UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
(No Fee Required)
For the quarterly period ended January 2, 1994
Commission File Number 1-5109
TODD SHIPYARDS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 91-1506719
(State or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
1801- 16th AVENUE SW, SEATTLE, WASHINGTON 98134-1089
(Street address of principal executive offices - Zip Code)
Registrant's telephone number: (206) 623-1635
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 _____
There were 11,305,434 shares of the corporation's $.01 par value
common stock outstanding at January 2, 1994.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No _____
PART I FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
TODD SHIPYARDS CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS
Periods Ended January 2, 1994 and December 27, 1992
(In thousands of dollars, except per share data)
Quarter Ended Nine Months Ended
1/2/94 12/27/92 1/2/94 12/27/92
Revenues $20,870 $ 8,704 $48,838 $ 40,225
Operating expenses:
Direct labor and benefits 10,944 2,683 25,987 14,622
Materials and other 7,118 1,766 20,257 8,899
Administrative expenses 6,002 6,555 17,900 21,217
Executive compensation - 750 - (1,477)
Contract losses (4,923) 5,500 (8,715) 5,500
Other ( 272) (166) (872) (1,516)
Subtotal 18,869 17,088 54,557 47,245
Income (loss) before
interest and other items 2,001 (8,384) (5,719) (7,020)
Provision for environmental
cleanup (6,500) - (6,500) -
Closed facilities adjustment
Galveston 3,131 - 3,131 -
Los Angeles 2,522 - 2,522 -
Gain on sale of facility 613 - 613 -
Net investment and interest
income and other 608 587 3,476 1,675
Income (loss) before income
taxes 2,375 (7,797) (2,477) (5,345)
Income tax provision(benefit) 571 (784) (263) 50
Income (loss) before
extraordinary item 1,804 (7,013) (2,214) (5,395)
Extraordinary item - (552) - -
Net income (loss) 1,804 (7,565) (2,214) (5,395)
Retained earnings at
beginning of period 29,119 47,109 33,137 44,939
Retained earnings at
end of period $30,923 $39,544 $30,923 $39,544
Net income (loss) per common share:
Income (loss) before
extraordinary item $ .16 $ (.58) $ (.19) $ (.45)
Extraordinary item - (.05) - -
Net income (loss) $ .16 $ (.63) $ (.19) $ (.45)
Weighted average number of
shares (thousands) 11,479 11,956 11,693 11,956
The accompanying notes are an integral part of this statement.
TODD SHIPYARDS CORPORATION
CONSOLIDATED BALANCE SHEETS
As of January 2, 1994 and March 28, 1993
(in thousands of dollars)
1/2/94 3/28/93
ASSETS: (Unaudited)(Audited)
Cash and cash equivalents $ 5,912 $ 24,673
Restricted cash 9,708 10,961
Marketable securities 40,202 29,081
Accounts receivable, less allowance for losses
of $1,294 at 1/2/94 and $1,807 at 3/28/93:
U.S. Government 4,372 4,952
Commercial and other 3,494 12,016
7,866 16,968
Costs and estimated profits in excess of
billings on incomplete contracts 9,218 5,542
Inventories 806 984
Other current assets 1,271 1,724
Total current assets 74,983 89,933
Property, plant and equipment, net 24,245 24,636
Deferred pension asset 12,912 12,012
Other assets 2,666 2,706
Total assets $114,806 $129,287
LIABILITIES:
Accounts payable and accruals $ 5,491 $ 6,828
Accrual for loss on contracts 3,767 12,499
Payrolls and vacations 3,782 4,657
Estimated liability for closure of facilities 125 2,686
Taxes other than income taxes 1,247 1,414
Income taxes 3,967 3,979
Other 342 559
Total current liabilities 18,721 32,622
Accrued environmental cleanup 6,500 -
Deferred credit related to closure of
Galveston shipyard - 3,281
Accrued postretirement health benefits 23,134 22,684
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value: 19,500,000 shares
authorized; 11,956,033 shares issued 120 120
Additional paid-in capital 38,181 38,181
Retained earnings 30,923 33,137
69,224 71,438
Less treasury stock 2,773 738
Total stockholders' equity 66,451 70,700
Total liabilities & stockholders' equity $114,806 $129,287
The accompanying notes are an integral part of this statement
