UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
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 April 28, 1996
----- -----------------------------
Common Stock, $1 par value 47,514,000
(Excluding treasury shares)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
EG&G, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1996 and April 2, 1995
(Unaudited)
---------
(In Thousands Except Per Share Data)
----------------------------------
Three Months Ended
-----------------------
March 31, April 2,
1996 1995
--------- --------
Sales:
Products $208,001 $196,380
Services 138,790 141,850
-------- --------
Total Sales 346,791 338,230
-------- --------
Costs and Expenses:
Cost of sales:
Products 131,925 129,283
Services 124,456 123,856
-------- --------
Total cost of sales 256,381 253,139
Research and development expenses 10,961 10,774
Selling, general and administrative expenses 59,524 58,644
-------- --------
Total Costs and Expenses 326,866 322,557
-------- --------
Operating Income From Continuing Operations 19,925 15,673
Other Income (Expense), Net (Note 2) (1,895) (200)
-------- --------
Income From Continuing Operations Before Income Taxes 18,030 15,473
Provision for Income Taxes 6,148 6,121
-------- --------
Income From Continuing Operations 11,882 9,352
Income From Discontinued Operations, Net of
Income Taxes (Note 3) 900 4,337
-------- --------
Net Income $ 12,782 $ 13,689
======== ========
Earnings Per Share:
Continuing Operations $.25 $.17
Discontinued Operations .02 .08
---- ----
Net Income $.27 $.25
==== ====
Cash Dividends Per Common Share $.14 $.14
==== ====
Weighted Average Shares of Common Stock Outstanding 47,630 54,413
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
EG&G, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As of March 31, 1996 and December 31, 1995
(Dollars in Thousands Except Per Share Data)
------------------------------------------
March 31, December 31,
1996 1995
--------- ------------
(Unaudited)
---------
Current assets:
Cash and cash equivalents $ 69,602 $ 76,204
Accounts receivable (Note 4) 219,245 211,903
Inventories (Note 5) 120,737 114,199
Other (Note 7) 72,398 66,380
-------- --------
Total Current Assets 481,982 468,686
-------- --------
Property, Plant and Equipment:
At cost (Note 6) 431,097 417,566
Accumulated depreciation and amortization (268,987) (270,026)
-------- --------
Net Property, Plant and Equipment 162,110 147,540
-------- --------
Investments (Note 7) 14,032 16,072
Intangible Assets (Note 8) 119,075 123,421
Other Assets 48,673 48,196
-------- --------
Total Assets $825,872 $803,915
======== ========
EG&G, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
As of March 31, 1996 and December 31, 1995
(Dollars in Thousands Except Per Share Data)
------------------------------------------
March 31, December 31,
1996 1995
--------- ------------
(Unaudited)
---------
Current Liabilities:
Short-term debt $ 33,277 $ 5,275
Accounts payable 79,670 72,759
Accrued expenses (Note 9) 158,355 168,671
Net liabilities of discontinued operations (Note 3) 6,249 3,746
-------- --------
Total Current Liabilities 277,551 250,451
-------- --------
Long-Term Debt 115,094 115,222
Long-Term Liabilities 69,784 71,296
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
Retained earnings 504,240 498,181
Cumulative translation adjustments 22,326 28,679
Net unrealized gain on marketable investments (Note 7) 608 244
Cost of shares held in treasury;
12,596,000 shares at March 31, 1996 and
12,492,000 shares at December 31, 1995 (223,833) (220,260)
-------- --------
Total Stockholders' Equity 363,443 366,946
-------- --------
Total Liabilities and Stockholders' Equity $825,872 $803,915
======== ========
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 March 31, 1996 and April 2, 1995
(Unaudited)
---------
(In Thousands)
------------
Three Months Ended
------------------------
March 31, April 2,
1996 1995
--------- -------
Cash Flows Provided by (Used in) Operating Activities:
Net income $ 12,782 $ 13,689
Deduct net income from discontinued operations (900) (4,337)
-------- --------
Income from continuing operations 11,882 9,352
Adjustments to reconcile income from continuing operations
to net cash provided by (used in) continuing operations:
Depreciation and amortization 9,062 8,727
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (8,836) 12,737
Decrease (increase) in inventories (7,935) 2,476
Increase (decrease) in accounts payable 7,886 (1,964)
