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 July 3, 1994

                                   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 July 31, 1994


Common Stock, $1 par value                        55,121,000

                                          (Excluding treasury shares)


                           PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements
         --------------------

                             EG&G, INC. AND SUBSIDIARIES

                          CONSOLIDATED STATEMENT OF INCOME

          For the Three and Six Months Ended July 3, 1994 and July 4, 1993

                                     (Unaudited)
                                      --------- 
(In Thousands Except Per Share Data) ---------------------------------- Three Months Ended Six Months Ended ------------------ ---------------- July 3, July 4, July 3, July 4, 1994 1993 1994 1993 ------- ------- ------- ------- Sales: Products $353,531 $388,073 $ 734,844 $ 765,984 Services 292,466 273,980 587,639 544,995 -------- -------- ---------- ---------- Total Sales 645,997 662,053 1,322,483 1,310,979 -------- -------- ---------- ---------- Costs and Expenses: Cost of sales: Products 290,583 326,721 614,832 647,930 Services 267,034 245,358 538,459 486,582 -------- -------- ---------- ---------- Total cost of sales 557,617 572,079 1,153,291 1,134,512 Selling, general and administrative expenses 62,873 58,621 121,751 115,732 -------- -------- ---------- ---------- Total Costs and Expenses 620,490 630,700 1,275,042 1,250,244 -------- -------- ---------- ---------- Income From Operations 25,507 31,353 47,441 60,735 Other income (expense), net (Note 2) (433) 328 (454) (322) -------- -------- ---------- ---------- Income Before Income Taxes 25,074 31,681 46,987 60,413 Provision for Federal and non-U.S. income taxes 8,651 10,613 16,211 20,238 -------- -------- ---------- ---------- Income Before Cumulative Effect of Accounting Changes 16,423 21,068 30,776 40,175 Cumulative Effect of Accounting Changes: Income taxes (Note 3) - - - (7,300) Postretirement benefits other than pensions (Note 4) - - - (13,200) -------- -------- ---------- ---------- Net Income $ 16,423 $ 21,068 $ 30,776 $ 19,675 ======== ======== ========== ==========
EG&G, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME For the Three and Six Months Ended July 3, 1994 and July 4, 1993 (Continued) Earnings Per Share: Income Before Cumulative Effect of Accounting Changes $.30 $.37 $.56 $ .71 Cumulative Effect of Accounting Changes: Income taxes - - - (.13) Postretirement benefits other than pensions - - - (.23) ---- ---- ---- ----- Net Income $.30 $.37 $.56 $ .35 ==== ==== ==== ===== Cash Dividends Per Common Share $.14 $.13 $.28 $ .26 ==== ==== ==== ===== Weighted Average Shares of Common Stock Outstanding 55,121 56,489 55,421 56,606 The accompanying unaudited notes are an integral part of these consolidated financial statements.
EG&G, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET As of July 3, 1994 and January 2, 1994 (Dollars in Thousands) --------------------
July 3, January 2, 1994 1994 ------- ---------- (Unaudited) Current assets: Cash and cash equivalents $ 55,518 $ 72,185 Accounts receivable (including unbilled receivables of $65,700 as of July 3, 1994 and $67,800 as of January 2, 1994), less reserves 236,224 237,609 Inventories (Note 5) 129,312 121,581 Other 42,251 33,657 -------- -------- Total Current Assets 463,305 465,032 -------- -------- Property, Plant and Equipment: At cost (Note 6) 350,227 327,416 Less - Accumulated depreciation and amortization 234,613 221,320 -------- -------- Net Property, Plant and Equipment 115,614 106,096 -------- -------- Investments (Note 7) 29,465 25,920 -------- -------- Intangible and Other Assets (Note 8) 186,214 171,760 -------- -------- Total Assets $794,598 $768,808 ======== ========
EG&G, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Continued) As of July 3, 1994 and January 2, 1994 Current Liabilities: Short-term debt $ 55,131 $ 43,589 Accounts payable 60,241 60,794 Accrued expenses (Note 9) 130,347 132,714 -------- -------- Total Current Liabilities 245,719 237,097 -------- -------- Long-Term Liabilities 57,792 54,177 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 Capital in excess of par value - - Retained earnings 511,596 496,063 Cumulative translation adjustments 3,986 (8,287) Unrealized gain on marketable investments (Note 7) 4,053 - -------- -------- 579,737 547,878 Less - Cost of shares held in treasury; 4,981,000 shares at July 3, 1994 and 3,970,000 shares at January 2, 1994 88,650 70,344 -------- -------- Total Stockholders' Equity 491,087 477,534 -------- -------- Total Liabilities and Stockholders' Equity $794,598 $768,808 ======== ======== 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 Six Months Ended July 3, 1994 and July 4, 1993 (Unaudited)
