-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HKwA9kB+eD0qGR4/s/xG5UOT2zglPnFptxvfq30YFzwC0AbF0+YGcRWg1iJsdCMY kdv0Cv9XstYOfEPV2jJNFg== 0000031791-95-000019.txt : 19951119 0000031791-95-000019.hdr.sgml : 19951119 ACCESSION NUMBER: 0000031791-95-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951001 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EG&G INC CENTRAL INDEX KEY: 0000031791 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 042052042 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05075 FILM NUMBER: 95592772 BUSINESS ADDRESS: STREET 1: 45 WILLIAM ST CITY: WELLESLEY STATE: MA ZIP: 02181-4078 BUSINESS PHONE: 6172375100 MAIL ADDRESS: STREET 1: 45 WILLIAM ST CITY: WELLESLEY STATE: MA ZIP: 02181 FORMER COMPANY: FORMER CONFORMED NAME: EDGERTON GERMESHAUSEN & GRIER INC DATE OF NAME CHANGE: 19670626 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended October 1, 1995 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 02181 (Address of principal executive offices)(Zip Code) (617) 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 October 29, 1995 Common Stock, $1 par value 48,129,000 (Excluding treasury shares) PART I. FINANCIAL INFORMATION Item 1. Financial Statements EG&G, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS For the Three and Nine Months Ended October 1, 1995 and October 2, 1994 (Unaudited) ---------
(In Thousands Except Per Share Data) ---------------------------------- Three Months Ended Nine Months Ended -------------------- ---------------------- Oct. 1, Oct. 2, Oct. 1, Oct. 2, 1995 1994 1995 1994 -------- -------- ---------- ----------- Sales: Products $186,197 $188,746 $ 589,877 $ 547,868 Services 175,405 148,114 452,206 444,619 -------- -------- ---------- ----------- Total Sales 361,602 336,860 1,042,083 992,487 -------- -------- ---------- ----------- Costs and Expenses: Cost of sales: Products 116,975 124,297 381,567 356,100 Services 156,973 130,425 397,051 389,478 -------- -------- ---------- ---------- Total cost of sales 273,948 254,722 778,618 745,578 Research and development expenses 10,238 9,126 30,599 28,290 Selling, general and administrative expenses 58,330 57,273 177,672 175,193 Goodwill write-down - 40,300 - 40,300 Restructuring charges - 30,400 - 30,400 -------- -------- ---------- ---------- Total Costs and Expenses 342,516 391,821 986,889 1,019,761 -------- -------- ---------- ---------- Operating Income (Loss) From Continuing Operations 19,086 (54,961) 55,194 (27,274) Other Income (Expense), Net (Note 2) 1,218 (3,382) 851 (3,836) -------- -------- ---------- ---------- Income (Loss) From Continuing Operations Before Income Taxes 20,304 (58,343) 56,045 (31,110) Provision (Benefit) for Income Taxes 6,635 (1,403) 20,681 9,040 -------- -------- ---------- ---------- Income (Loss) From Continuing Operations 13,669 (56,940) 35,364 (40,150) Income From Discontinued Operations, Net of Income Taxes (Note 3 2,309 8,646 10,679 22,632 -------- -------- ---------- ---------- Net Income (Loss) $ 15,978 $(48,294) $ 46,043 $ (17,518) ======== ======== ========== ==========
EG&G, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (Continued) For the Three and Nine Months Ended October 1, 1995 and October 2, 1994 (Unaudited) ---------
(In Thousands Except Per Share Data) ---------------------------------- Three Months Ended Nine Months Ended -------------------- ---------------------- Oct. 1, Oct. 2, Oct. 1, Oct. 2, 1995 1994 1995 1994 -------- -------- ---------- ----------- Earnings (Loss) Per Share: Continuing Operations $.27 $(1.03) $.67 $(.73) Discontinued Operations .05 .15 .20 .41 ---- ------ ---- ----- Net Income (Loss) $.32 $ (.88) $.87 $(.32) ==== ====== ==== ===== Cash Dividends Per Common Share $.14 $.14 $.42 $.42 ==== ==== ==== ==== Weighted Average Shares of Common Stock Outstanding 50,138 55,121 52,666 55,321
The accompanying unaudited notes are an integral part of these consolidated financial statements. EG&G, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET As of October 1, 1995 and January 1, 1995 (Dollars in Thousands Except Per Share Data) ------------------------------------------
Oct. 1, January 1, 1995 1995 --------- ---------- (Unaudited) --------- Current assets: Cash and cash equivalents $ 64,288 $ 66,424 Accounts receivable (Note 4) 209,350 226,268 Inventories (Note 5) 111,270 123,299 Other (Note 7) 57,612 56,635 Net assets of discontinued operations (Note 3) - 8,852 -------- -------- Total Current Assets 442,520 481,478 -------- -------- Property, Plant and Equipment: At cost (Note 6) 410,384 364,801 Accumulated depreciation and amortization (264,095) (243,139) -------- -------- Net Property, Plant and Equipment 146,289 121,662 -------- -------- Investments (Note 7) 12,725 16,515 Intangible Assets (Note 8) 128,338 127,312 Other Assets (Note 8) 56,108 46,162 -------- -------- Total Assets $785,980 $793,129 ======== ========
