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 2, 1995
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 9,938,987 shares of the corporation's $.01 par value
common stock outstanding at July 26, 1995.
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
Quarterly Periods Ended July 2, 1995 and July 3, 1994
(In thousands, except per share data)
Quarter Ended
7/2/95 7/3/94
Revenue $ 12,952 $ 14,469
Operating expenses:
Direct labor and benefits 5,468 6,915
Materials and other 3,428 4,082
Administrative expenses 4,856 5,843
Contract losses and other - (408)
Total operating expenses 13,752 16,432
Operating loss (800) (1,963)
Investment and other income 859 950
Income (loss) before income taxes
and cumulative effect of change
in accounting principle 59 (1,013)
Income tax expense - -
Income (loss) before cumulative effect
of change in accounting principle 59 (1,013)
Cumulative effect to April 3, 1994 of
accounting change, net of tax - Note 2 - 438
Net income (loss) $ 59 $ (575)
Earnings per share:
Income (loss) before cumulative effect of
change in accounting principle $ .01 $ (.09)
Cumulative effect of change in
accounting principle, net of tax - .04
Income (loss) per common share $ .01 $ (.05)
Weighted average number of shares 9,939 10,885
Retained earnings at beginning of period $ 33,576 $ 29,788
Income (loss) for the period 59 (575)
Unrealized gain (loss) on
available-for-sale securities 591 (438)
Retained earnings at end of period $ 34,226 $ 28,775
The accompanying notes are an integral part of this statement.
TODD SHIPYARDS CORPORATION
CONSOLIDATED BALANCE SHEETS
July 2, 1995 and April 2, 1995
(in thousands of dollars)
7/2/95 4/2/95
ASSETS: (Unaudited)(Audited)
Cash and cash equivalents $6,060 $ 11,966
Restricted cash 413 313
Marketable securities 41,923 41,901
Accounts receivable, less allowance for
losses of $548 at 7/2/95 and 4/2/95:
Government 3,089 435
Commercial and other 5,338 6,331
8,427 6,766
Costs and estimated profits in excess
of billings on incomplete contracts 2,566 6,392
Inventories 973 1,063
Other 1,041 61
Total current assets 61,403 68,462
Property, plant and equipment, net 25,483 24,552
Deferred pension asset 15,898 15,564
Other assets 1,925 2,346
$104,709 $110,924
LIABILITIES:
Accounts payable and accruals $ 4,234 $ 7,076
Payrolls and vacations 3,427 3,596
Stock purchase payable - 2,525
Other 62 323
Taxes other than income taxes 645 1,136
Income taxes 2,813 3,102
Total current liabilities 11,181 17,758
Accrued postretirement health benefits 22,213 22,310
Environmental remediation reserves 8,232 8,423
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 34,226 33,576
72,527 71,877
Treasury stock, at cost (2,017,046 shares
at 7/2/95; 2,017,024 shares at 4/2/95) 9,444 9,444
Total stockholders' equity 63,084 62,433
$104,709 $110,924
The accompanying notes are an integral part of this statement
TODD SHIPYARDS CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarterly Periods Ended July 2, 1995 and July 3, 1994
(in thousands of dollars)
Period Ended
7/2/95 7/3/94
Cash flows from operating activities:
Net income (loss) $ 59 $ (575)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 690 746
Effect of change in accounting principle - (438)
Utilization of contract reserves - (408)
Decrease in costs and estimated
profits in excess of billing on
incomplete contracts 3,826 100
Increase (decrease) in accounts payable
and accruals (2,842) 1,218
Decrease in accounts receivable (1,661) 278
Increase in other current assets (980) (616)
Decrease in taxes other than income taxes (491) (786)
Increase in deferred pension asset (334) (285)
Decrease in income taxes (289) (384)
Other, net (166) (266)
Total adjustments (2,247) (841)
Net cash used in operating activities (2,188) (1,416)
Cash flows from investing activities:
Purchases of marketable securities (4,506) -
Maturities of marketable securities 5,075 4,244
Sales of marketable securities - 467
Capital expenditures (1,662) (1,258)
Net cash provided by (used in)
investing activities (1,093) 3,453
Cash flows from financing activities:
Purchases of treasury stock (2,525) (485)
Decrease (increase) in cash restricted to
secure bid and performance bonds (100) 259
Net cash used in financing activities (2,625) (226)
Net increase (decrease) in cash and
cash equivalents (5,906) 1,811
Cash and cash equivalents at beginning of
period 11,966 3,787
Cash and cash equivalents at end of period $ 6,060 $ 5,598
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ - $ 1
Income taxes 276 384
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 April
2, 1995 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. 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 contracts to predominately shorter
term commercial and government contracts. This change was
applied to general and administrative costs of prior years and
resulted in a cumulative effect adjustment of $438 thousand,
which was included in income of the first quarter of fiscal year
1995.
3. FINANCING ARRANGEMENTS
In June 1995 Todd Pacific Shipyards Corporation, the shipyard
subsidiary of the Company, finalized a $5 million credit facility
to secure letters of credit used in the normal course of its
business activities. The Company has guaranteed this facility.
At July 2, 1995, letters of credit outstanding amounted to
approximately $1.4 million.
