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 October 1, 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 October 31, 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
(In thousands of dollars, except per share data)
Quarter Ended Six Months Ended
10/1/95 10/2/94 10/1/95 10/2/94
---------------- ----------------
Revenues $26,837 $10,372 $39,789 $24,841
Operating expenses:
Direct labor and benefits 9,514 4,707 14,982 11,740
Materials and other 9,614 1,633 13,042 5,715
Administrative expenses 7,710 5,078 12,566 10,803
Contract loss reserves - (547) - (955)
---------------- ----------------
Subtotal 26,838 10,871 40,590 27,303
Operating loss (1) (499) (801) (2,462)
Investment and other income 690 1,616 1,549 2,566
---------------- ----------------
Income before income taxes
and cumulative effect of
change in accounting principle 689 1,117 748 104
Income tax provision - - - -
---------------- ----------------
Income before cumulative
effect of change in
accounting principle 689 1,117 748 104
Cumulative effect to April 3,
1994 of accounting change,
net of tax - - - 438
---------------- ----------------
Net income $ 689 $ 1,117 $ 748 $ 542
================ ================
Earnings per share:
Income before cumulative
effect of change in
accounting principle $ 0.07 $ 0.10 $ 0.08 $ 0.01
Cumulative effect of change
in accounting principle - - - 0.04
---------------- ----------------
Income per common share $ 0.07 $ 0.10 $ 0.08 $ 0.05
================ ================
Weighted average number of
shares 9,939 10,804 9,939 10,885
================ ================
Retained earnings at
beginning of period $34,226 $28,775 $33,576 $29,788
Income for the period 689 1,117 748 542
Unrealized gain (loss) on
available-for-sale securities 200 (138) 791 (576)
---------------- ----------------
Retained earnings at
end of period $35,115 $29,754 $35,115 $29,754
================ ================
The accompanying notes are an integral part of this statement.
TODD SHIPYARDS CORPORATION
CONSOLIDATED BALANCE SHEETS (in thousands of dollars, except share data)
Period Ended
10/1/95 4/2/95
--------------------
ASSETS: (Unaudited)(Audited)
Cash and cash equivalents $5,221 $ 11,966
Restricted cash 521 313
Marketable securities 38,711 41,901
Accounts receivable, less allowance for
losses of $616 at 10/1/95 and $548 at 4/2/95:
Government 6,689 435
Commercial and other 5,954 6,331
12,643 6,766
Costs and estimated profits in excess
of billings on incomplete contracts 6,891 6,392
Inventories 1,238 1,063
Other 549 61
Total current assets 65,774 68,462
Property, plant and equipment, net 26,866 24,552
Deferred pension asset 16,232 15,564
Other assets 2,808 2,346
$111,680 $110,924
LIABILITIES:
Accounts payable and accruals $ 9,433 $ 7,076
Payrolls and vacations 3,586 3,596
Stock purchase payable - 2,525
Other 812 323
Taxes other than income taxes 788 1,136
Income taxes 2,813 3,102
Total current liabilities 17,432 17,758
Accrued postretirement health benefits 22,118 22,310
Environmental remediation reserves 8,158 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 35,115 33,576
73,416 71,877
Treasury stock, at cost (2,017,046 shares
at 10/1/95; 2,017,024 shares at 4/2/95) 9,444 9,444
Total stockholders' equity 63,972 62,433
$111,680 $110,924
The accompanying notes are an integral part of this statement.
TODD SHIPYARDS CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Month Periods Ended October 1, 1995 and October 2, 1994
(in thousands of dollars)
Period Ended
10/1/95 10/2/94
-------------------
Cash flows from operating activities:
Net income $ 748 $ 542
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 1,427 1,505
Effect of change in accounting principle - (438)
Contract reserves activity - (955)
Decrease (increase) in accounts receivable (5,877) 1,908
Increase (decrease) in accounts payable
and accruals 2,357 (455)
Decrease (increase) in other assets 816 (8)
Increase in deferred pension asset (668) (570)
Increase in costs and estimated profits in
excess of billings on incomplete contracts (499) (1,114)
Increase (decrease) in billings
in excess of costs and estimated
profits on incomplete contracts 489 (156)
Increase in other current assets (488) (770)
Decrease in taxes other than income taxes (348) (915)
Decrease in income taxes (289) (470)
Other, net (618) (364)
-----------------
Total adjustments (3,698) (2,802)
-----------------
Net cash used in operating activities (2,950) (2,260)
Cash flows from investing activities:
Purchases of marketable securities (6,479) ( 2,962)
Maturities of marketable securities 8,335 6,036
Sales of marketable securities 2,125 467
Capital expenditures (3,768) (1,424)
Acquisition (1,000) -
Other (275) -
-----------------
Net cash provided by (used in) investing
activities (1,062) 2,117
Cash flows from financing activities:
Purchases of treasury stock (2,525) (638)
Decrease (increase) in cash restricted
to secure bid and performance bonds (208) 352
-----------------
Net cash used in financing activities: (2,733) (286)
Net decrease in cash and cash equivalents (6,745) (429)
Cash and cash equivalents at beginning of period 11,966 3,787
-----------------
Cash and cash equivalents at end of period $ 5,221 $ 3,358
=================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ - $ 1
Income taxes 357 459
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. BASIS OF PRESENTATION
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 1995 financial statements have been reclassified to
conform to the fiscal 1996 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 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 $.4 million, which was
included in income of the first quarter of fiscal year 1995.
