28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 28, 1997
Commission File Number 1-6560
HE FAIRCHILD CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 34-0728587
State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
Washington Dulles International Airport
300 West Service Road, PO Box 10803
Chantilly, VA 20153
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 478-5800
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 ninety (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.
Outstanding at
Title of Class December 28, 1997
Class A Common Stock, $0.10 Par Value 17,047,167
Class B Common Stock, $0.10 Par Value 2,624,716
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
Page
PART 1. FINANCIAL INFORMATION
Item 1 Condensed Consolidated Balance Sheets as of December 28, 1997
(Unaudited) and Jue 30, 1997................................... 3
Consolidated Statements of Earnings for the Three and
Six Months ended December 28, 1997 and December 29, 1996
(Unaudited).................................................... 5
Condensed Consolidated Statements of Cash Flows for
the Six Months ended December 28, 1997 and December 29, 1996
(Unaudited).................................................... 6
Notes to Condensed Consolidated Financial Statements
(Unaudited).................................................... 7
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition...................................... 13
PART II. OTHER INFORMATION
Item 1. Legal Information........................................... 19
Item 4. Submission of Matters to Vote of Security Holders........... 19
Item 5. Other Information........................................... 19
Item 6. Exhibits and Reports on Form 8-K............................ 20
* For purposes of Part 1 and this Form 10-Q, the term "Company"
means The Fairchild Corporation, and its subsidiaries, unless
otherwise indicated. For purposes of Part II, the term "Company"
means The Fairchild Corporation, unless otherwise indicated.
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 28, 1997 (Unaudited) and June 30, 1997
(In thousands)
ASSETS
December 28, June 30,
1997 1997 (*)
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents, $30,687 $ 38,907 $ 19,420
and $4,830 restricted
Short-term investments 8,487 25,647
Accounts receivable-trade, less
allowances of $9,921 and $8,103 181,576 168,163
Inventories:
Finished goods 335,015 297,223
Work-in-process 33,677 26,887
Raw materials 24,438 18,626
--------- ---------
393,130 342,736
Prepaid expenses and other current
assets 53,450 33,631
--------- ---------
Total Current Assets 675,550 589,597
Property, plant and equipment, net
of accumulated depreciation of
$130,744 and $134,032 132,917 128,712
Net assets held for sale 26,447 26,147
Cost in excess of net assets
acquired (Goodwill), less
accumulated amortization
of $39,287 and $36,672 160,819 154,808
Investments and advances, affiliated
companies 22,282 55,678
Prepaid pension assets 59,282 59,742
Deferred loan costs 11,742 9,252
Long-term investments 6,843 4,120
Other assets 50,283 39,277
--------- ---------
TOTAL ASSETS $1,146,165 $1,067,333
========= =========
=
*Condensed from audited financial statements
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 28, 1997 (Unaudited) and June 30, 1997
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 28, June 30,
1997 1997 (*)
----------- ----------
CURRENT LIABILITIES:
Bank notes payable and current
maturities of long-term debt $ 92,443 $ 47,422
Accounts payable 83,685 84,953
Other accrued liabilities 87,799 105,199
Income taxes 16,297 5,881
---------- ---------
Total Current Liabilities 280,224 243,455
LONG-TERMLIABILITES:
Long-term debt, less current
maturities 371,610 416,922
Other long-term liabilities 29,050 23,622
Retiree health care liabilities 42,402 43,387
Noncurrent income taxes 47,388 42,013
Minority interest in subsidiaries 70,327 68,309
-------- --------
TOTAL LIABILITIES 841,001 837,708
STOCKHOLDERS' EQUITY:
Class A common stock, 10 cents par
value; authorized 40,000 shares,
23,289 and 20,234 shares issued and
17,047 and 13,992 shares
outstanding 2,329 2,023
Class B common stock, 10 cents par
value; authorized 20,000 shares, 2,625
and 2,632 shares shares issued and
outstanding 263 263
Paid-in capital 124,575 71,015
Retained earnings 230,841 209,949
Cumulative translation adjustment (1,398) (1,860)
Net unrealized holding gain (loss)
on available-for-sale securities 273 (46)
Treasury Stock, at cost, 6,242
shares of Class Common Stock (51,719) (51,719)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 305,164 229,625
--------- ---------
TOTAL LIABILITIES AND STICKHOLDERS'
EQUITY $1,146,165 $1,067,333
*Condensed from audited financial statements
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF EARNINGS (Unaudited)
For The Three (3) and Six (6) Months Ended December 28, 1997 and
December 29, 1996
(In thousands, except per share data)
For the Three For the Six
Months Ended Months Ended
12/28/97 12/29/96 12/28/97 12/29/96
------------------- -------------------
REVENUE:
Net sales $236,686 $159,912 $450,447 $306,002
Other income (expense), net (2,737) 425 2,620 648
------- ------- ------- -------
233,949 160,337 453,067 306,650
COSTS AND EXPENSES:
Cost of goods sold 171,637 121,137 333,336 227,417
Selling, general &
administrative 51,433 36,406 96,912 72,252
Research and development 245 22 850 45
Amortization of goodwill 1,392 1,113 2,615 2,229