(In Thousands) ------------ Six Months Ended ---------------------- July 3, July 4, 1994 1993 ------- ------- Cash Flows From Operating Activities: Net income $ 30,776 $ 19,675 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting changes - 20,500 Depreciation and amortization 17,737 19,008 Changes in assets and liabilities, net of effects from companies purchased: Decrease in accounts receivable 4,439 10,064 Increase in inventories (5,704) (1,342) Decrease in accounts payable and accrued expenses (5,534) (7,620) Other (18,972) (17,060) -------- -------- Net Cash Provided by Operating Activities 22,742 43,225 -------- -------- Cash Flows From Investing Activities: Capital expenditures (21,253) (12,335) Cost of acquisitions, net of cash and cash equivalents acquired - (33,548) Other 3,217 (1,722) -------- -------- Net Cash Used in Investing Activities (18,036) (47,605) -------- -------- Cash Flows From Financing Activities: Changes in commercial paper 9,967 29,984 Other changes in debt 759 (2,694) Proceeds from issuing common stock 1,166 6,453 Purchases of common stock (19,139) (17,292) Cash dividends (15,576) (14,747) -------- -------- Net Cash Provided by (Used in) Financing Activities (22,823) 1,704 -------- -------- Effect of exchange rate changes on cash and cash equivalents 1,450 (1,197) -------- -------- Net Decrease in Cash and Cash Equivalents (16,667) (3,873) Cash and cash equivalents at beginning of period 72,185 69,752 -------- -------- Cash and cash equivalents at end of period $ 55,518 $ 65,879 ======== ======== 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) Principles of Consolidation - - -------------------------------- 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. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes, however, that the disclosures are adequate to make the information presented not misleading. 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 2, 1994 in this report were extracted from the Company's audited 1993 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 July 3, 1994 and the results of operations for the three and six months ended July 3, 1994 and July 4, 1993 and the cash flows for the six months then ended. The results of operations are not necessarily to be considered indicative of the results for the entire year. Effective January 3, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 112 on accounting for postemployment benefits. This new standard requires that benefits paid for former or inactive employees after employment but prior to retirement must be accrued if certain criteria are met. Adoption of the statement did not have a material impact on the Company's financial position or results of operations. (2) Other Income (Expense), Net - - -------------------------------- Other income (expense), net, consisted of the following:
(In Thousands) ------------ Three Months Ended Six Months Ended ------------------ ---------------- July 3, July 4, July 3, July 4, 1994 1993 1994 1993 ------- ------- ------- ------- Interest and dividend income $ 614 $ 832 $ 1,453 $ 1,686 Interest expense (1,145) (1,582) (2,110) (3,083) Other 98 1,078 203 1,075 ------- ------- ------- ------- $ (433) $ 328 $ (454) $ (322) ======= ======= ======= =======
EG&G, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (3) Accounting for Income Taxes - - -------------------------------- Effective January 4, 1993, the Company adopted SFAS No. 109 on accounting for income taxes. As part of adopting the new standard, the Company recorded a one-time, non-cash charge against earnings of $7.3 million ($.13 per share) in the first quarter of 1993. (4) Postretirement Benefits Other Than Pensions - - ------------------------------------------------ Effective January 4, 1993, the Company adopted SFAS No. 106 on accounting for postretirement benefits other than pensions for its U.S. retiree health benefits. As part of adopting the new standard, the Company recorded a one-time, non-cash charge against earnings of $20 million before taxes, or $13.2 million after income taxes ($.23 per share), in the first quarter of 1993. (5) Inventories - - ---------------- Inventories consisted of the following:
(In Thousands) ------------ July 3, January 2, 1994 1994 ------- ---------- Finished goods $ 34,579 $ 30,864 Work in process 32,929 30,393 Raw materials 61,804 60,324 -------- -------- $129,312 $121,581 ======== ========
(6) Property, Plant and Equipment, at Cost - - ------------------------------------------- Property, plant and equipment consisted of the following:
(In Thousands) ------------ July 3, January 2, 1994 1994 ------- ---------- Land $ 17,303 $ 14,327 Buildings and leasehold improvements 97,266 91,280 Machinery and equipment 235,658 221,809 -------- -------- $350,227 $327,416 ======== ======== EG&G, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (7) Investments - - ---------------- Investments consisted of the following:
(In Thousands) ------------ July 3, January 2, 1994 1994 ------- ---------- Marketable investments $12,881 $ 6,838 Other investments 11,801 13,426 Joint venture investments 4,783 5,656 ------- ------- $29,465 $25,920 ======= =======