3. INCOME TAXES
During the quarter and the six month period ended October 1, 1995, the
Company's income tax provision was offset by a reduction in the deferred
tax valuation reserve.
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 acquire three FM radio stations in Monterey,
California for a total consideration of $3.5 million. On August 31, 1995,
Elettra completed the purchase of KPIG(FM) for $1.0 million. The Company
currently operates the other two stations, KAXT(FM) and KXDC(FM), under a
time brokerage agreement and a joint sales agreement, respectively, pending
Federal Communications Commission approval of their purchase. The Company
anticipates completing the purchase of KAXT(FM) and KXDC(FM) during the
third quarter. The effect of these transactions on Company revenue and
earnings is not expected to be material in fiscal year 1996.
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 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.
On September 7, 1995 the Company entered into a Partial Consent Decree (the
"Decree") with the United States Environmental Protection Agency (the
"EPA") to contribute $.6 million as its partial share of remediation costs
at the Operating Industries, Inc. hazardous material disposal site at
Monterey Park, California. The Decree encompasses all costs assessed to
date. The decree mandates payment to the EPA in early calendar 1996. A
proposed final consent decree for site remediation is not expected from the
EPA until calendar 1997. The cost of the partial settlement and future
final consent decree settlement is assumed in the aforementioned $8.2
million reserve.
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.
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 - The Company's second quarter revenue of $26.8 million represents
an increase of $16.4 million (158%) from 1995 levels. Fiscal year 1996
first half revenue of $39.8 million reflects an increase of $14.9 million
(60%) compared to last year. Results for second quarter of fiscal 1996 and
the first half of 1996 benefited from increasing Jumbo Mark II ferry
contract activity and two government overhauls performed during the summer.
Operating expenses - Direct costs during the second quarter and six months
ending October 1, 1995 were 71% and 70%, respectively, of revenue as the
Company faced steep price competition for government and commercial work.
Direct costs for the second quarter and first half ending October 2, 1994
were 61% and 70%, respectively, of revenue. The prior year second quarter
direct costs reflect favorable performance on a carrier repair project.
Administrative costs were 29% of fiscal year 1996 second quarter revenue
and 32% of 1996 first half revenue compared to 49% and 43% of fiscal year
1995 second quarter and first half results. Fiscal year 1996
administrative costs were benefited by increased business activity and
continuing cost reduction efforts partially offset by maintenance and
repair expenses incurred to mobilize the shipyard for Mark II ferry
construction.
Operating expenses for the second quarter and six month period of fiscal
year 1995 were reduced by $.5 million and $.9 million respectively from the
utilization of contract loss reserves established for a naval carrier
overhaul.
Investment and other income - Investment and other income for the second
quarter and for the first half decreased $.9 million and $1.0 million
respectively compared to prior year results as 1995 included a $.4 million
bankruptcy distribution and a $.5 million gain on the sale of land located
in Alameda, California.
Income taxes - The Company recognized no income tax expense in the first
and second quarters of fiscal year 1996 and 1995 as the expense was offset
by a reduction in the deferred tax valuation reserve.
Liquidity
Working capital - During the second quarter of fiscal year 1996, working
capital was $48.3 million, a decrease of $1.9 million during the quarter
and $2.4 million during the first half. The decrease in working capital
during each period is attributable to fixed asset additions. Working
capital includes restricted and unrestricted cash, cash equivalents and
marketable securities of $44.5 million.
Unbilled receivables - As of October 1, 1995 unbilled items on completed
contracts of $1.3 million was included in accounts receivable compared with
$2.0 million at the end of the first quarter and $2.7 million at the
beginning of the fiscal year.
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. Accordingly, shipyard capital
expenditures are expected to be financed out of working capital. A change
in the composition or timing of projected work could cause capital
expenditures and repair and maintenance expenditures to increase. However,
future business plans of the shipyard are not expected to require
substantial additional capital expenditures.
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 October 1, 1995, the Company's shipyard work backlog consists of
approximately $183 million of construction, repair and overhaul work
(including $170 million of Jumbo Ferry backlog). $47 million of this
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 signed contracts to acquire three FM radio
stations in the Monterey, California market in May 1995. Elettra completed
the purchase of one station in August 1995 and expects to complete the
purchase of the two remaining stations pending Federal Communications
Commission approval. The effect of these transactions on the Company's
1996 revenue and earnings is not expected to be material.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
The Company's Annual Meeting of Shareholders (the "Meeting") was held on
September 28, 1995 in Seattle, Washington.
At the Meeting the stockholders elected six directors, each of whom will
serve until the next Annual Meeting of Shareholders or until his respective
successor shall have been elected and qualified or until his earlier
resignation or removal. The Board of Directors elected at the Meeting and
the votes cast in favor of their election (with the votes cast in favor of
their election out of a total of 9,941,166 entitled to vote) are as
follows: Brent D. Baird (9,354,949); Steven A. Clifford (9,355,649);
Patrick W.E. Hodgson (9,355,587); Joseph D. Lehrer (9,354,849); Philip N.
Robinson (9,355,649); and John D. Weil (9,355,649).
The shareholders ratified the appointment of Ernst & Young LLP as the
Company's independent public accountants by a vote of 9,376,166 to 10,618
with 10,110 abstaining.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
On July 14, 1995 the Company issued a press release announcing that Patrick
L. Duong has been named Todd's Chief Financial Officer.
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/ Patrick L. Duong
Patrick L. Duong
Chief Financial Officer and Treasurer
October 31, 1995