EG&G, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Continued) As of October 1, 1995 and January 1, 1995 (Dollars in Thousands Except Per Share Data) ------------------------------------------
Oct. 1, January 1, 1995 1995 --------- ---------- (Unaudited) --------- Current Liabilities: Short-term debt $117,375 $ 59,988 Accounts payable 76,470 66,132 Accrued restructuring costs (Note 9) 7,931 21,532 Accrued expenses (Note 10) 146,886 134,170 Net liabilities of discontinued operations (Note 3) 6,195 - -------- -------- Total Current Liabilities 354,857 281,822 -------- -------- Long-Term Liabilities 71,136 65,941 -------- -------- Contingencies Stockholders' Equity: Preferred stock - $1 par value, authorized 1,000,000 shares; none outstanding - - Common stock - $1 par value, authorized 100,000,000 shares; issued 60,102,000 shares 60,102 60,102 Retained earnings 482,681 459,738 Cumulative translation adjustments 26,908 10,785 Unrealized gain on marketable investments (Note 7) 1,568 3,337 Cost of shares held in treasury; 12,030,000 shares at October 1, 1995 and 4,978,000 shares at January 1, 1995 (211,272) (88,596) --------- -------- Total Stockholders' Equity 359,987 445,366 --------- -------- Total Liabilities and Stockholders' Equity $785,980 $793,129 ========= ========
The accompanying unaudited notes are an integral part of these consolidated financial statements. EG&G, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the Nine Months Ended October 1, 1995 and October 2, 1994 (Unaudited) ---------
(In Thousands) ------------ Nine Months Ended ---------------------- Oct. 1, Oct. 2, 1995 1994 ------- ------- Cash Flows Provided by Operating Activities: Net income (loss) $ 46,043 $(17,518) Deduct net income from discontinued operations (10,679) (22,632) -------- -------- Income (loss) from continuing operations 35,364 (40,150) Adjustments to reconcile income (loss) from continuing operations to net cash provided by continuing operations: Goodwill write-down - 40,300 Noncash portion of restructuring charges - 4,902 Depreciation and amortization 28,097 26,599 Losses (gains) on dispositions and investments (1,711) 2,969 Changes in assets and liabilities, net of effects from companies purchased: Decrease in accounts receivable 20,066 8,927 Decrease (increase) in inventories 15,154 (4,651) Increase in accounts payable 8,721 1,945 Increase (decrease) in accrued restructuring costs (13,601) 24,663 Increase (decrease) in accrued expenses 10,727 (6,238) Change in prepaid expenses and other (8,366) (12,777) -------- -------- Net Cash Provided by Continuing Operations 94,451 46,489 Net Cash Provided by Discontinued Operations 25,726 20,060 -------- -------- Net Cash Provided by Operating Activities 120,177 66,549 -------- -------- Cash Flows Used in Investing Activities: Capital expenditures (42,331) (28,431) Cost of acquisitions, net of cash and cash equivalents acquired - (32,794) Proceeds from sales of investment securities 6,010 3,681 Other 1,404 503 -------- -------- Net Cash Used in Investing Activities (34,917) (57,041) -------- --------
EG&G, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) For the Nine Months Ended October 1, 1995 and October 2, 1994 (Unaudited) ---------
(In Thousands) ------------ Nine Months Ended ------------------- Oct. 1, Oct. 2, 1995 1994 ------- ------- Cash Flows Used in Financing Activities: Increase in commercial paper 61,276 14,728 Other debt payments (4,247) (1,078) Purchases of common stock (123,691) (19,139) Cash dividends (22,550) (23,290) Other 465 1,407 -------- -------- Net Cash Used in Financing Activities (88,747) (27,372) -------- -------- Effect of Exchange Rate Changes on Cash and Cash Equivalents 1,351 1,802 -------- -------- Net Decrease in Cash and Cash Equivalents (2,136) (16,062) Cash and cash equivalents at beginning of period 66,424 72,185 -------- -------- Cash and cash equivalents at end of period $ 64,288 $ 56,123 ======== ========