Effective January 3, 1994, the Company adopted SFAS No. 115 on accounting for certain investments in debt and equity securities. This new standard requires that available-for-sale investments in equity securities that have readily determinable fair values be measured at fair value in the balance sheet and that unrealized holding gains and losses for these investments be reported in a separate component of stockholders' equity until realized. At July 3, 1994, marketable investments classified as available-for-sale had an aggregate market value of $12.9 million and gross unrealized holding gains of $6.3 million. At July 3, 1994, $4.1 million was reported as a separate component of stockholders' equity, representing the unrealized holding gains, net of deferred federal income taxes. (8) Intangible and Other Assets - - -------------------------------- Intangible and other assets consisted of the following:
(In Thousands) ------------ July 3, January 2, 1994 1994 -------- ---------- Intangible assets $143,922 $139,205 Other assets 42,292 32,555 -------- -------- $186,214 $171,760 ======== ========
The majority of the increase in other assets was due to an increase in prepaid pension expense. EG&G, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) (9) Accrued Expenses - - --------------------- Accrued expenses consisted of the following:
(In Thousands) ------------ July 3, January 2, 1994 1994 ------- ---------- Payroll $ 13,032 $ 13,375 Employee benefits 47,624 46,121 Federal, non-U.S. and state income taxes 21,150 26,119 Other 48,541 47,099 -------- -------- $130,347 $132,714 ======== ========
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 operating results:
(In Thousands) ------------ Three Months Ended Six Months Ended -------------------------- --------------------------- July 3, July 4, Increase July 3, July 4, Increase 1994 1993 (Decrease) 1994 1993 (Decrease) ------- ------- -------- ------- ------- -------- Sales: Technical Services $149,253 $161,176 $(11,923)$ 305,674 $ 319,267 $(13,593) DOE Support 316,117 334,705 (18,588) 666,856 664,067 2,789 Instruments 71,074 55,449 15,625 133,929 102,671 31,258 Mechanical Components 58,386 62,644 (4,258) 114,425 126,285 (11,860) Optoelectronics 51,167 48,079 3,088 101,599 98,689 2,910 -------- -------- -------- ---------- ---------- -------- Total $645,997 $662,053 $(16,056)$1,322,483 $1,310,979 $ 11,504 ======== ======== ======== ========== ========== ======== Income from Operations: Technical Services $ 11,798 $ 17,409 $ (5,611)$ 23,639 $ 33,360 $ (9,721) DOE Support 11,455 12,723 (1,268) 21,516 26,974 (5,458) Instruments 2,448 1,300 1,148 2,935 2,245 690 Mechanical Components 4,126 5,554 (1,428) 7,478 10,047 (2,569) Optoelectronics 3,786 984 2,802 7,194 1,760 5,434 General Corporate Expenses (8,106) (6,617) (1,489) (15,321) (13,651) (1,670) -------- -------- -------- ---------- ---------- -------- Total $ 25,507 $ 31,353 $ (5,846)$ 47,441 $ 60,735 $(13,294) ======== ======== ======== ========== ========== ========
The discussion that follows is a summary analysis of the major changes in operating results by industry segment that occurred for the three and six months ended July 3, 1994 compared to the three and six months ended July 4, 1993. EG&G, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Second Quarter 1994 Compared to Second Quarter 1993 Sales Sales for the second quarter of 1994 of $646 million were $16 million below 1993 levels. Lower sales in Technical Services resulted primarily from a $12 million reduction in program expenditures under the new base operations contract at the Kennedy Space Center. In addition, sales returned to more normal levels in the automotive testing business following increases in 1993 caused by the introduction of new industry testing protocols. Department of Energy (DOE) Support sales levels declined primarily as a result of reduced program expenditures under the Rocky Flats contract. The increase in Instruments sales was due primarily to the acquisition of Wallac late in the second quarter of 1993 and, to a lesser extent, several large shipments of security instruments. In Mechanical Components, the decrease resulted primarily from the sale of an operation in late 1993. In Optoelectronics, the increase was caused by a higher level of shipments for flash products. Income from Operations Income from operations in 1994 was $25.5 million, $5.8 million less than 1993. In Technical Services, lower sales in the automotive testing business resulted in reduced income. The decrease also reflected the reduction in available fee under the new base operations contract at the Kennedy Space Center. The 1993 results of this segment included favorable contract adjustments negotiated in the second quarter. In DOE Support, the reduction was due to lower performance grades earned under the Idaho and Rocky Flats contracts. Uncertainty continues to exist in the DOE Support segment. The Idaho contract is scheduled to expire October 1, 1994. The Company is participating as the majority interest in a joint venture that has submitted a proposal for increased work scope at the facility. The DOE has not awarded the contract as of the date of this filing. The terms of the joint venture's proposal could result in a reduction of income to the Company. The DOE is proceeding with a contract reform initiative and has recently announced that five DOE sites will be competitively bid at the expiration of the