FORM 10-Q/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[ X ] Quarterly Report Pursuant to Section 12 or
15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1994
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the transition period from _______________________
to________________________
For Quarter Ended March 31, 1994
Commission File Number 0-16572
AVONDALE INDUSTRIES, INC.
Louisiana 39-1097012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 50280, New Orleans, Louisiana 70150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 504/436-2121
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 .
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest
practicable date.
Class Outstanding at March 31, 1994
Common stock, par value $1.00 per share 14,464,175 shares
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with the
Company's unaudited consolidated financial statements for the
periods ended March 31, 1994 and 1993 and Management's Discussion
and Analysis of Financial Condition and Results of Operations
included under Item 7 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1993 (the "1993 Form 10-K").
Results of Operations
The Company recorded net income of approximately $2.0 million, or
$0.14 per share, for the first quarter ended March 31, 1994
compared to $348,000, or $0.02 per share, for the first quarter
of 1993. The improvement in the Company's first-quarter 1994 net
income resulted from several factors, primarily the Company's
success in reducing operating expenses and a reduction in
interest expense.
Net sales for the first quarter ended March 31, 1994 decreased
approximately $34.3 million, or 24.6%, from the same period in
1993. The decrease in net sales is consistent with a declining
level of activity in the Company's shipbuilding operations, with
most of the Company's net sales attributable to shipbuilding
contracts with the U.S. Navy to build seven T-AO Oilers (three of
which remain to be completed), three Landing Ship Docks - Cargo
Variant (LSD-CV) and four MHC-51 Class Coastal Minehunters
(MHCs)(all of which remain to be completed).
Gross profit of $9.9 million for the current quarter is
consistent with the $10.2 million gross profit reported for the
same period in the prior year. Contributing to the 1994 gross
profit were profits currently being recognized as work progresses
on the two gaming vessels scheduled for delivery in the third
quarter of 1994 and on the contract to construct the seven T-AOs.
The Company's work on the contracts to construct the three LSD-
CVs and the four MHCs, which accounted for approximately 38% of
first quarter 1994 revenues, are being performed on a break-even
basis since reserves for contract losses were recorded as part of
the overall resolution of the Company's Requests for Equitable
Adjustments ("REAs"). The Company's other major shipbuilding
contracts are long-term contracts and profits will only be taken
as work progresses satisfactorily.
Selling, general and administrative ("SG&A") expenses decreased
approximately $661,000, or 8.9%, for the first quarter ended
March 31, 1994, as compared to 1993. The decrease in SG&A
expenses reflects the general decline in activity, primarily at
Avondale Gulfport Marine, Inc. which completed the Landing Craft
Air Cushion ("LCAC") contract when it delivered the final LCAC
vessel in June 1993.
Interest expense decreased by $1.2 million, or 50%, at March 31,
1994 as compared to the same period in 1993. The decrease is
principally due to the reduction in the Company's overall level
of debt, which decreased by $65.4 million at March 31, 1994 as
compared to March 31, 1993 (see "Liquidity and Capital Resources"
below).
There is no provision for income taxes for 1994 and 1993 due to
the availability of net operating loss carryforwards, the
benefits of which have not been fully recognized in the Company's
financial statements.
During the first three months of 1994 the Company delivered the
fourth ship of the seven T-AO Oiler contract. The Company
plans to deliver the first ship of the three LSD-CV contract in
the fourth quarter of 1994 and the two gaming vessels in third
quarter of 1994, as noted above. Currently, the Company is under
consideration for a contract for the construction of up to four
vessels that are in response to the Oil Pollution Act of 1990
("OPA'90") and has submitted a bid for the construction of four
double-hulled forebodies for a contract which is expected to be
awarded in late-1994, also in response to OPA'90. The Company
has also received expressions of interest from several other ship
owners who wish to retro-fit their vessels to comply with the
OPA'90 requirements.
Liquidity and Capital Resources
As discussed in the 1993 Form 10-K, the December 1993 settlement
of the Company's REAs substantially improved the Company's
liquidity. At the end of 1993, the Company invoiced
approximately $90.0 million of the $145.0 million REA settlement
amount, all of which was received by April 18, 1994. The
remaining $55.0 million will be billed by the Company as work
progresses on the contracts that were the subject of the REAs.
The cash received by the Company to date has permitted the
Company to retire its approximately $6.0 million of senior notes
and the approximately $38.0 million balance of outstanding loans
under its two credit facilities.
Avondale is finalizing a $35.0 million revolving credit facility
which will be secured principally by working capital assets and
the Company's 900 foot-long drydock. Among other things, the
credit facility includes the right of Avondale to call upon the
bank group to post letters of credit on Avondale's behalf up to
an aggregate limit of $25.0 million (of the $35.0 million total)
in support of its operations. The credit facility will replace
an existing credit facility under which $13.9 million of letters
of credit were outstanding at March 31, 1994. The current
letters of credit are cash collaterized with $13.9 million of
restricted short-term investments which, with the execution of
the new revolving credit facility, will be released to the
Company.
At the beginning of May, Avondale also called for redemption on
June 1, 1994, of $36.25 million of its Series 1983 Industrial
Revenue Bonds which were due June 2001. Avondale intends to
refinance the Bonds through the issuance of refunding bonds to
mature no earlier than 2004. Avondale is currently negotiating
the terms under which the refunding bonds will be issued.
Avondale also has agreed with Ogden Corporation, its former
corporate parent, to terminate certain arrangements between
Avondale and Ogden which have existed since the Spin-off in 1985.
Under these arrangements, Avondale could have been required to
issue to Ogden approximately $25.0 million of preferred stock or
subordinated debt upon the final resolution of certain
significant litigation and 1985 and prior years' potential tax
liabilities. The 1985 agreements also required Ogden to continue
to guarantee the Series 1983 Bonds as well as guarantee certain
other Avondale obligations.
Under the terms of the new agreement, the previous agreements
will terminate upon the payment by Avondale to Ogden of $13.0
million to settle any potential tax matters (including interest).
The payment will consist of $5.0 million cash on June 1, 1994 and
a two-year unsecured note in the principal amount of $8.0
million, bearing interest at 10% per annum and payable in $5.0
million and $3.0 million installments in 1995 and 1996,
respectively. In addition, Avondale is required to successfully
complete the refunding of the Series 1983 Bonds by June 1, 1994
and to secure by September 30, 1994 Ogden's release from its
other guarantees of Avondale obligations.
Further, in order to improve liquidity and to permit management
to focus on marine construction, repair and conversion
opportunities, the Company is exploring the possible sale of its
non-core assets. As previously disclosed, in March 1993, the
Company sold the assets of its Harvey Quick Repair business with
the majority of the net proceeds applied to the restructured
debt. The Company is in the process of marketing several other
facilities. Any such sales would only be made for amounts that
are not less than management's estimate of the fair value of the
assets.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.5(i) Avondale/Ogden Letter Agreement
15 Letter re: unaudited interim financial information
(b) Reports on Form 8-K:
Not applicable.
SIGNATURES
Pursuant to the requirements 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.
AVONDALE INDUSTRIES, INC.
Date: May 10, 1994 By:/s/ THOMAS M. KITCHEN
Thomas M. Kitchen
Vice President &
Chief Financial Officer
EXHIBIT INDEX
Number Description Page Number
10.5(i) Avondale/Ogden Letter Agreement
15 Letter re: unaudited interim financial information