The accompanying unaudited notes are an integral part of these consolidated financial statements. EG&G, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Basis of Presentation - -------------------------- The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. The balance sheet amounts as of January 1, 1995 in this report were extracted from the Company's audited 1994 financial statements included in the latest annual report on Form 10-K. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments, consisting only of normal recurring accruals, necessary to present fairly the financial position as of October 1, 1995 and the results of operations for the three and nine months ended October 1, 1995 and October 2, 1994 and the cash flows for the nine months then ended. The results of operations are not necessarily to be considered indicative of the results for the entire year. The Company changed its method of depreciation for certain classes of plant and equipment purchased after January 1, 1995 from an accelerated method to the straight-line method for financial reporting purposes. The Company believes that the straight-line method more appropriately reflects the timing of the economic benefits to be received from these assets, that consist mainly of manufacturing equipment. The Company also changed its convention for calculating depreciation expense during the year that an asset is acquired. Previously, the Company used the half-year convention; starting in 1995, the Company commences depreciation in the month the asset is placed in service. In the third quarter of 1995, the effect of applying these new methods was to reduce depreciation expense by $0.7 million, and to increase income from continuing operations and net income by $0.5 million and net income per share by $.01. For nine months, the effect was to reduce depreciation expense by $3.8 million, and to increase income from continuing operations and net income by $2.4 million and net income per share by $.05. The reductions in depreciation expense represent the differences in current year depreciation expense between the old and new methods. EG&G, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (2) Other Income (Expense), Net - -------------------------------- Other income (expense), net, consisted of the following:
(In Thousands) ------------ Three Months Ended Nine Months Ended ------------------ ----------------- Oct. 1, Oct. 2, Oct. 1, Oct. 2, 1995 1994 1995 1994 -------- ------- ------- ------- Interest and dividend income $ 1,167 $ 736 $ 3,302 $ 2,189 Interest expense (1,677) (1,352) (5,237) (3,462) Gains (losses) on investments, net 108 (2,112) 853 (2,151) Other 1,620 (654) 1,933 (412) ------- ------- ------- ------- $ 1,218 $(3,382) $ 851 $(3,836) ======= ======= ======= =======
(3) Discontinued Operations - --------------------------- The former Department of Energy (DOE) Support segment, which has provided services under management and operations contracts, is presented as discontinued operations in accordance with Accounting Principles Board Opinion No. 30. Summary operating results of the discontinued operations were as follows:
(In Thousands) ------------ Three Months Ended Nine Months Ended -------------------- -------------------- Oct. 1, Oct. 2, Oct. 1, Oct. 2, 1995 1994 1995 1994 --------- ------- ------- ------- Sales $82,968 $411,180 $606,259 $1,078,036 Costs and expenses 79,416 397,878 589,830 1,043,218 ------- -------- -------- ---------- Income from discontinued operations before income taxes 3,552 13,302 16,429 34,818 Provision for income taxes 1,243 4,656 5,750 12,186 ------- -------- ------- --------- Income from discontinued operations, net of income taxes $ 2,309 $ 8,646 $ 10,679 $ 22,632 ======= ======== ======== ==========
EG&G, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Net assets (liabilities) of discontinued operations consisted of the following:
(In Thousands) ------------ Oct. 1, January 1, 1995 1995 -------- ---------- Accounts receivable, primarily unbilled $ 4,775 $15,717 Operating current liabilities (11,079) (6,934) Other current assets 109 69 ------- ------- $(6,195) $ 8,852 ======= =======
(4) Accounts Receivable - ------------------------ Accounts receivable as of October 1, 1995 and January 1, 1995 included unbilled receivables of $50 million and $57 million, respectively, due primarily from U.S. Government agencies. Accounts receivable were net of reserves for doubtful accounts of $5 million and $5.8 million as of October 1, 1995 and January 1, 1995, respectively. (5) Inventories - ---------------- Inventories consisted of the following:
(In Thousands) ------------ Oct. 1, January 1, 1995 1995 -------- ---------- Finished goods $ 27,070 $ 35,304 Work in process 26,110 28,551 Raw materials 58,090 59,444 -------- -------- $111,270 $123,299 ======== ========