TODD SHIPYARDS CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended January 2, 1994 and December 27, 1992
(in thousands of dollars)
1/2/94 12/27/92
OPERATING ACTIVITIES:
Net loss $(2,214) $(5,395)
Adjustments to reconcile loss to net cash
provided by operating activities:
Depreciation and amortization 2,338 2,238
Loss (gain) on sale of fixed assets (608) 133
Galveston facility closure adjustment (3,281) -
Los Angeles facility closure adjustment (2,561) -
Decrease in accounts receivable 9,102 13,234
Net change in accrual for loss on contracts (8,732) 5,500
Increase in environmental cleanup accrual 6,500 -
Decrease (increase) in costs and
estimated profits in excess of
billing on incomplete contracts (3,676) 1,417
Decrease in facility closure provision - (549)
Decrease in accounts payable and accruals (1,337) (2,190)
Decrease in payrolls and vacations (875) (3,242)
Decrease (increase) in other current assets 453 (1,449)
Decrease in income taxes (12) (1,419)
Other, net (594) (783)
Total adjustments (3,283) 12,890
Net cash provided by (used in)
operating activities (5,497) 7,495
INVESTING ACTIVITIES:
Net increase in marketable securities (11,121) -
Capital expenditures (2,052) (588)
Proceeds from the sale of fixed assets 691 5
Net cash used in investing activities (12,482) (583)
FINANCING ACTIVITIES:
Purchases of treasury stock (2,035) -
Decrease in cash restricted to secure
bid and performance bonds 1,253 1,767
Net cash (used in) provided from
financing activities (782) 1,767
NET CHANGE IN CASH AND CASH EQUIVALENTS: (18,761) 8,679
CASH AND CASH EQUIVALENTS:
Beginning of period 24,673 54,021
End of period $ 5,912 $ 62,700
The accompanying notes are an integral part of this statement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Todd Shipyards Corporation (the "Company") has filed its
Consolidated Financial Statements for the fiscal year ended March
28, 1993 with the Securities and Exchange Commission as part of
its Annual Report on Form 10-K. That report should be read in
connection with this Form 10-Q.
1. STATEMENTS NOT AUDITED
The accompanying Consolidated Financial Statements are unaudited
but in the opinion of management reflect all adjustments
necessary for a fair presentation of financial position and
results of operations.
2. ENVIRONMENTAL MATTERS
The Company faces significant potential liabilities in connection
with the alleged presence of hazardous waste materials at certain
of its closed shipyards, at its Seattle Shipyard and at several
sites used by the Company for disposal of alleged hazardous
waste. The Company continues to analyze environmental matters and
associated liabilities for which it may be responsible. No
assurance can be given as to the extent of any significant
environmental liabilities until such analysis has been fully
completed. The overall eventual outcome of environmental matters
cannot be determined at this time, however, several site
investigations have progressed sufficiently to allow for
provisions in the accompanying consolidated financial statements.
The Company's involvement in each of these sites is detailed in
its previously filed Form 10-K.
During the quarter ended January 2, 1994 the Company analyzed the
most recent data available from the EPA and other sources
regarding the Harbor Island Superfund Site (see 1993 Form 10-K)
and believes it is now possible to estimate an initial cost for
the proposed surface and ground water clean-up phase of the
Remedial Investigation and Feasibility Study. The Company
further believes that investigations regarding several other
sites have progressed to the degree that it is currently possible
to estimate costs for their respective remediations. The Company
has provided aggregate reserves of $6.5 million for these
contingent liabilities; no amount has been taken into
consideration for the possible recovery of some or all these
amounts through various insurance contracts and/or right of
contribution actions against prior landowners and others who may
have been responsible for the alleged damage to the various
sites.