------- ------- ------- -------
224,707 158,678 433,713 301,943
OPERATING INCOME 9,242 1,659 19,354 4,707
Interest expense 15,695 11,468 28,683 26,140
Interest income (529) (1,579) (927) (3,771)
------- ------- ------- -------
Net interest expense 15,166 9,889 27,756 22,369
Investment income (loss), net (7,077) 1,836 (5,180) 1,461
Equity in earnings (loss) of
affiliates 429 (263) 2,121 1,614
Minority interest (1,087) (776) (1,875) (1,561)
------- ------- ------- -------
Loss from continuing
operations before taxes (13,659) (7,433) (13,336) (16,148)
Income tax benefit (6,546) (3,795) (6,656) (7,458)
------- ------- ------- -------
Loss from continuing
operations (7,113) (3,638) (6,680) (8,690)
Earnings from discontinued
operations, net 563 661 622 1,095
Gain on disposal of
discontinued operations, net 29,974 - 29,974 -
Extraordinary items, net (3,024) - (3,024) -
------- ------- ------- -------
NET EARNINGS (LOSS) $ 20,400 $ (2,977) $ 20,892 $ (7,595)
Basic and Diluted Earnings Per Share:
Loss from continuing
operations $ (0.42) $ (0.22) $ (0.40) $ (0.53)
Earnings from discontinued
operations, net 0.03 0.04 0.04 0.07
Gain on disposal of
discontinued operations, net 1.76 - 1.78 -
Extraordinary items, net (0.18) - (0.18) -
------- ------- ------- -------
Net earnings (loss) $ 1.19 $ (0.18) $ 1.24 $ (0.46)
======= ======= ======= =======
Weighted average shares
outstanding 17,088 16,551 16,864 16,489
======= ======= ======= =======
The accompanying notes to summarized financial information are an
integral part of these statements.
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For The Six (6) Months Ended December 28, 1997 and December 29,
1996
(In thousands)
For the Six Months Ended
------------------------
12/28/97 12/29/96
--------- ---------
Cash flows from operating activities:
Net earnings (loss) $ 20,892 $ (7,595)
Depreciation and amortization 13,157 10,304
Accretion of discount on long-term
liabilities 1,686 2,235
Net gain on the sale of discontinued
operations (29,974) --
Extraordinary items, net of cash
payments 3,024 --
Distributed earnings of affiliates,
net 344 1,906
Minority interest 1,875 1,561
Changes in assets and liabilities (104,883) (62,313)
------- -------
Net cash used for operating
activities (93,879) (53,902)
Cash flows from investing activities:
Purchase of property, plant and
equipment (19,083) (5,233)
Net proceeds received from (used for)
investments 5,786 (2,361)
Acquisition of subsidiaries, net of
cash acquired (11,774) --
Net proceeds from the sale of
discontinued operations 84,733 173,719
Changes in net assets held for sale (324) (936)
Other, net 179 21
------- -------
Net cash provided by investing
activities 59,517 165,210
Cash flows from financing activities:
Proceeds from issuance of debt 143,712 40,627
Debt repayments and repurchase of
debemtires, net (145,130) (94,394)
Issuance of Class A common stock 53,921 859
------- -------
Net cash provided by (used for)
financing activities 52,503 (52,908)
Effect of exchange rate changes on
cash 1,346 274
Net increase in cash and cash
equivalents 19,487 58,674
Cash and cash equivalents, beginning
of the year 19,420 39,649
------- -------
Cash and cash equivalents, end of the
period $ 38,907 $ 98,323
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except per share data)
1. FINANCIAL STATMENTS
The consolidated balance sheet as of December 28, 1997 and
the consolidated statements of earnings and cash flows for the
three months ended December 28, 1997 and December 29, 1996 have
been prepared by the Company, without audit. In the opinion of
management, all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows at December 28, 1997, and
for all periods presented, have been made. The balance sheet at
June 30, 1997 was condensed from the audited financial statements
as of that date.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. These consolidated financial statements should be read
in conjunction with the financial statements and notes thereto
included in the Company's June 30, 1997 Form 10-K and Banner
Aerospace, Inc.'s March 31, 1997 Form 10-K. The results of
operations for the period ended December 28, 1997 are not
necessarily indicative of the operating results for the full
year. Certain amounts in prior years' quarterly financial
statements have been reclassified to conform to the current
presentation.
2. BUSINESS COMBINATIONS
The Company's acquisitions described in this section have
been accounted for using the purchase method. The respective
purchase price is assigned to the net assets acquired based on
the fair value of such assets and liabilities at the respective
acquisition dates.
In December 1997, the Company acquired AS+C GmbH, Aviation
Supply + Consulting ("AS&C") in a business combination accounted
for as a purchase. The total cost of the acquisition was $13,245,
which exceeded the fair value of the net assets of AS&C by
approximately $7,350, which is preliminarily being allocated as
goodwill and amortized using the straight-line method over 40
years. The Company purchased AS&C with cash borrowed. AS&C is an
aerospace parts, logistics, and distribution company primarily
servicing the European OEM market.
In February 1997, the Company completed a transaction (the
"Simmonds Acquisition") pursuant to which the Company acquired
common shares and convertible debt representing an 84.2%
interest, on a fully diluted basis, of Simmonds S.A.
