FORM 10Q
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 June 30, 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 June 30, 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 file 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 June 30, 1994
Common stock, par value $1.00 per share 14,464,175 shares
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Independent Accountants' Report
Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993
Consolidated Statements of Operations -
Six Months Ended June 30, 1994 and 1993
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1994 and 1993
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
[LETTERHEAD OF DELOITTE & TOUCHE]
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Avondale Industries, Inc.
We have reviewed the condensed consolidated financial statements of
Avondale Industries, Inc. and subsidiaries, as listed in the
accompanying index, as of June 30, 1994 and for the three-month and
six-month periods ended June 30, 1994 and 1993. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and of making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to such condensed consolidated financial
statements for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Avondale
Industries, Inc. and subsidiaries as of December 31, 1993, and the
related consolidated statements of operations, shareholders' equity,
and cash flows for the year then ended (not presented herein); and
in our report dated March 22, 1994, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1993 is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
\s\ DELOITTE & TOUCHE
New Orleans, Louisiana
August 3, 1994
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
June 30, December 31,
1994 1993
-------- --------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . $ 19,911 $ 3,195
Restricted short-term investments . 1,193
Receivables (Note 2):
Accounts receivable . . . . . . . . 22,793 103,020
Contracts in progress . . . . . . . 41,678 27,032
Inventories:
Goods held for sale . . . . . . . . 6,768 4,604
Materials and supplies . . . . . . 7,819 9,005
Prepaid expenses . . . . . . . . . . 5,170 4,741
-------- --------
Total current assets . . . . . . . 105,332 151,597
Property, Plant And Equipment:
Land . . . . . . . . . . . . . . . . . 9,324 9,324
Buildings and improvements . . . . . . 46,669 46,162
Machinery and equipment . . . . . . . . 173,545 173,456
-------- --------
Total . . . . . . . . . . . . . . . . 229,538 228,942
Less accumulated depreciation . . . . . (108,179) (103,400)
-------- --------
Property, plant and equipment - net . 121,359 125,542
Goodwill - net (Note 4) . . . . . . . . 30,319 17,892
Other assets . . . . . . . . . . . . . 4,974 7,108
-------- --------
Total assets . . . . . . . . . . . $ 261,984 $ 302,139
======== ========
See Notes to Consolidated Financial Statements.
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
June 30, December 31,
1994 1993
-------- --------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable . . . . . . . . . . . . $ 5,000 $ 38,303
Current portion of long-term debt . . 866 6,568
Accounts payable . . . . . . . . . . 51,315 56,797
Accrued employee compensation . . . . 14,577 12,352
Other . . . . . . . . . . . . . . . . 10,844 13,012
-------- --------
Total current liabilities . . . . . 82,602 127,032
Notes payable . . . . . . . . . . . . . 3,000 107
Long-term debt . . . . . . . . . . . . 43,263 43,741
Other liabilities and deferred credits 14,656 16,904
-------- --------
Total liabilities . . . . . . . . . . 143,521 187,784
Commitments and contingencies (Note 4)
Shareholders' Equity:
Common stock, $1,00 par value, authorized
30,000,000 shares; issued-15,927,191 shares
in 1994 and 1993 . . . . . . . . . . 15,927 15,927
Additional paid-in capital . . . . . 373,911 373,911
Accumulated deficit . . . . . . . . . (259,519) (263,627)
-------- --------
Total . . . . . . . . . . . . . . . 130,319 126,211
Treasury stock (common: 1,463,016 shares in
1994 and 1993) at cost . . . . . . . . ( 11,856) ( 11,856)
-------- --------
Total shareholders' equity . . . . . . 118,463 114,355
-------- --------
Total . . . . . . . . . . . . . . . . $ 261,984 $ 302,139
======== ========
See Notes to Consolidated Financial Statements.
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
Quarter Ended June 30, Six Months Ended June 30,
1994 1993 1994 1993
-------- -------- -------- --------
Net sales . . . . . $ 122,314 $ 122,453 $ 227,348 $ 261,806
Cost of sales . . . 111,086 111,675 206,237 240,842
-------- -------- -------- --------
Gross profit . . . 11,228 10,778 21,111 20,964
Selling, general and
administrative expenses 8,431 8,046 15,196 15,472
-------- -------- -------- --------
Income from operations 2,797 2,732 5,915 5,492
Interest expense . ( 953) ( 2,360) ( 2,173) ( 4,812)
Other - net . . . . 230 27 366 67
-------- -------- -------- --------
Income before income
taxes 2,074 399 4,108 747
Income taxes (Note 5) -- -- -- --
-------- -------- -------- --------
Net income . . . . $ 2,074 $ 399 $ 4,108 $ 747
======== ======== ======== ========
Income per share of
common stock (Note 6) $ 0.14 $ 0.03 $ 0.28 $ 0.05
======== ======== ======== ========
See Notes to Consolidated Financial Statements.
