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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 4, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-5075
EG&G, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2052042
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
45 WILLIAM STREET, WELLESLEY, MASSACHUSETTS 02481
(Address of principal executive offices) (Zip Code)
(781) 237-5100
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
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 _____
Number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
CLASS OUTSTANDING AT MAY 2, 1999
----- --------------------------
Common Stock, $1 par value 45,216,000
(Excluding treasury shares)
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This Amendment No. 1 on Form 10-Q/A amends and restates Item 1 and Item 2
in their entirety of the Quarterly Report on Form 10-Q filed by EG&G, Inc., a
Massachusetts corporation (the "Company"), with the Securities and Exchange
Commission on May 18, 1999.
ITEM 1. FINANCIAL STATEMENTS
EG&G, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED
-------------------------
APRIL 4, MARCH 29,
1999 1998
---------- -----------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
Sales:
Products............................................... $230,406 $200,402
Services............................................... 127,081 155,534
-------- --------
TOTAL SALES....................................... 357,487 355,936
-------- --------
Cost of Sales:
Products............................................... 149,014 128,256
Services............................................... 112,136 136,504
-------- --------
Total Cost of Sales............................... 261,150 264,760
Research and Development Expenses........................... 13,502 11,042
Selling, General and Administrative Expenses................ 57,017 61,315
Restructuring Charges (Note 2).............................. -- 31,400
Gains on Dispositions (Note 3).............................. -- (67,478)
-------- --------
OPERATING INCOME FROM CONTINUING OPERATIONS................. 25,818 54,897
Other Expense, Net (Note 4)................................. (3,976) (1,202)
-------- --------
Income From Continuing Operations Before Income Taxes....... 21,842 53,695
Provision for Income Taxes.................................. 7,755 19,212
-------- --------
NET INCOME.................................................. $ 14,087 $ 34,483
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Earnings Per Share:
Basic.................................................. $ .31 $ .76
Diluted................................................ $ .31 $ .75
Cash Dividends Per Common Share............................. $ .14 $ .14
Weighted Average Shares of Common Stock Outstanding:
Basic.................................................. 44,910 45,262
Diluted................................................ 45,704 45,766
The accompanying unaudited notes are an integral part of these consolidated
financial statements.
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EG&G, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
an Activity (including Certain Costs Incurred in a Restructuring). The charges
do not include additional costs associated with the restructuring plans, such as
training, consulting, purchase of equipment and relocation of employees and
equipment. These costs will be charged to operations or capitalized, as
appropriate, when incurred.
(3) GAINS ON DISPOSITIONS
In January 1998, the Company sold its Rotron division for $103 million in
cash, resulting in a pre-tax gain of $64.4 million. During the first quarter of
1998, the Company also sold a small product line for $4 million in cash,
resulting in a pre-tax gain of $3.1 million. The after-tax gain of this
divestiture was $42.6 million, or $.93 diluted earnings per share. In April
1998, the Company sold its Sealol Industrial Seals division for cash of $100
million, resulting in a pre-tax gain of $58.3 million. Sealol's first quarter
1998 sales were $23 million and its operating income was $2.1 million, or $.04
diluted earnings per share. The after-tax gain of these divestitures was $45.2
million, or $.99 diluted earnings per share. The Company has deferred gain
recognition of approximately $16 million of sales proceeds from these
divestitures pending the resolution in 1999 of certain events and contingencies
related to the sales. The Company currently anticipates recognition of a portion
of the deferred gains in subsequent quarters of 1999.
(4) OTHER INCOME (EXPENSE)
Other expense, net, consisted of the following:
THREE MONTHS ENDED
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APRIL 4, MARCH 29,
1999 1998
------------- --------------
(IN THOUSANDS)
Interest income................................ $ 596 $ 995
Interest expense............................... (5,549) (2,641)
Other.......................................... 977 444
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$(3,976) $(1,202)
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(5) ACCOUNTS RECEIVABLE
Accounts receivable at April 4, 1999 and January 3, 1999 included unbilled
receivables of $41 million and $38 million, respectively, which were due
primarily from U.S. government agencies. Accounts receivable were net of
reserves for doubtful accounts of $4.2 million and $4.6 million at April 4, 1999
and January 3, 1999, respectively.
(6) INVENTORIES
Inventories consisted of the following:
APRIL 4, JANUARY 3,
1999 1999
-------- ----------
(IN THOUSANDS)
Finished goods..................................... $ 32,457 $ 36,552
Work in process.................................... 27,503 26,818
Raw materials...................................... 64,426 64,892
-------- --------
$124,386 $128,262
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The headcount reduction, by function, resulting in the Employee Separation
Costs detailed above is as follows:
HEADCOUNT REDUCTION
-------------------
Sales & Marketing........................................... 44
Production.................................................. 137
General & Administrative.................................... 110
---
Total.................................................. 291
===
Integration of Current Operating Divisions and Consolidation of Certain
Production Facilities
As part of the Company's second quarter restructuring plan, management
reorganized its current operating divisions into five Strategic Business Units
(SBUs). This resulted in termination of employees as well as the integration and
consolidation of certain facilities and product lines. This effort is
company-wide and affects all five SBUs. The major components within the
Optoelectronics plan consisted of the closing of two wafer fab production
facilities and a development program.
The total restructuring charges in the second quarter of 1998 included
$10.3 million for termination of leases and other contractual obligations. This
amount included approximately $7.0 million for termination of facility leases
and other lease-related costs, $1.5 million for termination of distributor
arrangements and $1.8 million for various other commitments. The facility leases
have remaining terms ranging from six months to five years. The amount accrued
reflects the Company's best estimate of actual costs to buy out the leases in
certain cases or the net cost to sublease the properties in other cases.