("Simmonds"). The Company initiated a tender offer to purchase
the remaining shares and convertible debt held by the public. By
June 30, 1997, the Company had purchased, or placed sufficient
cash in escrow to purchase, all the remaining shares and
convertible debt of Simmonds. The total purchase price of
Simmonds, including the assumption of debt, was approximately
$62,000, which the Company funded with available cash and
borrowings. The Company recorded approximately $14,150 in
goodwill as a result of this acquisition, which will be amortized
using the straight-line method over 40 years. Simmonds is one of
Europe's leading manufacturers and distributors of aerospace and
automotive fasteners.
In January 1997, Banner Aerospace, Inc. ("Banner"), a
majority-owned subsidiary of the Company, acquired PB Herndon
Company ("PB Herndon") in a business combination accounted for as
a purchase. The total cost of the acquisition was $16,000,
including the assumption of $1,300 in debt, which exceeded the
fair value of the net assets of PB Herndon by approximately
$3,500, which is being amortized using the straight-line method
over 40 years. The Company purchased PB Herndon with available
cash. PB Herndon is a distributor of specialty fastener lines and
similar aerospace related components.
On June 30, 1997, the Company sold all the patents of
Fairchild Scandinavian Bellyloading Company ("SBC") to Teleflex
Incorporated ("Teleflex") for $5,000, and immediately thereafter
sold all the stock of SBC to a wholly owned subsidiary of
Teleflex for $2,000. The Company may also receive additional
proceeds of up to $7,000 based on future net sales of SBC's
patented products and services.
3. DISCONTINUED OPERATIONS
On November 20, 1997, Shared Technologies Fairchild Inc.
("STFI"), a corporation in which the Company owned approximately
42% of the outstanding common stock, entered into a merger
agreement with Intermedia Communications Inc. ("Intermedia")
pursuant to which holders of STFI common stock will receive
$15.00 per share in cash (the "STFI Merger"). The Company was
paid approximately $85,000 in cash (before tax and selling
expenses) in exchange for preferred stock of STFI owned by the
Company, and expects to receive an additional $93,000 in cash
(before tax and selling expenses) in the first three months of
1998 in exchange for the 6,225,000 shares of common stock of STFI
owned by the Company. In the quarter ended December 28, 1997, the
Company recorded a $29,974 gain, net of tax, on disposal of
discontinued operations, from the proceeds received for the
preferred stock of STFI. The results of STFI have been accounted
for as discontinued operations.
Earnings from discontinued operations includes the Company's
equity in earnings of $622 and $1,095 from the STFI investments
during the six months ended December 28, 1997 and December 29,
1996, respectively.
4. EQUITY SECURITIES
On December 19, 1997, the Company completed a secondary
offering of public securities. The offering consisted of an
issuance of 3,000,000 shares of the Company's Class A Common
Stock at $20.00 per share (the "Offering").
The Company had 17,047,167 shares of Class A common stock
and 2,624,716 shares of Class B common stock outstanding at
December 28, 1997. Class A common stock is traded on both the
New York and Pacific Stock Exchanges. There is no public market
for the Class B common stock. Shares of Class A common stock are
entitled to one vote per share and cannot be exchanged for shares
of Class B common stock. Shares of Class B common stock are
entitled to ten votes per share and can be exchanged, at any
time, for shares of Class A common stock on a share-for-share
basis. For the six months ended December 28, 1997, 47,084 shares
of Class A Common Stock were issued as a result of the exercise
of stock options, and shareholders converted 7,800 shares of
Class B common stock into Class A common stock.
5. CREDIT AGREEMENT
On December 19, 1997, immediately following the Offering,
the Company restructured its FHC and RHI Credit Agreements by
entering into a new credit facility to provide the Company with a
$300,000 senior secured credit facility (the "Facility")
consisting of (i) a $75,000 revolving loan with a letter of
credit sub-facility of $30,000 and a $10,000 swing loan sub-
facility, and (ii) a $225,000 term loan. Advances made under the
Facility will generally bear interest at a rate of, at the
Company's option, either (i) 2% over the Citibank N.A. base rate,
or (ii) 3% over the Eurodollar Rate ("LIBOR") for the first nine
months following closing, and is subject to change based upon the
Company's financial performance thereafter. The Facility is
subject to a non-use commitment fee of 1/2% of the aggregate unused
availability for the first nine months post-closing and is
subject to change based upon the Company's financial performance
thereafter. Outstanding letters of credit are subject to fees
equivalent to the LIBOR margin rate. A borrowing base is
calculated monthly to determine the amounts available under the
Facility. The borrowing base is determined monthly based upon
(i) the EBITDA of the Company's Aerospace Fastener business, as
adjusted, and (ii) specified percentages of various marketable
securities and cash equivalents. The Facility will mature on June
18, 2004. The term loan is subject to mandatory prepayment
requirements and optional prepayments. The revolving loan is
subject to mandatory prepayment requirements and optional
commitment reductions. On December 28, 1997, the Company was in
compliance with all the covenants under its credit agreements.
The Company recognized an extraordinary loss of $3,024, net
of tax, to write-off the remaining deferred loan fees associated
with early extinguishment of FHC and RHI Credit Agreements.