3. FACILITY CLOSURES
GALVESTON SHIPYARD
On December 16, 1993, the Company sold its Galveston shipyard
facilities to The Board of Trustees of the Galveston Wharves
("Galveston Wharves") for $6 million, consisting of $.6 million
cash with the balance financed with City of Galveston special
project revenue bonds issued to the Company. The revenue bonds
bear interest at the rate of eight percent payable semiannually
beginning July 1, 1994. The revenue bonds are secured by a lien
on the shipyard property and a subordinate lien on the revenues
of the Galveston Wharves. Annual bond principal payments of
$.216 million are due beginning January 1, 1995 with a final
balloon payment of $3.456 million due January 1, 2004. The
Company is recognizing the gain on the sale of the facility as
bond payments are received.
Upon the sale of the Galveston facility, the Company reversed a
$3.2 million deferred credit relating to estimated Galveston
facility closure costs. Upon receipt of the initial proceeds from
the Galveston facility and equipment sale, the Company recognized
a net gain of $.6 million.
LOS ANGELES SHIPYARD
During the third quarter ending January 2, 1994, the Company
reduced the Los Angeles facility closure provision from $2.6
million to $.1 million to account for remaining Los Angeles
facility closure costs. The provision had reflected estimated
contributions necessary to fund the Los Angeles Local 9 pension
plan. Based on data available to the Company regarding the plan
assets and the plan's expected future operating activity, the
Company believes that the pension plan assets currently
adequately fund its liabilities and that no contributions to the
plan will be necessary.
4. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the nine-month period ending 1/2/94 12/27/92
Interest $ 22 $ 93
Income taxes 12 1,469
In the fiscal year 1994 non-cash operating activities included
adjustments to the Galveston and Los Angeles facility closure
provisions for $3.3 million and $2.6 million respectively.
Certain amounts in the statement of cashflows for fiscal year
1993 have been reclassified to conform to the fiscal 1994
presentation.
5. SHARE REPURCHASE
The Company has from time to time subsequent to the end of the
second quarter ended September 26, 1993 re-acquired shares of the
Company's common stock in a number of open market transactions
and through an odd lot tender offer. As of January 2, 1994 the
Company had repurchased 12,641 Company shares in the odd lot
tender offer and 490,300 Company shares in open market
transactions for a total cost of $2,035,000. The Company held
650,599 treasury shares as of January 2, 1994.
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Notes to Consolidated Financial Statements are an integral
part of Management's Discussion and Analysis of Financial
Condition and Results of Operations and should be read in
conjunction herewith.
FINANCIAL OVERVIEW
Operating Results
Revenues - Revenues in the third quarter of fiscal year 1994
increased 140% to $20.9 million compared with $8.7 million in the
prior year due to growth in commercial conversion and overhaul
activities and government phased maintenance performed during the
period. For the nine month period revenues increased 21% to
$48.8 million from $40.2 million as increases in commercial
business exceeded decreases in government programs.
Revenues for the third quarter were as follows:
FY % of FY % of Change
Contract Source 1994 Revenue 1993 Revenue Amount Percent
U.S. Government $ 8.2 39% $2.5 29% $5.7 228%
Commercial 12.7 61% 6.2 71% 6.5 105%
Total revenue $20.9 100% $8.7 100% $12.2 140%
Revenues for the nine month period were as follows:
FY % of FY % of Change
Contract Source 1994 Revenue 1993 Revenue Amount Percent
U.S. Government $13.2 27% $24.5 61% $(11.3) (46%)
Commercial 35.6 73% 15.7 39% 19.9 127%
Total revenue $48.8 100% $40.2 100% $ 8.6 21%
Operating expenses - The Company's direct costs during the third
quarter and nine months ending January 2, 1994 were 87% and 95%
of revenues respectively. These results are primarily due to the
difficulties experienced on a contract for the conversion of two
commercial container ships to an open cargo hold configuration
("conversion contract") and to work being performed on a contract
for the overhaul of a Washington State Ferry vessel ("overhaul
contract"). Direct costs consist of contract specific labor
costs, related benefit costs and material costs.
Administrative expenses for the third quarter and nine month
period of fiscal year 1994 were $.5 million and $3.3 million
lower than the respective prior year periods reflecting the
Company's continuing cost reduction efforts.
