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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 July 3, 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 10,805,490 shares of the corporation's $.01 par value
common stock outstanding at August 1, 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 July 3, 1994 and June 27, 1993
(In thousands, except per share data)
Quarter Ended
7/3/94 6/27/93
Revenues $ 14,469 $ 14,280
Operating expenses:
Direct labor and benefits 6,915 7,357
Materials and other 4,082 6,043
Administrative expenses 5,843 5,959
Contract losses and other (408) (2,430)
Subtotal 16,432 16,929
Loss before investment and other income,
income taxes and cumulative effect of
change in accounting principle (1,963) (2,649)
Investment and other income 950 2,413
Loss before income taxes and cumulative
effect of change in accounting principle (1,013) (236)
Income tax benefit - (65)
Loss before cumulative effect of change
in accounting principle (1,013) (171)
Cumulative effect to April 3, 1994 of
accounting change, net of tax - Note 2 438 -
Net loss $ (575) $ (171)
Earnings per share:
Loss before cumulative effect of
change in accounting principle $ (.09) $ (.01)
Cumulative effect of change in
accounting principle .04 -
Loss per common share $ (.05) $ (.01)
Pro forma amounts, assuming the new
accounting method is applied retroactively
Net income $ (575) $ 115
Earnings per share (.05) .01
Weighted average number of shares 10,885 11,808
Retained earnings at beginning of period $ 29,788 $ 33,137
Loss for the period (575) (171)
Unrealized loss on available-for-sale
securities (438) -
Retained earnings at end of period $ 29,775 $ 32,966
The accompanying notes are an integral part of this statement.
TODD SHIPYARDS CORPORATION
CONSOLIDATED BALANCE SHEETS
Periods Ended July 3, 1994 and April 3, 1994
(in thousands of dollars)
Period Ended
7/3/94 4/3/94
ASSETS: (Unaudited)(Audited)
Cash and cash equivalents $5,598 $ 3,787
Restricted cash 5,460 5,719
Marketable securities 43,331 48,480
Accounts receivable, less allowance for
losses of $653 at 7/3/94 and 4/3/94:
Government 1,240 3,364
Commercial and other 6,594 4,748
7,834 8,112
Costs and estimated profits in excess
of billings on incomplete contracts 2,115 3,063
Inventories 973 932
Other current assets 1,601 985
Total current assets 66,912 71,078
Property, plant and equipment, net 24,494 24,001
Deferred pension asset 14,222 13,937
Other assets 2,464 2,431
$108,092 $111,447
LIABILITIES:
Accounts payable and accruals $ 8,484 $ 7,266
Payrolls and vacations 3,633 3,552
Taxes other than income taxes 584 1,370
Accrual for loss on contracts 572 2,267
Other 115 334
Income taxes 3,568 3,952
Total current liabilities 16,956 18,741
Accrued postretirement health benefits 22,394 22,466
Environmental remediation reserves 6,500 6,500
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value (authorized,
19,500,000; issued, 11,956,033 shares) 120 120
Additional paid-in capital 38,181 38,181
Retained earnings 28,775 29,788
67,076 68,089
Treasury stock, at cost (1,133,171 shares
at 7/3/94; 1,019,370 shares at 4/3/94) 4,834 4,349
Total stockholders' equity 62,242 63,740
$108,092 $111,447
The accompanying notes are an integral part of this statement
TODD SHIPYARDS CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Periods Ended July 3, 1994 and June 27, 1993
(in thousands of dollars)
Period Ended
7/3/94 6/27/93
Cash flows from operating activities:
Net loss $ (575) $ (171)
Adjustments to reconcile loss to net
cash used in operating activities:
Effect of change in accounting principle (438) -
Depreciation and amortization 746 767
Utilization of contract reserves (408) (2,430)
Increase (decrease) in accounts payable
and accruals 1,218 (653)
Decrease in taxes other than income taxes (786) (24)
Decrease (increase) in other current assets (616) 230
Decrease in income taxes (384) (12)
Increase in deferred pension asset (285) (300)
Decrease in accounts receivable 278 1,325
Decrease (increase) in costs and
estimated profits in excess of
billing on incomplete contracts 100 (5,574)
Other, net (266) 213
Total adjustments (841) (6,458)
Cash used in operating activities (1,416) (6,629)
Cash flows from investing activities:
Purchases of marketable securities - (6,948)
Maturities of marketable securities 4,244 5,277
Sales of marketable securities 467 5,862
Capital expenditures (1,258) (919)
Net cash provided by investing activities 3,453 3,272
Cash flows from financing activities:
Purchases of treasury stock (485) -
Decrease (increase) in cash restricted to
secure bid and performance bonds 259 (4,288)
Net cash used in financing activities (226) (4,288)
Net change in cash and cash equivalents 1,811 (7,645)
Cash and cash equivalents at beginning of
period 3,787 24,673
Cash and cash equivalents at end of period $ 5,598 $ 17,028
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1 $ 9
Income taxes 384 12
The accompanying notes are an integral part of this statement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
Todd Shipyards Corporation (the "Company") has filed its
Consolidated Financial Statements for the fiscal year ended April
3, 1994 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. Certain amounts in the fiscal 1994
financial statements have been reclassified to conform to the
fiscal 1995 presentation.