Approximately 375 employees of the total of 900 employees expected to be
terminated as part of the two restructuring plans have been severed as of April
4, 1999. The plans are expected to be mainly implemented by the segments by
mid-1999, except for the SBU consolidation, the completion of which is expected
to occur by the end of 1999. Cash outlays, primarily for employee separation
costs, were $3.6 million in the first quarter. Pre-tax cost savings under these
restructuring plans, due primarily to reduced depreciation and lower employment
costs, totaled approximately $3.9 million during the first quarter of 1999, or
$.05 earnings per diluted share. Fiscal year 2000 will reflect a full year's
savings from the restructuring plans and pre-tax annual savings are anticipated
to be approximately $24 million, or $.33 per diluted share. The Company expects
to incur approximately $28.5 million of cash outlays in connection with its
restructuring plans throughout 1999. These funds are expected to come primarily
from operating cash flows or borrowings from existing credit facilities.
The components of the restructuring charges met the criteria set forth in
Emerging Issues Task Force Issue (EITF) 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). The charges do not include
additional costs associated with the restructuring plans, such as training,
consulting, purchase of equipment and relocation of employees and equipment.
These costs will be charged to operations or capitalized, as appropriate, when
incurred.
DIVESTITURES AND OTHER
In January 1998, the Company sold its Rotron business unit for proceeds of
$103 million. In April 1998, the Company sold its Sealol Industrial Seals
operation for proceeds of $100 million, of which $45 million was utilized for
the Belfab acquisition. The Company realized gains of $125.8 million on the
dispositions.
OTHER
1999 Compared to 1998
Other expense was $4 million for 1999 versus $1.2 million reported in 1998.
This net increase of $2.8 million in other expense in 1999 was due primarily to
the impact of higher interest expense on increased debt levels resulting from
the Lumen acquisition. Income tax expense as a percent of pre-tax income held
constant at 36% for the first quarters of 1999 and 1998.
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FINANCIAL CONDITION
In March 1999, two of the Company's $100 million credit facilities were
renewed and increased to a $250 million credit facility that expires in March
2000. The Company has an additional revolving credit agreement for $100 million
that expires in March 2002. During the first quarter of 1999, the Company did
not draw down its credit facilities, which are used primarily as backup for the
Company's commercial paper program. In addition to financing ongoing operations,
the Company plans to utilize its commercial paper program to fund a portion of
anticipated acquisitions as they occur in 1999 and beyond. Debt at April 4, 1999
consisted of $184 million of short-term debt, primarily commercial paper
borrowings, and $117 million of long-term debt, primarily unsecured long-term
notes.
On December 16, 1998, Lighthouse Weston Corp. ("Lighthouse"), a wholly
owned subsidiary of the Company, completed its tender offer for shares of common
stock of Lumen for a purchase price of $253 million, including $75 million of
assumed debt. Lighthouse acquired approximately 92.3% of Lumen's common stock
pursuant to the tender offer. On January 4, 1999, Lumen became a wholly owned
subsidiary of the Company, as a result of the merger of Lighthouse with and into
Lumen. The acquisition of Lumen by the Company was accounted for as a purchase.
The Company financed the transaction with a combination of available cash and
short-term debt. Debt assumed in connection with the Lumen transaction was
approximately $75 million on the date of the acquisition. The Company paid down
this debt by the end of April 1999.
In January 1999, the Company filed a shelf registration statement with the
Securities and Exchange Commission (SEC) to register $465 million of securities.
This registration statement, together with the $35 million of securities covered
by a previously filed registration statement, will provide the Company with
financing flexibility to offer up to $500 million aggregate principal amount of
common stock, preferred stock, depository shares, debt securities, warrants,
stock purchase contracts and/or stock purchase units. The Company expects to use
the net proceeds from the sale of the securities for general corporate purposes,
which may include, among other things: the repayment of outstanding
indebtedness, working capital, capital expenditures, the repurchase of shares of
common stock and acquisitions. The precise amount and timing of the application
of such proceeds will depend upon the Company's funding requirements and the
availability and cost of other funds.
Cash and cash equivalents increased by $10.7 million and were $106.3
million at the end of the first quarter of 1999. Net cash provided by continuing
operations was $10.2 million for the three months ended April 4, 1999. This was
comprised of net income before depreciation, amortization and other non-cash
items of $30.6 million offset by a $20.4 million net change in certain other
assets and liabilities during the 1999 quarter. The primary net changes
consisted primarily of a $1.6 million decrease in inventory and a $.9 million
decrease in accounts receivable offset by decreases in base operations' accounts
payable and accrued expenses of $14 million, as well as $3.6 million of cash
outlays associated with the Company's 1998 restructuring programs. The decreases
in accrued expenses were attributable primarily to the Company's cash payments
during the quarter for employee benefit and incentive programs. Capital
expenditures were $8.5 million for the three months ended April 4, 1999. Capital
expenditures for fiscal 1999 are not expected to exceed $50 million.
The Company plans to fund the Perkin-Elmer transaction with a combination
of existing cash and equivalents, borrowings under its existing credit
facilities and other financing, as required.
THE YEAR 2000 ISSUE
The following Year 2000 statements constitute a Year 2000 Readiness
Disclosure within the meaning of the Year 2000 Readiness and Disclosure Act of
1998.
The operations of the Company rely on various computer technologies which,
as is common to most corporations, may be affected by what is commonly referred
to as the Year 2000 ("Y2K") issue. The Y2K issue is the result of computer
programs that were written using two digits rather than four to define the
applicable year. Computer equipment and software, as well as devices with
embedded technology that are
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EG&G, INC. AND SUBSIDIARIES
SIGNATURE
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.
EG&G, Inc.
By: /s/ ROBERT F. FRIEL
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ROBERT F. FRIEL
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
Date May 24, 1999
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