In the third quarter of fiscal year 1993 the Company accrued a
$.8 million liability reflecting the balance owing on a former
officer and director's employment contract. In the 1993 nine
month period the Company booked a net benefit of $1.5 million due
to the second quarter cancellation of a $2.3 million executive
compensation program partially offset by the third quarter $.8
employment contract liability.
Operating expenses for fiscal year 1994 were reduced by $4.9
million in the third quarter and $8.7 million for the nine month
period for utilization of loss reserves provided for on the
conversion and overhaul contracts. Operating expenses for the
third quarter and nine month period of fiscal year 1993 were
increased by $5.5 million reflecting a provision for loss
reserves on the conversion contract.
Other operating expenses for the third quarter and nine month
period of fiscal year 1994 reflect estimated deferred pension
asset increases of $.3 million and $.9 million respectively.
During the third quarter of fiscal year 1993 the Company
recognized a $1.3 million charge to other operating expenses for
an early retirement program, this charge was offset by a $1.5
million contract settlement at a closed facility. Other
operating expenses for the nine month period of fiscal year 1993
include the third quarter $1.3 million retirement charge, a $1.3
million benefit for estimated deferred pension asset increases
and the third quarter $1.5 million contract settlement.
Fiscal year 1994 operating expenses were also benefited by
estimated deferred pension asset increases of $.3 million in the
third quarter and $.9 million in the nine month period. This
compares with the third quarter of fiscal year 1993 when the
Company's operating expenses were increased by $1.4 million for
the estimated expenses of an early retirement offer. For the
nine month period of fiscal year 1993 deferred pension asset
increases were offset by the estimated early retirement offer
costs.
Provision for environmental cleanup - As discussed in Note 2 to
the financial statements the Company is defending various
environmental claims and legal actions that arise in the normal
course of business, including matters in which the Company has
been designated a potentially responsible party at certain waste
disposal sites. During the third quarter of fiscal year 1994 the
Company recorded provisions totaling $6.5 million for sites where
it is possible to make reasonable estimates of the Company's
environmental liability. The provision reflects estimated soil
contamination remediation costs at the Company's Seattle facility
and estimated future expenditures connected with environmental
matters at closed facilities and certain waste disposal sites.
Adjustments for closed facilities
Galveston - During the first quarter of fiscal year 1991 the
Company decided to cease operations at its Galveston shipyard and
began efforts to sell the shipyard, its drydocks and equipment.
At the time of cessation, the Company did not recognize any net
gain or loss in the consolidated financial statements due to the
uncertainties of amounts to be realized and the costs of closure.
Upon the December 1993 disposition of the Galveston facility, the
Company reversed the $3.2 million deferred credit for estimated
Galveston facility closure costs.
Los Angeles - In April 1990 the Company established a reserve of
approximately $7.5 million for closure to the Los Angeles
facility and closure-related liabilities including potential Los
Angeles Local 9 Pension Fund obligations. As of the end of the
third quarter, the known Los Angeles closure liabilities were
limited to potential pension plan contributions and lease
obligations. Trustees of the Los Angeles Local 9 Pension Fund
have represented to the Company that plan assets currently
adequately fund plan obligations. Accordingly, the Company
reduced the Los Angeles facility closure provision by $2.5
million to $.1 million in the quarter ending January 2, 1994.
Gain on sale of facility - As discussed in Note 3 to the
financial statements the Company sold its Galveston shipyard
facilities in December 1993 to Galveston Wharves for $6 million,
consisting of $.6 million cash with the balance financed with
special revenue bonds issued to the Company. The Company is
recognizing the gain on the sale as the bond payments are
received. Upon receipt of the initial proceeds from the
Galveston facility and equipment sale, the Company recognized a
net gain of $.6 million.
Net investment and interest income and other - Net investment and
interest income for the third quarter of fiscal year 1994 were
relatively unchanged compared to the third quarter of the prior
fiscal year and represent interest income earned on invested cash
less nominal interest and letter of credit expenses. Investment
and other income for the nine month period increased versus the
prior year due to a $1.8 million benefit from the settlement of
an insurance dispute.