EG&G, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (6) Property, Plant and Equipment, at Cost - ------------------------------------------- Property, plant and equipment consisted of the following:
(In Thousands) ------------ Oct. 1, January 1, 1995 1995 -------- ---------- Land $ 17,537 $ 15,877 Buildings and leasehold improvements 111,482 95,938 Machinery and equipment 281,365 252,986 -------- -------- $410,384 $364,801 ======== ========
(7) Investments - ---------------- Investments consisted of the following:
(In Thousands) ------------ Oct. 1, January 1, 1995 1995 ------- ---------- Marketable investments $12,271 $14,187 Other investments 3,173 6,330 Joint venture investments 5,013 5,314 ------- ------- 20,457 25,831 Less investments classified as other current assets (7,732) (9,316) ------- ------- $12,725 $16,515 ======= =======
At October 1, 1995, marketable investments, all classified as available for sale, had an aggregate market value of $12.3 million and gross unrealized holding gains of $2.4 million. Unrealized holding gains, net of deferred taxes, of $1.6 million and $3.3 million were reported as a separate component of stockholders' equity at October 1, 1995 and January 1, 1995, respectively. In the first nine months of 1995, proceeds and gross realized gains from sales of available-for-sale securities were $2.9 million and $2.8 million, respectively. Average cost was the basis for computing the realized gains. Marketable investments of $4.2 million, other investments of $3.1 million and joint venture investments of $0.4 million were classified as other current assets at October 1, 1995. EG&G, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (8) Intangible and Other Assets - -------------------------------- Most of the increase in intangible assets resulting from the effect of translating goodwill denominated in non-U.S. currencies at current exchange rates was offset by current year amortization. The majority of the increase in other assets was due to an increase in prepaid pension expense. (9) Accrued Restructuring Costs - -------------------------------- The decrease in accrued restructuring costs resulted from cash outlays of $13.6 million in the first nine months of 1995, mainly for employee termination costs. (10) Accrued Expenses - ---------------------- Accrued expenses consisted of the following:
(In Thousands) ------------ Oct. 1, January 1, 1995 1995 -------- ---------- Payroll and incentives $ 21,692 $ 16,842 Employee benefits 44,670 44,482 Federal, non-U.S. and state income taxes 24,902 17,243 Other 55,622 55,603 -------- ------- $146,886 $134,170 ======== ========
Certain reclassifications have been made to conform prior year's data to the current format. (11) Subsequent Event - ---------------------- On October 23, 1995, the Company issued $115 million of ten-year notes at an interest rate of 6.8%. Proceeds from the sale are being used to pay down commercial paper borrowings that were used mainly to finance repurchases of the Company's common stock. Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- EG&G, INC. AND SUBSIDIARIES Results of Operations --------------------- The following industry segment information is presented as an aid to a better understanding of the Company's operating results:
(In Thousands) ------------ Three Months Ended Nine Months Ended --------------------------- ---------------------------- Oct. 1, Oct. 2, Increase Oct. 1, Oct. 2, Increase 1995 1994 (Decrease) 1995 1994 (Decrease) ------- ------- -------- ------- ------- -------- Sales: Technical Services $161,584 $158,331 $ 3,253 $ 452,206 $464,005 $(11,799) Instruments 70,088 65,921 4,167 211,263 199,850 11,413 Mechanical Components 61,585 58,076 3,509 184,892 172,501 12,391 Optoelectronics 68,345 54,532 13,813 193,722 156,131 37,591 -------- -------- ------- ---------- -------- -------- $361,602 $336,860 $24,742 $1,042,083 $992,487 $ 49,596 ======== ======== ======= ========== ======== ======== Operating Income (Loss) From Continuing Operations: Technical Services $ 9,037 $ 9,186 $ (149) $ 31,573 $ 33,819 $ (2,246) Instruments 5,000 (53,302) 58,302 11,095 (50,189) 61,284 Mechanical Components 5,961 3,395 2,566 19,098 11,186 7,912 Optoelectronics 5,850 (4,228) 10,078 14,484 3,243 11,241 General Corporate Expenses (6,762) (10,012) 3,250 (21,056) (25,333) 4,277 -------- -------- ------- ---------- -------- -------- $ 19,086 $(54,961) $74,047 $ 55,194 $(27,274) $ 82,468 ======== ======== ======= ========== ======== ========