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(In thousands)
(UNAUDITED)
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES: -------- --------
Net income . . . . . . . . . . . . . $ 4,108 $ 747
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization . . . 5,800 5,862
Changes in operating assets and liabilities,
net of dispositions:
Receivables . . . . . . . . . . . 65,581 1,907
Inventories . . . . . . . . . . . ( 978) 606
Prepaid expenses . . . . . . . . ( 429) 1,467
Accounts payable . . . . . . . . ( 5,482) ( 5,533)
Accrued employee compensation . . 2,225 2,133
Other - net . . . . . . . . . . . ( 1,312) ( 1,849)
-------- --------
Net Cash Provided By Operating Activities 69,513 5,340
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . ( 2,014) ( 398)
Proceeds from sale of assets . . . . 7,591
Purchase of restricted short-term investments (13,891)
Proceeds from sale of restricted
short-term investments 12,698
Payment to former corporate parent (Note 4) ( 5,000)
-------- --------
Net Cash Provided By (Used For)
Investing Activities . . . . . . . . ( 8,207) 7,193
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings (Note 3) (80,840) (13,035)
Proceeds from long-term borrowings (Note 3) 36,250
-------- --------
Net Cash (Used For) Financing Activities (44,590) (13,035)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . 16,716 ( 502)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD . . . . . . . 3,195 7,613
-------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD . . . . . . . . . . $ 19,911 $ 7,111
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 2,461 $ 4,569
======== ========
Note issued to former corporate parent (Note 4) $ 8,000
========
See Notes to Consolidated Financial Statements.
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include the accounts of Avondale Industries, Inc. and its
subsidiaries ("Avondale" or the "Company"). In the opinion of
management of the Company, all adjustments (such adjustments
consisting only of a normal recurring nature) necessary for a
fair presentation of the operating results for the interim
periods presented have been included in the interim financial
statements. These interim financial statements should be read
in conjunction with the December 31, 1993 audited financial
statements and related notes filed on Form 10-K for the year
ended December 31, 1993 (the "1993 Form 10-K").
The financial statements required by Rule 10-01 of Regulation S-
X have been reviewed by independent public accountants as stated
in their report included herein.
2. RECEIVABLES
The following information presents the elements of receivables
at June 30, 1994 and December 31, 1993 (in thousands):
1994 1993
-------- --------
(Unaudited)
Long-term contracts:
U.S. Government:
Amounts billed . . . . . . . $ 12,625 $ 90,867
Unbilled costs and estimated
profits on contracts in
progress . . . . . . . . . 32,559 16,813
-------- --------
Total . . . . . . . . . . . 45,184 107,680
Commercial:
Amounts billed . . . . . . . 6,534 8,820
Unbilled costs and estimated
profits on contracts in
progress . . . . . . . . . 9,119 10,219
-------- --------
Total from long-term contracts 60,837 126,719
Trade and other current receivables 3,634 3,333
-------- --------
Total . . . . . . . . . . . . . . $ 64,471 $ 130,052
======== ========
Unbilled costs and estimated profits on contracts in progress
were not billable to customers at the balance sheet dates under
terms of the respective contracts. As discussed in Note 2 of
the Company's 1993 Annual Report on Form 10-K for the year ended
December 31, 1993, as a result of the Company's settlement with
the U.S. Navy of its Requests for Equitable Adjustments ("REAs")
in December 1993, the Company invoiced approximately $90 million
of the settlement amount at the end of 1993, all of which was
received by the Company by April 18, 1994.
3. FINANCING ARRANGEMENTS
On May 10, 1994, the Company established with a bank group a $35
million revolving credit facility secured principally by the
Company's working capital assets and its 900 foot floating
drydock. The new credit facility replaces a similar previous
existing facility and provides the Company with the right to
require the bank group to post letters of credit on the
Company's behalf up to an aggregate limit of $25 million (of the
$35 million credit line limit) in support of its operations. At
June 30, 1994 $22 million of letters of credit were outstanding
under the new credit facility. The new credit facility contains
certain terms and covenants similar to the previous facility
which provide for, among other things, (1) requirements to meet
certain financial covenants (relating to net worth, debt,
interest coverage and backlog), (2) limitations related to
annual capital expenditures, the incurrence of new indebtedness
and the payment of dividends and (3) compliance with all terms
and conditions of all other debt agreements.