Income taxes - For the third quarter of fiscal year 1994 the
Company recognized a $.6 million income tax provision pursuant to
Financial Accounting Standard 109 reflecting the lack of
assurance that previously recognized deferred benefits would be
realized. The Company does not project taxable income for fiscal
year 1994 after adjusting net income for the non-taxable facility
closure adjustments and for contract losses realized in fiscal
year 1994. In the third quarter of fiscal year 1993 the Company
booked a $.8 million tax benefit to account for the estimated
losses on the conversion contract entered into during the period.
For the nine month period of fiscal year 1994 the Company
recognized $.3 million in tax benefits reflecting refunds
receivable. This compares with a $.1 million alternative minimum
tax provision in the prior year period.
Extraordinary items - In the third quarter of fiscal year 1993
the Company reversed the tax loss and tax credit carry forward
benefits recognized in the first six months of fiscal year 1993
to reflect the third quarter reversal of the tax provision.
Net income (loss) - As a result of the foregoing factors, the
Company had net income of $1.8 million in the third quarter of
fiscal year 1994 compared to a net loss of $7.6 million in the
third quarter of fiscal year 1993. For the first nine months of
fiscal year 1994 the Company had a net loss of $2.2 million
compared with net loss of $5.4 in the prior period.
Liquidity
Working capital - For the nine month period, working capital
decreased $1.3 million due primarily to losses from shipyard
operations (primarily the conversion contract and the overhaul
contract) partially offset by increased third quarter business
activity and cash received from the settlement of an insurance
dispute during the first quarter. Working capital includes
restricted and unrestricted cash, cash equivalents and marketable
securities of $55.8 million.
Unbilled receivables - As of January 2, 1994 unbilled items on
completed contracts of $.8 million was included in accounts
receivable compared with 9.9 million at March 28, 1993 and $7.4
million at the end of the third quarter of fiscal year 1993.
Restricted Cash - As of January 2, 1994 the Company's restricted
cash balance was $9.7 million compared with $11.0 million at
March 28, 1993. The January 2, 1994 restricted cash balance
includes $8.9 million in cash and cash equivalents deposited in
escrow accounts with a bank in lieu of posting performance bonds
on the conversion contract and the overhaul contract. Upon re-
delivery of the vessels involved the respective escrows will be
released.
Capital Resources
Based on its current projections for fiscal year 1994, the
Company believes existing cash and short-term investments
together with funds generated from operations exceed currently
anticipated Company operations, capital expenditures,
environmental expenses and performance bonds and escrow accounts
necessary to secure contract performance.
FUTURE OPERATIONS
The Company's future profitability depends upon its ability to
compete profitably in a highly competitive overhaul and repair
market. In recent contract awards the Company has competed
against other large West Coast and Gulf Coast shipyards and
against small ship repair organizations. This business
environment creates pressure on Company operations as some of the
larger shipyards are nonunion with lower wage and benefit
expenses and many of the larger shipyards have a larger volume of
business over which to allocate their overhead costs. The
Company's competition from small ship repair organizations arises
from their lower prevailing wage requirements amplified by low
overhead costs as a result of small investments in plant and
equipment.
The Company's current work backlog is approximately $15 million.
This compares to a negligible backlog balance at the end of the
third quarter of fiscal year 1993. In the next 12 months, the
Company anticipates a number of important bid opportunities as
the Washington State Ferry System is expected to award sizable
contracts for repair and new construction and the Navy is
expected to begin relocating ships to its Everett, Washington
home port. There can be no assurances that the Company will be
successful in any of these bids in a highly competitive
marketplace.
The Company believes that any possible profit improvements from
shipyard operations for fiscal year 1995 and beyond will result
from a combination of cost reductions, work process modifications
and increased Navy, commercial and ferry work. There can be no
assurance that the Company will be successful in obtaining any
increased workload or in achieving the necessary cost reductions
and work process modifications.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the
quarter ended January 2, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
TODD SHIPYARDS CORPORATION
Registrant
By:/s/ David K. Gwinn
David K. Gwinn
Chief Financial Officer
February 14, 1994