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 June 30, 1996
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. [X]
There were 9,910,187 shares of the corporation's $.01 par value
common stock outstanding at July 30, 1996.
PART I FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
TODD SHIPYARDS CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS
Quarterly Periods Ended June 30, 1996 and July 2, 1995
(In thousands, except per share data)
Quarter Ended
6/30/96 7/2/95
Revenue $ 30,231 $ 12,952
Operating expenses:
Cost of sales 24,261 8,896
Administrative and manufacturing
overhead expense 8,498 4,856
Total operating expenses 32,759 13,752
Operating loss (2,528) (800)
Gain on sale of available-for-sale security 1,719 -
Investment and other income 840 859
Income before income taxes 31 59
Income tax expense - -
Net income $ 31 $ 59
Earnings per share $ - $ .01
Weighted average number of shares 9,910 9,939
Retained earnings at beginning of period $ 38,696 $ 33,576
Income for the period 31 59
Unrealized gain (loss) on
available-for-sale securities (342) 591
Retained earnings at end of period $ 38,385 $ 34,226
The accompanying notes are an integral part of this statement.
TODD SHIPYARDS CORPORATION
CONSOLIDATED BALANCE SHEETS
Periods Ended June 30, 1996 and March 31, 1996
(in thousands of dollars)
6/30/96 3/31/96
ASSETS: (Unaudited) (Audited)
Cash and cash equivalents $ 8,500 $ 8,552
Restricted cash 2,283 1,546
Securities available for sale 32,172 33,036
Accounts receivable, less allowance for losses
of $511 at June 30,1996 and March 31, 1996
US Government 1,169 2,731
Other 4,693 6,299
Costs and estimated profits in excess
of billings on incomplete contracts 11,277 15,063
Inventories 1,297 1,225
Other 664 254
Total current assets 62,055 68,706
Property, plant and equipment, at cost 66,090 65,607
Less accumulated depreciation 39,960 39,108
26,130 26,499
Deferred pension asset 17,535 17,201
Other assets 4,971 4,974
Total assets $ 110,691 $ 117,380
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accruals $ 6,615 $ 11,831
Payrolls and vacations 3,739 3,896
Income taxes 2,026 2,370
Taxes other than income taxes 950 1,073
Other 613 656
Total current liabilities 13,943 19,826
Environmental reserves 7,497 7,896
Accrued post retirement health benefits 22,182 22,278
Stockholders' equity:
Common stock, $.01 par value - authorized
19,500,000 shares, issued 11,956,033 shares
at June 30, 1996 and March 31, 1996, and
outstanding 9,910,187 at June 30, 1996
and March 31, 1996 120 120
Additional paid-in capital 38,181 38,181
Retained earnings 38,385 38,696
76,686 76,997
Less treasury stock 9,617 9,617
Total stockholders' equity 67,069 67,380
Total liabilities and stockholders' equity $ 110,691 $ 117,380
TODD SHIPYARDS CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarterly Periods Ended June 30, 1996 and July 2, 1995
(in thousands of dollars)
Period Ended
6/30/96 7/2/95
Cash flows from operating activities:
Net income $ 31 $ 59
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 875 690
Gain on sale of available-for-sale security (1,719) -
Decrease in accounts payable
and accruals (5,216) (2,842)
Decrease in costs and estimated
profits in excess of billings
on incomplete contracts 3,786 3,826
Decrease (increase) in accounts receivable 3,168 (1,661)
Increase in other current assets (410) (980)
Decrease in environmental reserves (399) (191)
Decrease in income taxes (344) (289)
Increase in deferred pension asset (334) (334)
Decrease in payrolls and vacations (157) (169)
Other, net (300) (297)
Total adjustments (1,050) (2,247)
Net cash used in operating activities (1,019) (2,188)
Cash flows from investing activities:
Purchases of securities available for sale (3,723) (4,506)
Sale of marketable securities 3,146 -
Maturities of securities available for sale 2,763 5,075
Capital expenditures (482) (1,662)
Net cash provided by (used) in investing
activities 1,704 (1,093)
Cash flows from financing activities:
Increase in restricted cash (737) (100)
Purchase of treasury stock - (2,525)
Net cash used in financing activities (737) (2,625)
Net change in cash and cash equivalents (52) (5,906)
Cash and cash equivalents at beginning of
period 8,552 11,966
Cash and cash equivalents at end of period 8,500 6,060
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ - $ -
Income taxes 291 276
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
31, 1996 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. CONTRACTS
The Company has a $181 million contract to construct three Mark
II Ferries for the Washington State Ferry System. The Mark II
Ferries are designed to transport 218 automobiles and 2,500
passengers each and will be the largest ferries in the Washington
State Ferry System fleet.
As of June 30, 1996, the Company is approximately 30% complete
with the three ship contract. Steel fabrication on the first of
the three Mark II ferries, the MV Tacoma, is nearly complete.