The discussion that follows is a summary analysis of the major changes in operating results by industry segment that occurred for the three and nine months ended October 1, 1995 compared to the three and nine months ended October 2, 1994. Third Quarter 1995 Compared to Third Quarter 1994 Sales Sales from continuing operations were $361.6 million in the third quarter of 1995, a 7% increase over the 1994 level. In Technical Services, a new communications systems development contract's billings of $18.9 million were partially offset by the effects of continuing reductions in government contract funding and the increasingly competitive procurement environment. In addition, demand for automotive testing services was lower in 1995. The net result was an increase of $3.3 million for the segment. Instruments' sales increased $4.2 million primarily as a result of higher demand for diagnostic products. The $3.5 million increase in EG&G, INC. AND SUBSIDIARIES Management's Discussion and Analysis (Continued) Mechanical Components resulted mainly from higher demand for industrial process sealing products. In Optoelectronics, the increase of $13.8 million, or 25%, was due primarily to $9.1 million of sales of IC Sensors, acquired at the end of the third quarter of 1994, and continuing increases in demand for flash products. Operating Income (Loss) From Continuing Operations Excluding the 1994 nonrecurring charges, operating income increased $3.3 million in 1995. The 1994 operating loss from continuing operations included a goodwill write-down of $40.3 million and restructuring charges of $30.4 million resulting from management's repositioning plan. The impact of these nonrecurring charges on each segment was as follows: Technical Services-$1.6 million, Instruments-$55.7 million, Mechanical Components-$2.7 million, Optoelectronics-$9.7 million and General Corporate Expenses-$1 million. In Technical Services, income decreased $1.7 million, excluding the 1994 restructuring charges. Costs incurred in excess of contract terms and the effects of lower sales in some operations were partially offset by unfavorable 1994 contract adjustments. The 1995 improvement of $2.6 million in Instruments, excluding the 1994 nonrecurring charges, resulted from cost reductions of $1.8 million from the 1994 repositioning plan and margin on higher sales. The Instruments' 1994 loss included a goodwill write-down of $39.2 million related to the Berthold business and restructuring charges of $16.5 million. Excluding the 1994 restructuring charges, Mechanical Components' income was essentially the same as last year. Repositioning cost reductions and margin on higher sales of industrial sealing products were offset by increased costs at some operations. The Optoelectronics' net increase of $0.4 million, excluding the 1994 nonrecurring charges, included margin on higher sales and $0.8 million of repositioning cost reductions. These increases were offset by one product line's lower margins due to competitive pricing pressures and higher production costs, and planned increased research and development expenses for the amorphous silicon program. The 1994 loss in Optoelectronics included $8.6 million of restructuring charges and a $1.1 million write-off of a small unit's goodwill. The $2.2 million decrease in general corporate expenses, excluding the 1994 restructuring charges, resulted from cost reductions of $0.6 million in 1995 and $1 million of costs in 1994 associated with the repositioning plan. The $4.6 million net increase in other income was due to a $1.8 million investment write-down in 1994 and gains on the disposition of operating assets and lower foreign exchange transaction losses in 1995. The 1995 effective tax rate reflects an adjustment of the year-to-date effective rate due, in part, to lower than anticipated tax costs of the capital restructuring of selected non-U.S. subsidiaries. The 1994 tax provision and effective rate for continuing operations were significantly impacted by the goodwill write-down and the restructuring charges. EG&G, INC. AND SUBSIDIARIES Management's Discussion and Analysis (Continued) Nine Months 1995 Compared to Nine Months 1994 Sales Sales for the first nine months of 1995 were $1,042.1 million, a 5% increase over the 1994 level. In Technical Services, the $11.8 million decrease was primarily due to continuing reductions in government contract funding, including the phase down of the Superconducting Super Collider Laboratory contract, and the increasingly competitive procurement environment. In addition, demand for automotive testing services was lower in 1995. Partially offsetting these decreases were billings under a new communications systems development contract. Instruments' sales increased $20.4 