Decrease in accrued restructuring costs (1,697) (4,233)
Decrease in accrued expenses (6,252) (1,658)
Change in prepaid and deferred taxes (2,413) (2,634)
Change in prepaid expenses and other (6,212) (8,885)
-------- --------
Net Cash Provided by (Used in) Continuing Operations (4,515) 13,918
Net Cash Provided by Discontinued Operations 3,403 15,151
-------- --------
Net Cash Provided by (Used in) Operating Activities (1,112) 29,069
-------- --------
EG&G, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 1996 and April 2, 1995
(Unaudited)
---------
(In Thousands)
------------
Three Months Ended
------------------------
March 31, April 2,
1996 1995
--------- -------
Cash Flows Used in Investing Activities:
Capital expenditures (26,982) (9,217)
Proceeds from sales of investment securities 4,459 2,307
Other 851 (576)
-------- --------
Net Cash Used in Investing Activities (21,672) (7,486)
-------- --------
Cash Flows Provided by (Used in) Financing Activities:
Increase in commercial paper 28,894 21,751
Other debt proceeds (payments) (1,012) 2,219
Proceeds from issuance of common stock 3,472 144
Purchases of common stock (7,045) (28,615)
Cash dividends (6,674) (7,721)
Other 22 (553)
-------- --------
Net Cash Provided by (Used in) Financing Activities 17,657 (12,775)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (1,475) 1,392
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents (6,602) 10,200
Cash and cash equivalents at beginning of period 76,204 66,424
-------- --------
Cash and cash equivalents at end of period $ 69,602 $ 76,624
======== ========
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) Basis of Presentation
- --------------------------
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. 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 December 31, 1995 in this report
were extracted from the Company's audited 1995 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 March 31, 1996 and the
results of operations for the three months ended March 31, 1996 and
April 2, 1995 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 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 provides that companies account for the grant of
stock options and other stock-based compensation at either fair value or
continue to account for at intrinsic value in accordance with Accounting
Principles Board (APB) Opinion No. 25 with disclosure of pro forma
compensation expense and the effect on net income and earnings per share
based on fair value. The Company has elected to continue to apply APB
Opinion No. 25.
(2) Other Income (Expense), Net
- --------------------------------
Other income (expense), net, consisted of the following:
(In Thousands)
------------
Three Months Ended
--------------------
March 31, April 2,
1996 1995
--------- -------
Interest income $ 955 $ 1,059
Interest expense (3,184) (1,593)
Gains (losses) on investments, net - 900
Other 334 (566)
------- -------
$(1,895) $ (200)
======= =======
EG&G, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(3) Discontinued Operations
- ----------------------------
The former Department of Energy (DOE) Support segment, which has provided
services under management and operations contracts, is presented as
discontinued operations in accordance with APB Opinion No. 30.
Summary operating results of the discontinued operations were as follows:
(In Thousands)
------------
Three Months Ended
-------- -------
March 31, April 2,
1996 1995
-------- -------
Sales $32,289 $246,154
Costs and expenses 30,905 239,481
Income from discontinued
operations before income taxes 1,384 6,673
Provision for income taxes 484 2,336
------- --------
Income from discontinued
operations, net of income taxes $ 900 $ 4,337
======= ========
Net assets (liabilities) of discontinued operations consisted of the
following:
(In Thousands)
------------
March 31, December 31,
1996 1995
-------- ----------
Accounts receivable, primarily
unbilled $ 3,306 $ 7,575
Operating current liabilities (9,643) (11,439)
Other 88 118
------- --------
$(6,249) $ (3,746)
======= ========
(4) Accounts Receivable
- -----------------------
Accounts receivable as of March 31, 1996 and December 31, 1995 included
unbilled receivables of $40 million and $44 million, respectively, which
were due primarily from U.S. Government agencies. Accounts receivable
were net of reserves for doubtful accounts of $4.1 million and
$4.4 million as of March 31, 1996 and December 31, 1995, respectively.