In August 1997, the Company entered into a delayed-start
swap interest rate lock hedge agreement (the "FHC Hedge
Agreement") to reduce its exposure to increases in interest rates
on variable rate debt. In December 1997, the Company amended the
FHC Hedge Agreement. Beginning on February 17, 1998, the FHC
Hedge Agreement will provide interest rate protection on $100,000
of variable rate debt for ten years, with interest being
calculated based on a fixed LIBOR rate of 6.715%. On January 14,
1998, the FHC Hedge Agreement was further amended to provide
interest rate protection with interest being calculated based on
a fixed LIBOR rate of 6.24% from February 17, 1998 to February
17, 2003. On February 17, 2003, the bank will have a one-time
option to either (i) elect to cancel the ten-year agreement; or
(ii) do nothing and proceed with the transaction, using a fixed
LIBOR rate of 6.715% for the period February 17, 2003 to February
19, 2008. No costs were incurred as a result of these
transactions.
On November 25, 1997, Banner amended its credit agreement to
increase its revolving credit facility by $50,000.
6. RESTRICTED CASH
The Company had restricted cash of approximately $30,687 and
$4,839 on December 28, 1997 and June 30, 1997, respectively, all
of which is maintained as collateral for certain debt facilities.
7. SUMMARIZED STATEMENT OF EARNINGS INFORMATION
The following table presents summarized historical financial
information, on a combined 100% basis, of the Company's principal
investments, which are accounted for using the equity method.
Six Months Ended
December 28, December 29,
1997 1996
------------ ------------
Net sales $ 48,841 $ 52,239
Gross profit 18,191 20,096
Earnings from continuing operations 8,132 5,036
Net earnings 8,132 5,036
The Company owns approximately 31.9% of Nacanco Paketleme
common stock. The Company recorded equity earnings of $2,584 and
$1,571 from this investment for the six months ended December 28,
1997 and December 29, 1996, respectively.
8. MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
On December 28, 1997, the Company had $70,327 of minority
interest, of which $69,700 represents Banner. Minority
shareholders hold approximately 36% of Banner's outstanding
common stock.
9. EARNINGS PER SHARE
Effective December 28, 1997, the Company adopted Statement
of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS 128). This statement replaces the previously reported
primary and fully diluted earnings (loss) per share with basic
and diluted earnings (loss) per share. Unlike primary earnings
(loss) per share, basic earnings (loss) per share excludes any
diluted effects of options. Diluted earnings (loss) per share is
very similar to the previously reported fully diluted earnings
(loss) per share. All earnings (loss) per share have been
restated to conform to the requirements of SFAS 128.
The following table illustrates the computation of basic and
diluted earnings (loss) per share:
For the Three For the Six
Months Ended Months Ended
12/28/97 12/29/96 12/28/97 12/29/96
Numerator:
Loss from continuing
operations $ (7,113) $(3,638) $(6,680) $(8,690)
======== ====== ====== ======
Denominator:
Weighted average shares
outstanding 17,088 16,551 16,864 16,489
======= ======= ======= =======
Earnings (Loss) Per Share:
Loss from continuing
operations $ (0.42) $ (0.22) $ (0.40) $ (0.53)
======= ====== ====== ======
The computation of diluted loss per share for the three-
month and six-month periods ended December 28, 1997 and December
29, 1996 excluded the effect of incremental common shares
attributable to the potential exercise of outstanding common
stock options and outstanding warrants, because their effect was
antidilutive. These shares could potentially dilute basic
earnings (loss) per share in the future. The Company entered into
an agreement subsequent to December 28, 1997, which upon
consummation, would increase the number of shares outstanding
(see Note 11).
10. CONTINGENCIES
Government Claims
The Corporate Administrative Contracting Officer (the
"ACO"), based upon the advice of the United States Defense
Contract Audit Agency, has made a determination that Fairchild
Industries, Inc. ("FII"), a former subsidiary of the Company, did
not comply with Federal Acquisition Regulations and Cost
Accounting Standards in accounting for (i) the 1985 reversion to
FII of certain assets of terminated defined benefit pension
plans, and (ii) pension costs upon the closing of segments of
FII's business. The ACO has directed FII to prepare cost impact
proposals relating to such plan terminations and segment closings
and, following receipt of such cost impact proposals, may seek
adjustments to contract prices. The ACO alleges that substantial
amounts will be due if such adjustments are made, however, an
estimate of the possible loss or range of loss from the ACO's
assertion cannot be made. The Company believes it has properly
accounted for the asset reversions in accordance with applicable
accounting standards. The Company has held discussions with the
government to attempt to resolve these pension accounting issues.
Environmental Matters
The Company's operations are subject to stringent Government
imposed environmental laws and regulations concerning, among
other things, the discharge of materials into the environment and
the generation, handling, storage, transportation and disposal of
waste and hazardous materials. To date, such laws and
regulations have not had a material effect on the financial
condition, results of operations, or net cash flows of the
Company, although the Company has expended, and can be expected
to expend in the future, significant amounts for investigation of
environmental conditions and installation of environmental
control facilities, remediation of environmental conditions and
other similar matters, particularly in the Aerospace Fasteners
segment.