In addition, on June 1, 1994, the Company completed the issuance
of $36.25 million of Series 1994 Refunding Bonds resulting in
the refinancing and redemption of the $36.25 million Series 1983
Industrial Revenue Bonds ("IRBs"). The Series 1994 Refunding
Bonds call for principal amortization to begin on June 1, 1997
and continue thereafter until final payment in 2014. The
Refunding Bonds are comprised of $6 million at the tax-exempt
rate of 8.25% maturing in 2004 and $30.25 million at the tax-
exempt rate of 8.50% maturing in 2014. The Refunding Bonds are
secured by the Company's 650 foot floating drydock and a debt
reserve fund. Certain terms and covenants provide that, among
other things, the Company meet certain financial covenants
relating to (1) net worth, (2) debt and debt coverage ratios,
(3) payment of dividends and (4) maintenance of a minimum level
of lines of credit and cash.
As further discussed in Note 4 to the financial statements the
Company issued to its former corporate parent an $8 million
unsecured note, due in $5 million and $3 million installments in
1995 and 1996, respectively, with an annual interest rate of
10%.
4. COMMITMENTS AND CONTINGENCIES
Litigation
In January 1986, the Louisiana Department of Environmental
Quality advised the Company that it may be a responsible party
with respect to an oil reclamation site operated by an
unaffiliated company. The Company supplied a substantial
portion of the waste oil that was processed at the reclamation
site during the period 1978 through 1982. Potential liability,
if any, for clean-up of this site typically would be apportioned
among the responsible parties based on the volume of material
sent by each to the waste site. The Company and certain of the
other potentially responsible parties for the site have entered
into a preliminary agreement to fund the site's remediation.
Pursuant to that agreement the Company agreed to contribute $3.5
million as its estimated share of the total clean-up costs,
which obligation it had fully funded by June 30, 1994.
Following completion of the remediation, a final determination
will be made as to the proper allocation of the remediation
responsibility among the various parties. The Company's share
of the clean-up costs could be lower, or higher, than the $3.5
million that it has contributed, but the Company does not expect
its remediation costs to vary materially from this amount.
Additionally, since July 1986, a number of toxic tort lawsuits
have been filed seeking substantial damages against the Company
and numerous other defendants alleging various claims in
connection with this oil reclamation site.
The Company initiated litigation against its insurer for a
declaration of coverage of the liability, if any, that may arise
in connection with the remediation of the site referred to in
the preceding paragraph or the related tort litigation. The
court has ruled that the insurer has the duty to defend the
Company, but has not yet ruled on whether the carrier has a duty
to indemnify the Company if any liability is ultimately assessed
against it.
In addition to the above, the Company is also named as a
defendant in numerous other lawsuits and proceedings arising in
the ordinary course of business, some of which involve
substantial damage claims. While the outcome of these lawsuits
and proceedings against the Company cannot be predicted with
certainty, management does not expect these matters to have a
material adverse effect on the financial condition or results of
operations of the Company.
The Company has established accruals for certain of the
litigation discussed above, and in the opinion of management,
after review with counsel, the eventual disposition of these
matters will not have a material adverse effect on its financial
condition or results of operations.
Ogden
The Company and its former corporate parent Ogden Corporation
("Ogden") have terminated certain arrangements between the two
companies which related to Ogden's sale of the Avondale Common
Stock to Avondale's Employee Stock Ownership Plan ("the Spin-
off") in 1985. Prior to their termination, these arrangements
could have required the Company to reimburse Ogden for
approximately $20 million for certain 1985 and prior years' tax
liabilities or to issue preferred stock or debentures to Ogden
in the amount of its reimbursement obligation. The 1985
agreements also required Ogden to continue to guarantee the
Series 1983 IRBs as well as guarantee certain other Avondale
obligations. The previous arrangements terminated (i) upon the
payment by the Company to Ogden of $5 million of cash on June 1,
1994, (ii) the Company's delivery to Ogden of a two-year
unsecured note in the principal amount of $8 million bearing
interest at 10% per annum and payable in $5 million and $3
million installments in 1995 and 1996, respectively, (iii) the
refunding on June 1, 1994 of the $36.25 million Refunding Bonds
(without an Ogden guarantee) to replace an IRB issuance that
Ogden had guaranteed, and (iv) the Company's securing of Ogden's
release from its other guarantees of the Company's obligations.