million due to the effects of changes in foreign exchange rates and higher demand for diagnostic and security products. This increase was partially offset by a $9 million decrease due to the divestiture of three product lines, resulting in a net increase of $11.4 million. Higher demand, primarily for industrial process sealing and aerospace products, resulted in the $12.4 million increase in Mechanical Components. Optoelectronics' sales increased $37.6 million, or 24%, over 1994 primarily due to $23.4 million of sales of IC Sensors and higher shipments of flash products. Operating Income (Loss) From Continuing Operations Excluding the 1994 nonrecurring charges, operating income increased $11.8 million in 1995. The 1994 operating loss included a goodwill write-down of $40.3 million and restructuring charges of $30.4 million. The Technical Services' decrease of $3.8 million, excluding the 1994 restructuring charges, resulted from costs incurred in excess of contract terms, an estimated provision for a legal judgement, start-up costs for the environmental services and systems business and the effect of lower sales levels. Partially offsetting these decreases were unfavorable 1994 contract adjustments. Instruments' increase of $5.6 million, excluding the 1994 nonrecurring charges, resulted from cost reductions of $5 million from the 1994 repositioning plan and margin on higher sales. These increases were partially offset by the unfavorable impact on export shipment margins caused by the strengthening of the Finnish Markka against other major currencies, and expenses associated with the expansion of the food monitoring business. Instruments' 1994 loss included a goodwill write-down of $39.2 million and restructuring charges of $16.5 million. In Mechanical Components, the $5.2 million increase, excluding the 1994 restructuring charges, resulted from higher sales, $0.9 million of cost reductions and, to a lesser extent, lower inventory adjustments and lower costs associated with new programs. The $1.6 million increase in Optoelectronics, excluding the 1994 nonrecurring charges, resulted primarily from higher sales and $1.8 million of cost reductions. These increases were partially offset by one product line's lower margins due to competitive pricing pressures and higher production costs, completion of a government contract in September 1994, decreased sales of power supplies and planned increased research and development expenses for the amorphous silicon program. EG&G, INC. AND SUBSIDIARIES Management's Discussion and Analysis (Continued) The $3.3 million decrease in general corporate expenses, excluding the 1994 restructuring charges, resulted from $1.6 million of cost reductions in 1995 and $1 million of costs in 1994 associated with the repositioning plan. The $4.7 million net increase in other income was due to a $1.8 million investment write-down in 1994 and gains on sales of investments and operating assets and higher income generated by investments accounted for using the equity method in 1995. The 1994 tax provision and effective rate for continuing operations were significantly impacted by the goodwill write-down and the restructuring charges. Depreciation Change: The Company changed its method of depreciation for certain classes of plant and equipment purchased after January 1, 1995 from an accelerated method to the straight-line method for financial reporting purposes. The Company believes that the straight line method more appropriately reflects the timing of the economic benefits to be received from these assets, that consist mainly of manufacturing equipment. The Company also changed its convention for calculating depreciation expense during the year that an asset is acquired. Previously, the Company used the half-year convention; starting in 1995, the Company commences depreciation in the month the asset is placed in service. In the third quarter of 1995, the effect of applying these new methods was to reduce depreciation expense by $0.7 million, and to increase income from continuing operations and net income by $0.5 million and net income per share by $.01. For nine months, the effect was to reduce depreciation expense by $3.8 million, and to increase income from continuing operations and net income by $2.4 million and net income per share by $.05. The reductions in depreciation expense represent the differences in current year depreciation expense between the old and new methods. Most of this difference occurred in the Optoelectronics segment. Depreciation and amortization for the nine months of 1995 was higher