System installation and outfitting on the MV Tacoma are in the
early stages of completion. Preparations for the second of the
three ferries, the MV Wenatchee, are well underway. Steel
fabrication for the MV Wenatchee started late in the first
quarter ended June 30, 1996. No Mark II project profit was
booked in the first quarter of fiscal year 1997. Mark II project
profit contributions in fiscal year 1997 will be evaluated as the
Company completes the MV Tacoma's outfitting and electrical
installation.
As construction of the ferries progresses, revisions in cost and
profit estimates for the contract will be made. Changes in these
estimates may be a result of productivity factors, overhead
costs, material costs, production schedules and levels of
shipyard activity. Changes in these factors could materially
affect the Company's financial results.
3. INCOME TAXES
During the quarter ended June 30, 1996 the Company's income tax
expense was offset by a reduction in the deferred tax valuation
reserve.
4. ENVIRONMENTAL MATTERS
The Company faces significant potential liabilities in connection
with the alleged presence of hazardous waste materials at certain
of its closed shipyards, its Seattle shipyard and 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 $7.5 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. No assurance can be given that the
$7.5 million reserve is adequate to cover all potential
environmental costs the Company could incur. Where appropriate,
the Company has recognized insurance recoveries that are probable
of realization. The Company's involvement in each of these sites
is detailed in its previously filed Form 10-K.
5. 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.
6. INVESTMENT SALE
In a series of transactions during the first quarter of fiscal
year 1997 the Company sold 120,200 shares of stock held in
another corporation ("Investee") for $3.1 million, a gain of $1.7
million ($.17 per share). There is a common director of the
Company and the Investee. The investment gain was recorded in
the Company's first quarter 1997 results for the period ending
June 30, 1996. The shares were reflected as available-for-sale
marketable securities in the March 31, 1996 audited financial
statements.
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 for the first quarter of fiscal year 1997
increased $17.2 million (132%) compared to the prior year period
resulting from higher levels of Mark II ferry construction and
commercial repair activity.
Cost of sales - Fiscal year 1997 cost of sales expenses increased
$15.4 million (173%) compared to 1996 results as competitive
pressures reduced ship repair profit margins. Cost of sales for
the first quarter of 1997 were 80% of revenue compared to 69% of
revenue in the prior year first quarter.
Administrative and manufacturing overhead expense - First quarter
1997 overhead expenses increased $3.6 million (73%) from prior
year first quarter results reflecting the higher level of ship
repair and ship construction activity.
Gain on sale of available-for-sale security - First quarter 1997
results include a $1.7 million ($.17 per share) gain from the
sale of an available-for-sale security.
Investment and other income - Investment and other income for the
first quarter of 1997 was level with the prior year period as
average cash balances and interest levels remained even with
first quarter of 1996.
Income taxes - The Company recognized no income tax expense in
the first quarter of fiscal year 1997 and fiscal year 1996 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 1997 by $.8 million to $48.1 million. The decrease is
attributable to shipyard fixed asset additions and environmental
settlement payments. Working capital includes restricted and
unrestricted cash, cash equivalents and marketable securities of
$43.0 million.
Unbilled receivables - Unbilled items on completed contracts
totaled $.7 million at the end of the first quarter of 1997.
This compares with $.3 million at the beginning of the period and
$2.0 at the end of the first quarter of 1996. Unbilled balances
are included in accounts receivable.
Capital Resources
Based on its current projections for fiscal year 1997, 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.
FUTURE OPERATIONS
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 which have more advantageous cost structures.
The Company's competitors include non-union shipyards, shipyards
with excess capacity and government subsidized facilities.
At June 30, 1996, the Company's firm shipyard backlog consists of
approximately $123 million of construction, repair and overhaul
work. Substantially all of the Company's June 30, 1996 firm
backlog is for the construction of three Mark II Ferries that are
scheduled for delivery during fiscal years 1997, 1998 and 1999.
Backlog at July 2, 1995 of $196 million included $177 million of
Mark II Ferry work.
In May 1996, the Company was awarded a contract for phased
maintenance repairs to four Navy supply ships currently scheduled
over eleven availabilities in five years. The notional value of
the contract is $79 million. The Company can provide no
assurance as to the timing or level of work that may be performed
as part of this maintenance contract. The Navy has not yet
exercised material portions of this contract. Accordingly, the
Company's backlog includes less than $1 million of phased
maintenance work.
On July 31, 1996, the main contract between the Company and a
consortium of unions forming the Pacific Metal Trades Council
expired. The Company and the unions are currently negotiating a
new master agreement and in the interim continue to work under
the expired contract. The Ferry Project Agreement negotiated
between the Pacific Metal Trades Council and the Company provides
for continued operation of the complete shipyard for the length
of the Mark II ferry construction contract through the use of a
"no-strike/no lock-out" clause.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
On May 24, 1996 the Company issued a press release reporting that
it had been awarded a contract to service four U.S. Navy supply
ships during eleven availabilities currently scheduled over the
next five years. The notional value of the contract award is $79
million.
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
August 1, 1996