EG&G, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(5) Inventories
- ----------------
Inventories consisted of the following:
(In Thousands)
------------
March 31, December 31,
1996 1995
-------- -----------
Finished goods $ 28,719 $ 28,540
Work in process 31,849 28,613
Raw materials 60,169 57,046
-------- --------
$120,737 $114,199
======== ========
(6) Property, Plant and Equipment, at Cost
- -------------------------------------------
Property, plant and equipment consisted of the following:
(In Thousands)
------------
March 31, December 31,
1996 1995
-------- -------
Land $ 11,723 $ 12,003
Buildings and leasehold improvements 111,045 108,254
Machinery and equipment 308,329 297,309
-------- --------
$431,097 $417,566
======== ========
(7) Investments
- ----------------
Investments consisted of the following:
(In Thousands)
------------
March 31, December 31,
1996 1995
-------- -----------
Marketable investments $ 8,872 $ 9,547
Other investments 986 1,396
Joint venture investments 5,563 7,349
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15,421 18,292
Less investments classified
as other current assets (1,389) (2,220)
------- -------
$14,032 $16,072
======= =======
EG&G, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
At March 31, 1996, marketable investments, all classified as available
for sale, had an aggregate market value of $8.9 million and gross
unrealized holding gains of $0.9 million. Net unrealized holding gains,
net of deferred taxes, of $0.6 million and $0.2 million were reported as
a separate component of stockholders' equity at March 31, 1996 and
December 31, 1995, respectively. Marketable investments of $0.4 million
and other investments of $1 million were classified as other current
assets at March 31, 1996.
(8) Intangible and Other Assets
- --------------------------------
The decrease in intangible assets resulted primarily from current year
amortization and the effect of translating goodwill denominated in non-
U.S. currencies at current exchange rates.
(9) Accrued Expenses
- ---------------------
Accrued expenses consisted of the following:
(In Thousands)
------------
March 31, December 31,
1996 1995
-------- -----------
Payroll and incentives $ 16,892 $ 28,660
Employee benefits 43,529 40,178
Federal, non-U.S. and state income taxes 31,882 33,153
Other 66,052 66,680
-------- --------
$158,355 $168,671
======== ========
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
EG&G, INC. AND SUBSIDIARIES
Results of Operations
---------------------
The following industry segment information is presented as an aid to a
better understanding of the Company's operating results:
(In Thousands)
------------
Three Months Ended
-------------------------------
March 31, April 2, Increase
1996 1995 (Decrease)
--------- ------- ---------
Sales:
Instruments $ 73,581 $ 69,842 $ 3,739
Mechanical Components 68,541 59,790 8,751
Optoelectronics 65,879 59,433 6,446
Technical Services 138,790 149,165 (10,375)
-------- -------- --------
$346,791 $338,230 $ 8,561
======== ======== ========
Operating Income From Continuing
Operations:
Instruments $ 6,808 $ 3,244 $ 3,564
Mechanical Components 7,227 6,019 1,208
Optoelectronics 4,115 2,320 1,795
Technical Services 8,450 11,110 (2,660)
General Corporate Expenses (6,675) (7,020) 345
-------- -------- --------
$ 19,925 $ 15,673 $ 4,252
======== ======== ========
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 March 31, 1996 compared to the three months ended April 2, 1995.
Overview
Sales from continuing operations increased 3% in 1996 to $347 million,
reflecting a 10% growth in the three products segments, partially offset
by a decline in the Technical Services segment's sales. Operating income
from continuing operations increased 27% over the 1995 level, reflecting
the impact of higher sales and increased savings resulting from the
Company's restructuring plan. In the first quarter of 1996, cost savings
under the restructuring plan totaled $6 million, a $3 million increase
over the savings achieved in the first quarter of 1995.
EG&G, INC. AND SUBSIDIARIES
Management's Discussion and Analysis (Continued)
Sales
Sales from continuing operations were $347 million in the first quarter of
1996, a 3% increase over the 1995 level. The Instruments' $3.7 million
increase resulted primarily from higher demand for security and diagnostic
products, partially offset by a $2.2 million decrease due to the
divestiture of two product lines in 1995. The continued recovery of the
aerospace market and higher demand for industrial process sealing and
electromechanical products resulted in the $8.8 million increase in
Mechanical Components' sales. In Optoelectronics, the $6.4 million
increase resulted from higher demand for flash products and sensors for
the medical and automotive markets. In Technical Services, the $10.4
million decrease was primarily due to the $6.6 million combined impact of
reduced government funding levels and the completion of two contracts in
1995. Automotive operations' sales decreased $3.8 million as a result of
lower demand for stationary testing services and reduced outsourcing of
automotive testing.