2. CHANGE IN CONTRACT ACCOUNTING METHOD
Effective the beginning of the quarter ended July 3, 1994 the
company changed its method of accounting for general and
administrative costs from recognizing these expenses as contract
costs to recognizing them as incurred which reflects the change,
over time, in the Company's business from predominately longer
term Department of Defense to predominately shorter term
commercial contracts. This change has been applied to general
and administrative costs of prior years and results in a
cumulative effect adjustment of $438, which is included in income
of the first quarter of fiscal year 1995. The effect of the
change was to decrease income before the cumulative effect of the
accounting change for the quarter ended July 3, 1994 by $994
($.09 per share) and net income by $556 ($.05 per share). There
was no income tax effect as a result of the change.
The proforma amounts reflect the effect of the retroactive
application of reflecting general and administrative costs as
incurred had the new method been in effect.
3. CONTRACTS IN PROGRESS
Navy Repair Contract - In March 1994, the Company entered into a
contract to perform repair work on a Navy carrier (the "Carrier
Project") at the Bremerton Naval Base. Work began in March 1994
and is expected to be complete in September 1994. During the
quarter ended July 3, 1994 the Company recognized $758 in
estimated program losses due primarily to production
difficulties.
4. INCOME TAXES
During the quarter ended July 3, 1994 the Company's income tax
expense was offset by a reduction in the deferred tax valuation
reserve.
5. 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 existence or extent of any
significant environmental liabilities until such analysis is
complete. The Company has provided aggregate reserves of $6,500
for contingent environmental remediation liabilities for the
sites that have progressed to the degree that it is possible to
estimate remediation costs. The actual costs will depend upon
numerous factors, including the number of parties found liable at
each environmental site, the method of remediation, outcome of
negotiations with regulatory authorities, outcome of litigation,
technological developments and changes in environmental laws and
regulations. The Company is negotiating with its insurance
carriers and certain prior landowners and operators for past and
future remediation costs. The Company has not included any
insurance recovery in determining its remediation provision. No
assurance can be given that the $6,500 reserve is adequate to
cover all potential remediation costs the Company could incur.
The Company's involvement in each of these sites is detailed in
its previously filed Form 10-K.
6. OTHER CONTINGENCIES
The Company is subject to various risks and is involved in
various claims and legal proceedings arising out of the ordinary
course of its business. These include complex matters of contract
performance specifications, environmental protection and
Government procurement regulations. Only a portion of these
risks and legal proceedings involving the Company are covered by
insurance.
7. SHARE REPURCHASE
Beginning in fiscal year 1994, the Company has from time to time
re-acquired shares of the Company's stock in a number of open
market transactions. As of August 1, 1994, the Company had
repurchased 1,008,885 shares of the Company's common stock for a
total cost of $4,194 bringing total treasury shares to 1,156,543.
The Company is funding these purchases out of working capital.
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.
OPERATING RESULTS
All comparisons within the following discussion are with the
corresponding periods in the previous year, unless otherwise
stated.
