE Support 10,061 14,251 (4,190)
Instruments 487 945 (458)
Mechanical Components 3,352 4,493 (1,141)
Optoelectronics 3,408 776 2,632
General Corporate Expenses (7,215) (7,034) (181)
-------- -------- -------
Total $ 21,934 $ 29,382 $(7,448)
======== ======== =======
The discussion that follows is a summary analysis of the major changes in
operating results by industry segment that occurred for the three months
ended April 3, 1994 compared to the three months ended April 4, 1993.
Sales for 1994 were $676 million, $28 million above the 1993 level.
Higher program scopes at Idaho and Mound resulted in a $21 million
Department of Energy (DOE) Support increase. The $16 million Instruments
increase resulted primarily from the sales of Wallac, acquired in June
1993. In Mechanical Components, the $8 million decrease resulted
primarily from the divestiture of an operation in the fourth quarter of
1993 and from lower sales in the electromechanical and industrial sealing
businesses.
Income from operations was $21.9 million in 1994, compared to
$29.4 million in 1993. The $4.1 million decrease in Technical Services
reflected the reduction in available fee under the new base operations
contract at the Kennedy Space Center. In addition, profits in the
automotive testing business were adversely impacted by the faster than
anticipated return to normal sales levels following increases in 1993
caused primarily by the introduction of new industry testing protocols.
EG&G, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
In DOE Support, the $4.2 million decrease was primarily attributable to
estimated lower performance grades at Rocky Flats and Idaho. In
Instruments, the income generated by the Wallac acquisition was offset by
the effects of pricing pressures in security instruments. Certain
operating elements within this segment did not contribute to income as a
result of continuing unfavorable market conditions. In Mechanical
Components, the $1.1 million decrease resulted from lower sales and
inventory adjustments. The $2.6 million Optoelectronics increase
resulted primarily from improved margins in the German and Far East
operations due to increased sales and cost reductions. The net change in
other income (expense) was a $0.6 million reduction in expense due
primarily to lower interest expense.
Liquidity and Capital Resources
-------------------------------
The Company's cash and cash equivalents decreased $24.9 million during
the first quarter of 1994 while total debt increased $9.7 million. Net
cash used in operating activities, which totaled $3.5 million, included a
$13.7 million increase in prepaid pension. The Company invested
$7 million in physical plant and equipment during the first quarter of
1994 and expects to increase this level of investment in subsequent
quarters.
In the fourth quarter of 1993, the Board of Directors authorized the
purchase of up to a total of 5.5 million shares of the Company's common
stock through periodic purchases on the open market. The Company has
purchased 2.2 million shares under this program to date, including
1.1 million shares purchased in the first quarter of 1994.
Effective March 21, 1994, the Company concluded the restructuring of its
credit facilities with the signing of two revolving credit agreements
totaling $250 million. These agreements consist of a $175 million
364-day facility and a $75 million three-year facility and serve as
backup facilities for the commercial paper borrowing.
PART II. OTHER INFORMATION
EG&G, INC. AND SUBSIDIARIES
Item 4. Results of Votes of Security Holders
------------------------------------
(a) The Company's annual meeting of stockholders was held on
April 26, 1994.
(b) Proxies for the meeting were solicited pursuant to Regulation
14A, and there were no solicitations in opposition to
management's nominees for Directors. All such nominees were
elected, and the number of Directors was fixed at eleven.
(c) The stockholders voted 4,250,768 shares for and 39,899,963
shares against, with 2,829,013 shares abstaining and 3,144,439
shares not voting, on a stockholder proposal to request the
Board of Directors to commission a subcommittee to develop
criteria for the acceptance and execution of military contracts.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
for the three months ended April 3, 1994.
EG&G, INC. AND SUBSIDIARIES
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.
EG&G, Inc.
By /s/ John F. Alexander, II
--------------------------------
Corporate Controller and
Acting Chief Financial Officer
(Principal Accounting Officer and
Principal Financial Officer)
Date May 13, 1994
------------