current contracts. In addition to Idaho, the list of sites includes the Nevada Test Site and Rocky Flats where the Company's contracts with the DOE expire late in 1995. The contract reform initiative also provides for increased contractor liability. The Company is reviewing and evaluating the recently issued request for proposal for the Rocky Flats contract. The decrease in Mechanical Components was due to increased start up costs for the transportation element of the electromechanical business and the impact of lower sales in the industrial seal business. The EG&G, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Optoelectronics increase was due to a higher level of shipments of flash products and the continued benefit of cost reductions implemented in 1993. In Instruments, the income contributed by the Wallac sales was offset by costs associated with delays in new diagnostic product introductions and continued price erosion in the security instruments business. Several operating elements, particularly in the Instruments segment, continue to underperform against key measures of profitability and return on investment. Management has intensified the ongoing review and is focusing on the development of alternative programs to achieve business goals. This review may result in a charge to operating income if the Company determines that restructuring is advantageous or if it is unable to realize the value of any associated assets, including goodwill. The increase in general corporate expenses was due to separation costs and general cost increases. The change in other income (expense) was due primarily to foreign exchange losses. Six Months 1994 Compared to Six Months 1993 Sales Sales for the six months of 1994 of $1.3 billion were slightly ahead of 1993. Technical Services sales declined $13.6 million primarily from a $21 million reduction in program costs at the Kennedy Space Center, partially offset by an increase in sales at the Tooele chemical demilitarization facility which is preparing for operational start-up. Instruments sales increased $31.3 million in 1994 primarily due to the acquisition of Wallac late in the second quarter of 1993. The $11.9 million decrease in Mechanical Components is primarily due to the divestiture of an operation late in 1993. Lower sales in our industrial seal and valve businesses also contributed to the decrease. Income from Operations Income from operations of $47.4 million declined $13.3 million in 1994. The $9.7 million decrease in Technical Services reflects the reduction in available fee at the Kennedy Space Center and the impact of lower sales in the automotive testing business. In addition, the 1993 results of Technical Services included adjustments from favorable contract negotiations. The decrease in DOE Support operating income is the result of lower performance grades at Rocky Flats and Idaho. In Instruments, the income contributed by the Wallac acquisition was offset by costs associated with delays in new diagnostic product introductions and price EG&G, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) erosion in security instruments. The Mechanical Components decrease resulted from lower sales and inventory adjustments in the industrial seal business and costs associated with new programs. In Optoelectronics, the increase resulted from higher levels of shipments and improved margins resulting from cost reductions. The increase in general corporate expenses was due to separation costs and general cost increases. Liquidity and Capital Resources ------------------------------- The Company's cash and cash equivalents decreased $16.7 million in the first six months of 1994 while total debt increased $11.2 million. Net cash provided by operating activities totaled $22.7 million during the period. The Company invested $21.3 million in physical plant and equipment during the first half of 1994. The $8.9 million increase in capital expenditures over 1993 was due primarily to a higher level of investment to support new product development initiatives in the Optoelectronics segment. In the fourth quarter of 1993, the Board of Directors authorized the purchase of up to a total of 5.5 million shares of the Company's common stock through periodic purchases on the open market. The Company has purchased 2.2 million shares under this program to date, including 1.1 million shares purchased in the first quarter of 1994. No shares were purchased under the program in the second quarter pending an evaluation of investment opportunities. Effective March 21, 1994, the Company concluded the restructuring of its credit facilities with the signing of two revolving credit agreements totaling $250 million. These agreements consist of a $175 million 364-day facility and a $75 million three-year facility and serve as backup facilities for the commercial paper borrowing. PART II. OTHER INFORMATION EG&G, INC. AND SUBSIDIARIES Item 6. Exhibits and Reports on Form 8-K -------------------------------- (b) Reports on Form 8-K - There were no reports on Form 8-K filed for the three months ended July 3, 1994. 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 August 1, 1994