In connection with its plans to dispose of certain real
estate, the Company must investigate environmental conditions and
may be required to take certain corrective action prior or
pursuant to any such disposition. In addition, management has
identified several areas of potential contamination at or from
other facilities owned, or previously owned, by the Company, that
may require the Company either to take corrective action or to
contribute to a clean-up. The Company is also a defendant in
certain lawsuits and proceedings seeking to require the Company
to pay for investigation or remediation of environmental matters
and has been alleged to be a potentially responsible party at
various "Superfund" sites. Management of the Company believes
that it has recorded adequate reserves in its financial
statements to complete such investigation and take any necessary
corrective actions or make any necessary contributions. No
amounts have been recorded as due from third parties, including
insurers, or set off against, any liability of the Company,
unless such parties are contractually obligated to contribute and
are not disputing such liability.
As of December 28, 1997, the consolidated total recorded
liabilities of the Company for environmental matters approximated
$7,500, which represented the estimated probable exposures for
these matters. It is reasonably possible that the Company's
total exposure for these matters could be approximately $12,300
on an undiscounted basis.
Other Matters
The Company is involved in various other claims and lawsuits
incidental to its business, some of which involve substantial
amounts. The Company, either on its own or through its insurance
carriers, is contesting these matters. In the opinion of
management, the ultimate resolution of the legal proceedings,
including those aforementioned, will not have a material adverse
effect on the financial condition, or future results of
operations or net cash flows of the Company.
11. SUBSEQUENT EVENTS
On January 13, 1998, certain subsidiaries (the "Selling
Subsidiaries"), of Banner Aerospace, Inc. ("Banner", a majority-
owned subsidiary of the Registrant), completed the disposition of
substantially all of the assets and certain liabilities of the
Selling Subsidiaries to two wholly-owned subsidiaries of
AlliedSignal Inc. (the "Buyers"), in exchange for unregistered
shares of AlliedSignal Inc. common stock with an aggregate value
equal to $345,000 (the "Banner Hardware Group Disposition"). The
purchase price received by the Selling Subsidiaries ($345,000)
was based on the consolidated net worth as reflected on an
estimated closing date balance sheet for the assets (and
liabilities) conveyed by the Selling Subsidiaries to the Buyers.
Such estimated closing date balance sheet is subject to review by
the parties, and the purchase price will be adjusted (up or down)
based on the net worth as reflected on the final closing date
balance sheet. The assets transferred to the Buyers consists
primarily of Banner's hardware group, which includes the
distribution of bearings, nuts, bolts, screws, rivets and other
type of fasteners, and its PacAero unit. Approximately $170,000
of the common stock received from the Buyers was used to repay
outstanding term loans of Banner's subsidiaries and related fees.
Banner effected the Banner Hardware Group Disposition to
concentrate its efforts on the rotables and jet engine businesses
and because the Banner Hardware Group Disposition presented a
unique opportunity to realize a significant return on the
disposition of the hardware group.
On January 28, 1998, the Company entered into a merger
agreement to acquire Edwards and Lock Management Corporation,
doing business as Special-T Fasteners ("Special-T"), in a
business combination to be accounted for as a purchase. The total
cost of the acquisition will be approximately $46,500, and will
be funded with approximately $23,000 of available cash and
$23,500 of unregistered shares of the Company's Class A common
stock. The acquisition is subject to usual regulatory approvals.
Special-T distributes precision fasteners worldwide, utilized
primarily in the aerospace industry, to both government and
commercial manufacturers.
On February 3, 1998, with the proceeds of the Offering, term
loan borrowings under the Facility, and the after tax proceeds
the Company has already received from the STFI Merger
(collectively, the "Refinancing"), the Company refinanced
substantially all of its existing indebtedness (other than
indebtedness of Banner), consisting of (i) $63,000 to redeem the
11 7/8% Senior Debentures due 1999; (ii) $117,600 to redeem the
12% Intermediate Debentures due 2001; (iii) $35,856 to redeem the
13 1/8% Subordinated Debentures due 2006; (iv) $25,063 to redeem
the 13% Junior Subordinated Debentures due 2007; and (v) accrued
interest of $10,562.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Fairchild Corporation (the "Company") was incorporated
in October 1969, under the laws of the State of Delaware. On
November 15, 1990, the Company changed its name from Banner
Industries, Inc. to The Fairchild Corporation. RHI Holdings,
Inc. ("RHI") is a direct subsidiary of the Company. RHI is the
100% owner of Fairchild Holding Corp. ("FHC") and the majority
owner of Banner Aerospace, Inc. ("Banner"). The Company's
principal operations are conducted through RHI and FHC. The
Company also holds significant equity interests in Shared
Technologies Fairchild Inc. ("STFI") and Nacanco Paketleme
("Nacanco").
The following discussion and analysis provide information
which management believes is relevant to assessment and
understanding of the Company's consolidated results of operations
and financial condition. The discussion should be read in
conjunction with the consolidated financial statements and notes
thereto.
CAUTIONARY STATEMENT
Certain statements in the financial discussion and analysis
by management contain forward-looking information that involves
risk and uncertainty, including current trend information,
projections for deliveries, backlog, and other trend projections.
Actual future results may differ materially depending on a
variety of factors, including product demand; performance issues
with key suppliers; customer satisfaction and qualification
issues; labor disputes; governmental export and import policies;
worldwide political stability and economic growth; legal
proceedings; business combinations; investment risks; and acts of
nature.