4. ACQUISITIONS
In May 1995 the Company organized Elettra Broadcasting
Corporation ("Elettra") through its wholly owned subsidiary, TSI
Management, Inc. for the purpose of investing in the radio
broadcasting industry. In May 1995, Elettra signed contracts to
purchase three FM radio stations in Monterey, California for a
total consideration of $3.5 million. These purchases are subject
to Federal Communications Commission approval. Pending this
approval, the Company began operating two of the three stations,
KAXT(FM) and KXDC(FM), on June 1, 1995 under a time brokerage
agreement. The Company anticipates completing the radio station
purchases by Fall 1995. The effect of these transactions on
Company revenue and earnings is not expected to be material in
fiscal year 1996.
5. INCOME TAXES
During the quarter ended July 2, 1995 the Company's income tax
expense was offset by a reduction in the deferred tax valuation
reserve.
6. 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 has been named as a defendant in civil
actions by parties alleging damages from past exposure to toxic
substances at Company facilities. The Company continues to
analyze environmental matters and associated liabilities. No
assurance can be given as to the existence or extent of any
significant environmental liabilities until such analysis is
complete. The Company has aggregate reserves of $8.2 million for
contingent environmental liabilities. 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 potential insurance recovery in determining its
remediation provision. No assurance can be given that the $8.2
million reserve is adequate to cover all potential environmental
costs the Company could incur. The Company's involvement in each
of these sites is detailed in its previously filed Form 10-K.
7. 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.
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 1996 decreased $1.5
million (10%) from 1995 levels. Shipyard activity decreased as
prior year activity included higher levels of government repair
work, primarily the repair of a United States Navy carrier (the
"Carrier Project"). This decrease was partially offset by
engineering efforts on the contract to build three Jumbo Mark II
Class Ferries (the "Jumbo Ferries") for the Washington State
Ferry System. Management expects shipyard revenue for the
remainder of the fiscal year to increase as the Company begins
Jumbo Ferry fabrication in the second quarter.
Operating expenses - Direct costs during the first quarter of
1996 were 69% of revenue reflecting tight gross margins on
shipyard work performed in the period. Prior year first quarter
direct costs were 76% of revenue reflecting the difficulties
experienced on a ship repair project.
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.
Investment and other income - Investment and other income
decreased by $.1 million due primarily to lower cash balances
held during the period.
Income taxes - The Company recognized no income tax expense in
the first quarter of fiscal year 1996 and fiscal year 1995 as the
expenses were offset by a reduction in the deferred tax valuation
reserve.
FINANCIAL CONDITION
Working capital - Working capital decreased in the first quarter
of 1996 by $.5 million to $50.2 million. The decrease is
attributable to shipyard fixed asset additions. Working capital
includes restricted and unrestricted cash, cash equivalents and
marketable securities of $48.4 million.
Unbilled receivables - Unbilled items on completed contracts
totaled $2.0 million at the end of the first quarter of 1996.
This compares with $2.7 million at the beginning of the period.
Unbilled balances are included in accounts receivable.
Capital Resources
Based on its current projections for fiscal year 1996, 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
shipyard are not expected to require substantial additional
capital expenditures. Shipyard capital expenditures are expected
to be financed out of working capital. The Company currently has
no plans to make significant additional equity contributions to
Elettra.
FUTURE OPERATIONS
Shipyard
The Company's future profitability depends largely on the ability
of the shipyard to maintain an adequate volume of repair 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 2, 1995, the Company's work shipyard backlog consists of
approximately $196 million of construction, repair and overhaul
work (including $177 million of Jumbo Ferry backlog). $67
million of shipyard backlog is expected to be completed in fiscal
year 1996.
The Company is currently competing for construction, repair and
overhaul work to add to the Jumbo Ferry work underway in the
shipyard. The Company believes that it may be awarded contracts
for shipyard related work from the United States Navy, the
Washington State Ferry System and other potential customers.
However, no assurance can be given that the Company will be
successful in obtaining this work.
Broadcasting
In May 1995, the Company organized Elettra Broadcasting, Inc.
through its wholly owned subsidiary, TSI Management, Inc. to
invest in the radio broadcasting industry. Elettra has signed
contracts to to purchase three FM radio stations in the Monterey,
California market. The effect of this transaction on the
Company's 1996 revenue and earnings is not expected to be
material.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
The Company filed three current reports on Form 8-K during the
first quarter of fiscal year 1996.
On April 4, 1995, the Company filed a Form 8-K attaching the
April 4, 1995 press release announcing that the Company purchased
455,000 shares of its common stock in a block on the open market
on March 31, 1995.
On June 1, 1995, the Company filed a Form 8-K attaching the June
1, 1995 press release announcing that the Company, through its
subsidiaries TSI Management, Inc. and Elettra Broadcasting, Inc.,
signed contracts to purchase three FM radio stations in the
Monterey, California market for total consideration of $3.5
million.
On June 20, 1995, the Company filed a Form 8-K attaching the June
19, 1995 press release announcing that Todd Pacific signed a
contract modification with the Washington State Department of
Transportation (the WSDOT) under which the WSDOT exercised its
options for two additional vessels.
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/ ___________________
Stephen G. Welch
Chief Financial Officer
July 26, 1995