The $13 million settlement with Ogden noted above was accounted
for as an adjustment to the purchase price incurred in
connection with the Spin-off from Ogden and resulted in a
concurrent increase to the Company's goodwill.
Letters of Credit
In the normal course of its business activities, the Company is
required to provide letters of credit to secure the payment of
workers' compensation and insurance obligations. Additionally,
under certain contracts the Company may be required to provide
letters of credit which may be drawn down in the event of the
Company's failure to perform under the contracts. Outstanding
letters of credit relating to these business activities amounted
to $22 million and approximately $13 million at June 30, 1994
and December 31, 1993, respectively.
5. INCOME TAXES
No provision for income taxes is reflected in the accompanying
financial statements due to the availability of net operating
loss carryforwards, the benefits of which have not been fully
recognized in the Company's financial statements (see Note 8 of
the Company's Annual Report on the 1993 Form 10-K).
6. INCOME (LOSS) PER SHARE
The weighted average number of shares used in the computation of
income per share was 14,468,000 and 14,464,000 for the quarters
ended June 30, 1994 and 1993, respectively, and 14,472,000 and
14,464,000 for the six months ended June 30, 1994 and 1993,
respectively. There are no factors that result in dilution in
the periods presented.
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 June 30, 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").
Overview
For the quarter and six months ended June 30, 1994 the Company
significantly improved its results of operations and financial
position as compared to the same periods in the prior year.
Net income increased substantially over the same periods in the
prior year, due principally to a reduction in interest expense
following the repayment by the Company of outstanding balances
on its previously outstanding revolving credit facilities and
senior notes. The repayment of these debt obligations was made
possible by the successful resolution and settlement of the
Company's Requests for Equitable Adjustments ("REAs") in
December 1993.
The Company successfully completed two financing measures in
the first six months of 1994 that strengthened the Company's
liquidity position. On May 10, 1994 the Company established a
$35 million revolving credit facility with a bank group. In
addition, on June 1, 1994 the Company refunded its $36.25
million of Series 1983 Industrial Revenue Bonds ("IRBs")
through the issuance of $36.25 million of Series 1994 Refunding
Bonds which are due in 2004 and in 2014.
In addition to the foregoing measures, the Company eliminated
certain significant contingencies when it terminated certain
arrangements between the Company and Ogden which, among other
things, would have required the Company to reimburse Ogden for
certain 1985 and prior years' tax liabilities. This settlement
is further discussed below and in Note 4 of the Notes to the
Consolidated Financial Statements herein.
Included in the Company's $1.2 billion backlog (excluding
options) at June 30, 1994 is work to be performed on three 1994
contract awards, a $27 million contract award for a third
gaming vessel, to be delivered in the fourth quarter of 1994,
and two contracts totaling $25.7 million for the drydock and
repair of four Fast Sealift Ships. These two drydock and
repair contracts are scheduled for completion in the fourth
quarter of 1994 and the first quarter of 1995. Additionally,
Avondale and four other shipyards received contracts for the
preliminary design study on the U.S. Navy's LPD 17 ship. The
$480,000 fixed-price contract is expected to last approximately
one year. The LPD 17 construction program is anticipated to be
a multi-ship project with the first construction contract award
forecasted for 1996. The U.S. Navy is expected to order
construction of up to twelve LPD 17 ships to partially replace
over 30 of its amphibious vessels that are scheduled for
decommissioning over the next ten years.
Results of Operations
The Company recorded net income of approximately $2.1 million,
or $0.14 per share, for the second quarter ended June 30, 1994
compared to $399,000, or $0.03 per share, for the second
quarter of 1993. For the first six months of 1994 the Company
recorded net income of approximately $4.1 million, or $0.28 per
share, compared to $747,000, or $0.05 per share, in the prior
year. The improvement in the Company's 1994 second quarter and
year-to-date net income principally reflects a reduction in
interest expense.
Net sales for the six months ended June 30, 1994 decreased
approximately $34.5 million, or 13.2%, from the same period in
1993 while net sales for the second quarter of 1994 decreased
$139,000 as compared to the prior year's quarter. 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 current year 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 Dock-Cargo
Variant (LSD-CV) vessels and four MHC-51 Class Coastal
Minehunters (MHCs)(all of which remain to be completed).