RECENT DEVELOPMENTS
The Company has effected a series of transactions designed
to: (i) reduce its total indebtedness and annual interest
expense; (ii) increase the number of publicly held shares of
Class A Common Stock; and (iii) increase the Company's operating
and financial flexibility.
On November 20, 1997, STFI, a corporation of which the
Company owns approximately 42% of the outstanding common stock,
entered into a merger agreement with Intermedia Communications,
Inc. ("Intermedia") pursuant to which holders of STFI common
stock will receive $15.00 per share in cash. The Company was paid
approximately $85 million in cash (before tax and selling
expenses) in exchange for preferred stock of STFI owned by the
Company, and expects to receive an additional $93 million in cash
(before tax and selling expenses) in the first three months of
1998 in exchange for the 6,225,000 shares of common stock of STFI
owned by the Company. The Intermedia transaction replaces an
earlier merger agreement with the Tel-Save Holdings, Inc. under
which the Company would have received consideration primarily in
common stock of Tel-Save Holdings, Inc. Consummation of the STFI
Merger is subject to certain conditions.
On December 19, 1997, the Company completed a secondary
offering of public securities. The offering consisted of an
issuance of 3,000,000 shares of the Company's Class A Common
Stock at $20.00 per share (the "Offering").
On December 19, 1997, immediately following the Offering,
the Company restructured its FHC and RHI Credit Agreements by
entering into a new six-and-a-half-year credit facility to
provide the Company with a $300 million senior secured credit
facility (the "Facility") consisting of (i) a $75 million
revolving loan with a letter of credit sub-facility of $30
million and a $10 million swing loan sub-facility, and (ii) a
$225 million term loan.
On January 13, 1998, certain subsidiaries (the "Selling
Subsidiaries"), of Banner Aerospace, Inc. ("Banner", a majority-
owned subsidiary of the Registrant), completed the disposition of
substantially all of the assets and certain liabilities of the
Selling Subsidiaries to two wholly-owned subsidiaries of
AlliedSignal Inc. (the "Buyers"), in exchange for unregistered
shares of AlliedSignal Inc. common stock with an aggregate value
equal to $345 million (the "Banner Hardware Group Disposition").
The purchase price received by the Selling Subsidiaries ($345
million) was based on the consolidated net worth as reflected on
an estimated closing date balance sheet for the assets (and
liabilities) conveyed by the Selling Subsidiaries to the Buyers.
Such estimated closing date balance sheet is subject to review by
the parties, and the purchase price will be adjusted (up or down)
based on the net worth as reflected on the final Closing Date
Balance Sheet. The assets transferred to the Buyers consists
primarily of Banner's hardware group, which includes the
distribution of bearings, nuts, bolts, screws, rivets and other
type of fasteners, and its PacAero Unit. Approximately $170
million of the common stock received from the Buyers was used to
repay outstanding term loans of Banner's subsidiaries and related
fees. Banner effected the Banner Hardware Group Disposition to
concentrate its efforts on the rotables and jet engine businesses
and because the Banner Hardware Group Disposition presented a
unique opportunity to realize a significant return on the
disposition of the hardware group.
On February 3, 1998, with the proceeds of the Offering, term
loan borrowings under the Facility, and the after tax proceeds
the Company has already received from the STFI Merger
(collectively, the "Refinancing"), the Company refinanced
substantially all of its existing indebtedness (other than
indebtedness of Banner), consisting of (i) $63.0 million to
redeem the 11 7/8% Senior Debentures due 1999; (ii) $117.6
million to redeem the 12% Intermediate Debentures due 2001; (iii)
$35.9 million to redeem the 13 1/8% Subordinated Debentures due
2006; (iv) $25.1 million to redeem the 13% Junior Subordinated
Debentures due 2007; and (vi) accrued interest of $10.6 million.
In December 1997, the Company acquired AS+C GmbH, Aviation
Supply + Consulting ("AS&C") in a business combination accounted
for as a purchase. The total cost of the acquisition was $13,245,
which exceeded the fair value of the net assets of AS&C by
approximately $7,350, which is preliminarily being allocated as
goodwill and amortized using the straight-line method over 40
years. The Company purchased AS&C with cash borrowed. AS&C is an
aerospace parts, logistics, and distribution company primarily
servicing the European OEM market.
RESULTS OF OPERATIONS
The Company currently reports in two principal business
segments: Aerospace Fasteners and Aerospace Distribution. The
results of Fairchild Technologies, together with the results of
Gas Springs and SBC (for the prior year period) are included in
the Corporate and Other classification. The following table
illustrates the historical sales and operating income of the
Company's operations for the three months and six ended December
28, 1997 and December 29, 1996, respectively.
(In thousands)
Three Months Ended Six Months Ended
------------------ ----------------
December December December December
28, 28, 28, 28,
1997 1996 1997 1996
-------- -------- -------- --------
Sales by Segment:
Aerospace Fasteners $ 91,014 $ 56,494 $167,861 $111,541
Aerospace
Distribution 119,614 96,985 242,528 181,092
Corporate and Other 31,346 10,290 50,193 19,944
Eliminations (a) (5,288) (3,857) (10,135) (6,575)
------- ------- ------- -------
Total Sales $236,686 $159,912 $450,447 $306,002
Operating Income
(Loss) by Segment:
Aerospace Fasteners $ 6,382 $ 2,156 $ 8,892 $ 4,264
Aerospace
Distribution 7,714 6,072 17,085 12,053
Corporate and Other (4,854) (6,569) (6,623) (11,610)
------- ------- ------- -------
Total Operating
Income $ 9,242 $ 1,659 $ 19,354 $ 4,707
(a) Represents intersegment sales from the Aerospace Fasteners
segment to the Aerospace Distribution segment.