than 1994 because the effect of the changes in methods was exceeded by the effect of higher capital expenditures and the inclusion of IC Sensors' depreciation. Discontinued Operations: Income from discontinued operations, net of income taxes, was $6.3 million lower for the quarter and $12 million lower for the nine months. The decrease reflected the expiration of the Idaho contract in September 1994 and the Rocky Flats contract in June 1995. Future sales and income from discontinued operations will continue to decrease as the Nevada test site contracts expire on December 31, 1995 and the Mound contract expires on September 30, 1996. Such sales and income are dependent upon work scopes and fee pools that are negotiated annually with the DOE. Liquidity and Capital Resources ------------------------------- The Company's cash and cash equivalents decreased $2.1 million in the first nine months of 1995 while commercial paper borrowings increased EG&G, INC. AND SUBSIDIARIES Management's Discussion and Analysis (Continued) $61.3 million. Net cash provided by continuing operations was $94.5 million in 1995 compared to $46.5 million in 1994. In 1995, accounts receivable were reduced by $20.1 million and inventories were reduced by $15.2 million, reflecting the results of the Company's aggressive working capital reduction program. These reductions were partially offset by cash outlays of $13.6 million under the 1994 repositioning plan. In September 1994, the Company acquired IC Sensors and NoVOCs, Inc. for net cash of $32.8 million. Discontinued operations generated cash of $25.7 million in 1995. Future cash flows from discontinued operations will decrease as the remaining three DOE contracts expire in 1995 and 1996. Under the 1994 repositioning plan, cash outlays for the first nine months of 1995 were $13.6 million, mainly for employee termination costs, bringing the total spent under the plan to $17.6 million. Future cash outlays of $7.9 million are expected to be incurred mainly in the fourth quarter of 1995 as the repositioning plan is completed. During the first nine months of 1995, the net work force reduction was 436, bringing the total reduction to 632 positions since the inception of the plan. The repositioning plan calls for a net work force reduction of approximately 800 positions in continuing operations. The actions taken have resulted in pre-tax savings of $3.6 million for the third quarter and $9.4 million for the first nine months of 1995. For the first nine months of 1995, capital expenditures were $42.3 million, an increase of $13.9 million over the 1994 level. Capital expenditures in 1995 are expected to approximate $70 million, more than $30 million higher than the 1994 level. These increases support new product development initiatives, primarily in the Optoelectronics segment. Depreciation expense in 1995 under the new methods is projected to be higher than in 1994 due to the higher level of capital expenditures and the inclusion of IC Sensors' depreciation. During the first nine months of 1995, the Company purchased 7.1 million shares of its common stock at a cost of $123.7 million under a stock repurchase program. As of October 1, 1995, the Company has authorization to purchase 6.2 million additional shares under the program. The Company is financing these activities with a combination of short-term and long-term debt and cash flows from operations. On October 23, 1995, the Company issued $115 million of ten-year notes at an interest rate of 6.8%. The proceeds are being used to pay down commercial paper borrowings that were used mainly to finance repurchases of the Company's common stock. Exhibits - -------- EG&G, INC. AND SUBSIDIARIES Exhibit 27 - Financial data schedule PART II. OTHER INFORMATION EG&G, INC. AND SUBSIDIARIES Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits incorporated by reference from Part I herein Exhibit 27 - Financial data schedule (submitted in electronic format only) (b) Reports on Form 8-K There were no reports on Form 8-K filed for the three months ended October 1, 1995. EG&G, INC. AND SUBSIDIARIES 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/ Thomas J. Sauser --------------------- Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date November 10, 1995 ----------------- EX-27 2
5 1,000 9-MOS DEC-31-1995 OCT-01-1995 64,288 0 209,350 5,032 111,270 442,520 410,384 264,095 785,980 354,857 0 60,102 0 0 299,885 785,980 1,042,083 1,042,083 381,567 778,618 208,271 0 5,237 56,045 20,681 35,364 10,679 0 0 46,043 .87 .87
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