Gross profit of $11.2 million for the current quarter and $21.1
million for the first six months of 1994 is consistent with the
$10.8 million and $20.9 million gross profit reported for the
respective periods in the prior year. Contributing to the 1994
gross profit were profits currently being recognized as work
progresses on two gaming vessels scheduled for delivery in the
third quarter of 1994 and profits being recognized on the
contract to construct the seven T-AOs. The Company's work on
the contract to construct the three LSD-CVs, which accounted
for approximately 19% and 22% of second quarter and year-to-
date 1994 revenues, respectively, is being performed on a
break-even basis and it is not expected that any additional
profits on the three LSD-CV contract will be recorded. Also
contributing to the 1994 gross profit were profits recognized
by the Company's marine repair and wholesale steel operations.
Selling, general and administrative ("SG&A") expenses for the
second quarter and six months ended June 30, 1994 remained
comparable to the same periods in 1993.
Interest expense decreased by $1.4 million, or 59.6%, for the
second quarter of 1994 and decreased approximately $2.6
million, or 54.8%, for the six months ended June 30, 1994 as
compared to the same periods in the prior year. The decrease
is due principally to the reduction in the Company's overall
level of debt, which decreased by $47.7 million, or 46.1%, at
June 30, 1994 as compared to June 30, 1993 (see "Liquidity and
Capital Resources" below).
There is no provision for income taxes in 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 six months of 1994 the Company delivered the
fourth ship of the seven T-AO Oilers contract. The Company
plans to deliver the first ship of the three LSD-CVs contract
in the fourth quarter of 1994 and the two gaming vessels in
third quarter of 1994. Currently, the Company has submitted a
bid for the construction of four double-hulled forebodies for a
contract which is expected to be awarded in late 1994. This
project is in response to the Oil Pollution Act of 1990
("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 Requests for Equitable Adjustments
("REAs") substantially improved the Company's liquidity. At
the end of 1993, the Company invoiced approximately $90 million
of the $145 million REA settlement amount, all of which was
received by the Company by April 18, 1994. The remaining $55
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 enabled the Company to retire its
approximately $6 million of senior notes and approximately $38
million balance of outstanding loans under two previous credit
facilities.
On May 10, 1994, the Company established with a bank group a
$35 million revolving credit facility secured principally by
the Company's working capital assets and its 900 foot floating
drydock. Among other things, under the credit facility the
Company has the right to require the bank group to post letters
of credit on the Company's behalf up to an aggregate limit of
$25 million (of the $35 million credit line limit) in support
of its operations. At June 30, 1994 $22 million of letters of
credit were outstanding under the new credit facility.
On June 1, 1994, the Company announced that it had completed
the issuance of $36.25 million of Series 1994 Refunding Bonds
resulting in the refinancing and redemption of the Series 1983
IRBs. The Series 1994 Refunding Bonds call for principal
amortization to begin on June 1, 1997 and continue thereafter
until final payment in 2014. The Refunding Bonds are comprised
of $6 million at the tax-exempt rate of 8.25% maturing in 2004
and $30.25 million at the tax-exempt rate of 8.50% maturing in
2014.
The Company and Ogden, its former corporate parent, have
terminated certain arrangements between them which have existed
since the Spin-off in 1985. Prior to their termination, these
arrangements could have required the Company to reimburse Ogden
for approximately $20 million for certain 1985 and prior years'
tax liabilities or to issue preferred stock or debentures to
Ogden in the amount of its reimbursement obligation. The 1985
agreements also required Ogden to continue to guarantee the
Series 1983 IRBs as well as guarantee certain other Avondale
obligations.
The previous arrangements terminated (i) upon the payment by
the Company to Ogden of $5 million of cash on June 1, 1994,
(ii) the Company's delivery to Ogden of a two-year unsecured
note in the principal amount of $8 million bearing interest at
10% per annum and payable in $5 million and $3 million
installments in 1995 and 1996, respectively, (iii) the
refunding on June 1, 1994 of the $36.25 million Refunding Bonds
(without an Ogden guarantee) to replace an IRB issuance that
Ogden had guaranteed, and (iv) the Company's securing of
Ogden's release from its other guarantees of the Company's
obligations. The $13 million settlement with Ogden noted above
was accounted for as an adjustment to the purchase price
incurred in connection with the Spin-off from Ogden and
resulted in a concurrent increase to the Company's goodwill.