CONSOLIDATED RESULTS
Net sales of $236.7 million in the second quarter of Fiscal
1998 improved significantly by $76.8 million, or 48%, compared to
sales of $159.9 million in the second quarter of Fiscal 1997. Net
Sales of $450.4 million in the Fiscal 1998 six-month period
improved by $137.8 million, or 46%, compared to sales of $306.0
million in the first six months of Fiscal 1997. Sales growth was
stimulated by the resurgent commercial aerospace industry,
together with the effects that recent acquisitions contributed in
the current periods, and increased sales at Fairchild
Technologies.
Gross Margin as a percentage of sales was 27.5% and 24.2% in
the second quarter of Fiscal 1998 and 1997, respectively, and
26.0% and 25.7% in the six-month period of Fiscal 1998 and 1997,
respectively. The increased margin in the Fiscal 1998 periods is
attributable to improving efficiencies associated with increased
production performances contributed by an improving skills base
in the work force, and a reduction in the payment of overtime
within the Aerospace Fasteners segment, and a change in product
mix and decreased price competition in the Aerospace Distribution
segment.
Selling, General & Administrative expense as a percentage of
sales was 21.7% and 22.8% in the second quarter of Fiscal 1998
and 1997, respectively, and 21.5% and 23.6% in the six-month
period of Fiscal 1998 and 1997, respectively. The improvement in
the Fiscal 1998 periods is attributable primarily to
administrative efficiencies relative to increasing sales.
Research and Development expense increased in the Fiscal
1998 periods, compared to the prior year periods, as a result of
product development within Fairchild Technologies. Additional
research and development expenses will be incurred in the future.
Other income increased $2.0 million in the current six-month
period, compared to the prior year six-month period, due
primarily to the sale of air rights over a portion of the
property the Company owns and is developing in Farmingdale, New
York.
Operating income of $9.2 million in the second quarter of
Fiscal 1998 increased $7.6 million, compared to operating income
of $1.7 million in the second quarter of Fiscal 1997. Operating
income of $19.4 million in the six months period ended December
28, 1997, improved by $14.7 million, compared to the six month
period ended December 29, 1996. The increase in operating income
was due to the improved results provided by the Company's
aerospace operations.
Investment income (loss), net, decreased by $8.9 million in
the second quarter and $6.6 million in the first six months of
Fiscal 1998, due to recognizing unrealized losses on the fair
market adjustments of trading securities in the Fiscal 1998
periods while recording unrealized gains from trading securities
in the Fiscal 1997 periods. The Company's portfolio of trading
securities is small, varied, and subject to fluctuations in
market value. Trading securities are marked to market value in
the statement of earnings.
Equity in earnings of affiliates increased slightly in the
second quarter and six months of Fiscal 1998, compared to the
first quarter of Fiscal 1997, due to improved earnings by
Nacanco.
Income taxes included a $6.7 million tax benefit in the
first six months of Fiscal 1998, on pre-tax losses of $13.7
million. The tax benefit was higher than the statutory rate due
primarily to larger losses generated by domestic operations.
Included in earnings from discontinued operations is the
Company's equity in earnings of STFI, which was slightly lower in
the Fiscal 1998 periods.
The $30.0 million after-tax gain on disposal of discontinued
operations in the Fiscal 1998 periods, includes the Company's
disposition of its preferred stock positions as a result of the
STFI Merger.
The extraordinary loss, net, in the Fiscal 1998 periods
includes the write-off of deferred loan fees associated with the
early extinguishment of the FHC and RHI credit facilities which
were replaced as part of the Refinancing.
Net earnings of $20.4 million in the first six months ended
December 28, 1997, improved by $28.5 million compared to the $7.6
million net loss recorded in the six months ended December 29,
1996. This improvement is attributable to a $14.6 million
increase in operating income; and the $30.0 million gain on the
disposition of discontinued operations, offset partially by a
$6.6 million decrease in investment income and the $3.0 million
extraordinary loss.
SEGMENT RESULTS:
AEROSPACE FASTENERS SEGMENT
Sales in the Aerospace Fasteners segment increased by $34.5
million in the second quarter and $56.3 million for the Fiscal
1998 six-month period, reflecting significant growth in the
commercial aerospace industry combined with the effect of the
Simmonds acquisition. New orders have continued to exceed
reported sales, resulting in a backlog of $207 million at
December 28, 1997, up from $196 million at June 30, 1997.
Excluding sales contributed by acquisitions, sales increased 22%
and 19% for the three and six months ended December 28, 1997,
respectively, compared to the same periods in the prior year.
Operating income improved by $4.2 million, or 196%, in the
second quarter and $4.6 million, or 109%, in the Fiscal 1998 six-
month period, compared to the Fiscal 1997 periods. Acquisitions
and marketing changes were contributors to this improvement.