Revenue - Revenue in the first quarter of 1995 was even with
1994. Increases in government repair activities were largely
offset by declines in commercial work. Government revenue
increased due to repair work performed on the Carrier Project
(see note 3). Commercial revenue decreased as prior year amounts
included performance on contract to convert two vessels to an
open-cargo configuration (the "Conversion Contract"). Management
expects government and commercial revenue to decrease
substantially in the second quarter. Revenue for the third and
fourth quarters is expected to benefit from scheduled government
phased maintenance activities and an upturn in commercial repair
work.
First quarter revenues:
FY % of FY % of Change
Contract Source 1995 Revenue 1994 Revenue Amount Percent
Government $ 7.4 51% $ 3.1 22% $ 4.3 139%
Commercial 7.1 49% 11.2 78% (4.1) (37%)
Total revenue $14.5 100% $14.3 100% $ .2 1%
Operating expenses - Direct costs during the first quarter were
76% of revenue reflecting the difficulties experienced on the
Carrier Project. Prior year first quarter direct costs were 94%
of revenue because of production difficulties experienced on the
Conversion Contract.
Operating expenses for the first quarter of 1995 were reduced by
a $.4 million net change in contract loss reserves. This change
reflects $1.2 million in loss reserve utilization offset by the
establishment of $.8 million in loss provisions on the Carrier
Project. Prior year operating expenses were reduced by $2.4
million reflecting $5.9 million loss reserve utilization on the
Conversion Contract offset by $3.5 million in increased loss
provisions on an overhaul contract.
Investment and other income - Investment and other income
decreased by $1.5 million due primarily to receipt of a $1.8
million insurance settlement in fiscal year 1994. This decrease
was partially offset by a $.2 million Galveston revenue bond
interest payment received during the quarter.
Income taxes - The Company recognized no income tax expense in
the first quarter of fiscal year 1995 as the expense was offset
by a reduction in the deferred tax valuation reserve. The prior
year benefit reflects overpayment of fiscal year 1993 income
taxes.
FINANCIAL CONDITION
Working capital - Working capital decreased in the first quarter
of 1995 by $2.3 million to $50.0 million. The decrease is
attributable to losses recognized on the Carrier Project.
Working capital includes restricted and unrestricted cash, cash
equivalents and marketable securities of $54.4 million.
Unbilled receivables - Unbilled items on completed contracts
totaled $2.1 million at the end of the first quarter of 1995.
This compares with $.9 million at the beginning of the period.
Unbilled balances are included in accounts receivable.
Restricted Cash - The Company's restricted cash balance was
relatively unchanged compared to the beginning of the quarter.
The restricted cash balance consists of escrow accounts
established to secure contract performance, contract warranty
provisions and property lease payments.
Capital Resources
Based on its current projections for fiscal year 1995, the
Company believes that its present amount of cash and cash
equivalents will be sufficient for the Company's working capital
needs. A change in the composition or timing of projected work
could cause capital expenditures and repair and maintenance
expenditures to increase. The future business plans of the
Seattle Shipyard are not expected to require substantial
additional capital expenditures. Capital expenditures are
expected to be financed out of working capital.
FUTURE OPERATIONS
The Company's future profitability depends largely on the ability
of the Seattle Shipyard to maintain an adequate volume of ship
repair, overhaul, conversion and new construction business. The
Company competes with other northwest shipyards, some of whom
have more advantageous cost structures. The Company's
competitors include non-union shipyards and shipyards with excess
capacity.
At July 3, 1994, the Company's work backlog consists of
approximately $27 million of government repair/overhaul work, all
of which is expected to be completed in fiscal year 1995.
During the Company's 1995 fiscal year, the Washington State Ferry
System is expected to award two major contracts for construction
of three new ferries and for overhaul of three existing ferries.
The Navy's Everett home port officially commenced operations in
April 1994. Relocation of a number of Navy ships to the Everett
home port is scheduled to take place during the upcoming year.
The Company believes that it may be awarded contracts for
shipyard related work from the Navy and the Washington State
Ferry System. However, no assurance can be given that the
company will be successful in obtaining this work.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
Exhibits -
18-1 Letter dated 8/17/94 from Ernst & Young, LLP regarding
changes
in accounting principles.
Financial Statement Schedules and Reports on Form 8-K -
None
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:_______________________________
David K. Gwinn
Chief Financial Officer
August 17, 1994