Further, in order to improve liquidity and to permit management
to focus on marine construction, the Company continues to
explore 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. While 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. Although management of the Company believes that
its available cash and liquidity sources are adequate to fund
its operations for the foreseeable future, management from time
to time has considered the advisability of certain capital
expenditure programs to, among other things, upgrade and
modernize its plant and equipment. While no final decision has
been made on whether to embark on such a capital expenditure
program, any material increase in capital expenditures would
require the Company to raise additional capital.
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
The Annual Meeting of the shareholders of Avondale
Industries, Inc. (the "Meeting") was held on May 6,
1994 and 13,003,232 shares were represented. The
voting tabulation for each of the proposals follows:
(a) The election of the following to the Board of
Directors:
Albert L. Bossier, Jr., 8,773,168 votes for, 954,338
votes withheld and Hugh A. Thompson, 8,825,639 votes
for, 901,867 votes withheld.
The following directors' terms of office as director
continued after the meeting:
Anthony J. Correro, III, Kenneth B. Dupont, William
A. Harmeyer and Thomas M. Kitchen.
(b) A proposal to urge the Board of Directors to take
steps to change the composition of the Board of
Directors to provide that the Board of Directors
shall consist of a majority of Independent Directors
was not adopted by the following vote: 8,118,091
against, 1,165,543 for, 103,947 abstained and zero
broker nonvote.
(c) A proposal to urge the Board of Directors to
establish a Nominating Committee of the Board was not
adopted by the following vote: 8,133,308 against,
1,140,698 for, 109,293 abstained and zero broker
nonvote.
(d) A proposal to urge the Board of Directors to adopt
and implement a policy of confidential voting at all
meetings of Company shareholders was not adopted by
the following vote: 7,581,563 against, 1,701,839
for, 92,491 abstained and zero broker nonvote.
(e) A proposal to urge the Board of Directors to take
steps necessary to declassify the Board of Directors
for the purposes of director elections was not
adopted by the following vote: 7,629,514 against,
1,641,967 for, 107,579 abstained and zero broker
nonvote.
(f) A proposal to urge the Board of Directors to take the
necessary steps to adopt and implement a policy of
cumulative voting for all elections of directors was
not adopted by the following vote: 8,095,016
against, 1,171,404 for, 110,307 abstained and zero
broker nonvote.
(g) A proposal to urge the Board of Directors to take the
steps necessary to reconstitute the Board's
Compensation Committee was not adopted by the
following vote: 7,663,846 against, 1,607,732 for,
105,787 abstained and zero broker nonvote.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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: August 5, 1994 By:/s/ ALBERT L. BOSSIER, JR.
Albert L. Bossier, Jr.
Chairman, President &
Chief Executive Officer
Date: August 5, 1994 By:/s/ THOMAS M. KITCHEN
Thomas M. Kitchen
Vice President &
Chief Financial Officer
EXHIBIT INDEX
Number Description Page Number
15 Letter re: unaudited financial information
[LETTERHEAD OF DELOITTE & TOUCHE]
August 3, 1994
Avondale Industries, Inc.
Post Office Box 50280
New Orleans, Louisiana 70150
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of
the unaudited interim financial information of Avondale
Industries, Inc. and subsidiaries for the periods ended June
30, 1994 and 1993, as indicated in our report dated August 3,
1994; because we did not perform an audit, we expressed no
opinion on that information.
We are aware that our report referred to above, which is
included in your Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, is incorporated by reference in
Registration Statement No. 33-31984 on Forms S-8 and S-3.
We also are aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered
a part of the Registration Statement prepared or certified by
an accountant or a report prepared or certified by an
accountant within the meaning of Sections 7 and 11 of that Act.
\s\ DELOITTE & TOUCHE
New Orleans, Louisiana
[LETTERHEAD OF AVONDALE INDUSTRIES, INC.]
August 8, 1994
Securities and Exchange Commission
450 5th Street, N. W.
Washington, D.C. 20549
Ladies and Gentlemen:
Please accept for filing, via a direct transmission to the EDGAR System, the
Form 10-Q of Avondale Industries, Inc. for the quarter ended June 30, 1994.
We are also mailing the required number of copies of this report to the
National Association of Securities Dealers, Inc.
Should you have any questions, please contact me at 504/436-5238.
Very truly yours,
\s\ Thomas M. Kitchen