Operating Income From Continuing Operations
Operating income from continuing operations was $19.9 million in the first
quarter of 1996, a 27% increase over 1995. The increase reflected the
impact of higher sales and increased savings resulting from the Company's
restructuring plan. In the first quarter of 1996, cost savings under the
restructuring plan totaled $6 million, a $3 million increase over the
savings achieved in the first quarter of 1995. The Instruments' $3.6
million increase in operating income resulted from the margin on higher
sales and $1 million of increased cost reductions resulting from the
restructuring plan. The Mechanical Components' increase of $1.2 million
resulted primarily from the margin on higher sales. The $1.8 million
increase in Optoelectronics resulted from the margin on higher sales and
$1 million of increased cost reductions. In Technical Services, the
profit impact of the sales reduction, primarily in automotive operations,
offset by an estimated provision for a legal judgment recorded in 1995,
resulted in a $2.7 million decrease.
Other
The net increase of $1.7 million in other expense was primarily due to
higher interest expense reflecting the issuance of $115 million of ten-
year notes in the third quarter of 1995, lower foreign exchange losses and
the absence of investment gains in 1996. The effective tax rate of 34.1%
in 1996 was lower than the 39.6% in 1995 primarily due to lower
repatriation costs and changes in geographical distribution of income.
Discontinued Operations
Income from discontinued operations, net of income taxes, was $3.4 million
lower in 1996, reflecting the expiration of the Rocky Flats and Nevada
Test Site contracts in 1995. The Mound contract, the Company's remaining
management and operations contract with the DOE, expires on September 30,
1996, and sales and income from the contract are dependent upon the work
scope and fee pools that are negotiated annually. In accordance with
contract terms, the DOE may extend the contract, under existing terms and
conditions, for a period of one year.
EG&G, INC. AND SUBSIDIARIES
Management's Discussion and Analysis (Continued)
Financial Condition
-------------------
The Company's cash and cash equivalents decreased $6.6 million in the
first quarter of 1996 while short-term debt increased $28 million, mainly
due to an increase in capital expenditures. Net cash used in continuing
operating activities was $4.5 million in 1996 compared to $13.9 million of
net cash provided in the first quarter of 1995. The change in net cash
resulted primarily from increases in accounts receivable and inventories
in 1996 compared to decreases in 1995. The increase in accounts
receivable was caused by higher sales in the products segments and the
timing of payments under government contracts.
Discontinued operations generated cash of $3.4 million in the first
quarter of 1996 compared to $15.2 million in 1995, reflecting the
expiration of the Rocky Flats and Nevada Test Site contracts.
Capital expenditures were $27 million in the first quarter of 1996, an
increase of $18 million over the same period in 1995. In 1996, capital
expenditures are expected to exceed the 1995 level by approximately 50%.
These increases support new product development initiatives primarily in
the Optoelectronics segment, including the amorphous silicon and
micromachined sensor programs.
During the first quarter of 1996, the Company purchased 300,000 shares of
its common stock through periodic purchases on the open market at a cost
of $7 million. As of March 31, 1996, the Company had authorization to
purchase 5.3 million additional shares.
In March 1996, the Company renegotiated its credit facilities with the
signing of two revolving credit agreements totaling $200 million. These
agreements consist of a $100 million, 364-day facility and a $100 million,
five-year facility, which expires in March 2001. These agreements serve
primarily as backup facilities for the Company's commercial paper
borrowing program.
Exhibits
EG&G, INC. AND SUBSIDIARIES
Exhibit 27 - Financial data schedule
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 23, 1996.
(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.
Item 5. Other Information
On April 23, 1996, the Company announced that Dr. Fred B. Parks
was elected President of the Company and a member of the Board
of Directors.
On April 24, 1996, the Company announced that Nicholas A.
Lopardo was elected to the Board of Directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits incorporated by reference from Part I herein
Exhibit 27 - Financial data schedule (submitted in electronic
format only)
(b) Reports on Form 8-K
Report on Form 8-K dated January 5, 1996 was filed with the
commission reporting the appointment of John F. Alexander, II as
Chief Financial Officer and the election of Tamara J. Erickson
as a member of the Board of Directors.
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
-------------------------
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date May 13, 1996
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