Excluding the results provided by acquisitions, operating income
increased by 116% in the second quarter and 11% for the six
months of Fiscal 1998, compared to the same periods in the prior
year. The Company anticipates that productivity efficiencies will
further improve operating income in the coming months.
AEROSPACE DISTRIBUTION SEGMENT
Aerospace Distribution sales were up $22.6 million, or 23%
in the second quarter and $61.4 million, or 34%, in the first six
months of Fiscal 1998, compared to the corresponding periods of
the prior year. The improvement in the Fiscal 1998 periods is due
to increased sales to commercial airlines, original equipment
manufacturers, and other distributors as well as increased sales
of turbine parts and engine management services. In addition,
incremental sales provided by PB Herndon also contributed to the
increase.
Operating income was up $1.6 million, or 27%, in the second
quarter and $5.0 million, or 42% for the first six months of
Fiscal 1998, compared to the same period of the prior year, due
primarily to the increase in sales and the related economies of
scale. This segment has benefited from the extended service lives
of existing aircraft, growth from acquisitions and internal
growth, which has increased its overall market share.
CORPORATE AND OTHER
The Corporate and Other classification includes Fairchild
Technologies, Gas Springs Division and corporate activities. The
results of SBC, which was sold at Fiscal 1997 year-end, are
included in the prior period results. The group reported an
increase in sales of $21.1 million, or 205%, in the second
quarter and $30.2 million, or 155%, in the first six months of
Fiscal 1998, as compared to the same periods in Fiscal 1997, due
primarily to an improvement in sales of Fairchild Technologies
advanced semiconductor manufacturing equipment products. The
operating loss decreased by $1.7 million, or 26%, in the second
quarter and $5.0, or 43%, in the first six months of Fiscal 1998,
compared to the Fiscal 1997 periods, as a result of an increase
in other income and a decline in legal expenses, partially offset
by increased losses at Fairchild Technologies. The operating
results classified under Corporate and Other are affected by the
operations of Fairchild Technologies Division ("The Division"),
which may fluctuate because of industry cyclicality, the volume
and timing of orders, the timing of new product shipments,
customer's capital spending, and pricing changes by The Division
and its competition. The Division has experienced a reduction of
its backlog, and margin compression during the past six months,
which combined with the existing cost base, may impact future
earnings from the Division.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $19.5 million from
$19.4 million at June 30, 1997 to $38.9 million at December 28,
1997. Cash received form the STFI Merger and the Offering was
partially offset by cash used for operations of $93.9 million,
net capital expenditures, including acquisitions of $30.9
million. The Company's principal cash requirements include debt
service, capital expenditures, acquisitions, and payment of other
liabilities. Other liabilities that require the use of cash
include post-employment benefits for retirees, environmental
investigation and remediation obligations, and litigation
settlements and related costs. The Company maintains credit
agreements with a consortium of banks, which provide a term loan
and revolving credit facilities to the Company, and a separate
revolving credit facility and term loans to Banner. The Company
anticipates that existing capital resources, cash generated from
operations, and cash from borrowings and asset sales will be
adequate to maintain the Company's current level of operations.
With the proceeds of the Offering, borrowings under the
Facility and the after tax proceeds the Company has already
received from the STFI Merger, the Company refinanced
substantially all of its existing indebtedness (other than
indebtedness at Banner), consisting of the 11 7/8% Senior
Debentures due 1999, the 12% Intermediate Debentures due 2001,
the 13 1/8% Subordinated Debentures due 2006, the 13% Junior
Subordinated debentures due 2007 and its existing bank
indebtedness. The Refinancing reduced the Company's total net
indebtedness by approximately $132 million and reduced the
Company's annual interest expense, on a pro forma basis, by
approximately $21 million. The completion of the STFI Merger will
reduce the Company's annual interest expense by approximately $3
million. In addition, a portion of the proceeds from the Banner
Hardware Group Disposition were used to repay all of Banner's
outstanding bank indebtedness, which will further reduce the
Company's annual interest expense by an additional $14 million.
The increase in the Company's shareholders' equity is
expected to be approximately $40 million resulting a projected
gain of $103 million to be recorded at the closing of the Banner
Hardware Group Disposition, and an estimated tax provision of $43
million and a minority interest effect of $20 million. The
operating income of the subsidiaries included in the Banner
Hardware Group Disposition was $6.1 million and $14.1 million for
the three and six months ended December 28, 1997, respectively.
Whereas the Company will no longer benefit from the operations of
the disposed Banner subsidiaries it expects to benefit from lower
interest expense and dividends paid on the AlliedSignal stock.
In order to focus its operations on the aerospace industry,
the Company is considering distributing (the "Spin-Off") to its
shareholders all of the stock of a subsidiary to be formed ("Spin-
Co"), which would own substantially all of the Company's non-
aerospace assets. Although the Company's ability to effect the
Spin-Off is uncertain, the Company may effect a spin-off of
certain non-aerospace assets as soon as it is reasonably
practicable following receipt of a solvency opinion relating to
Spin-Co and all necessary governmental and third party approvals.
In order to effect the Spin-Off, approval is required from the
board of directors of the Company, however, shareholder approval
is not required. In addition, the Company may encounter
unexpected delays in effecting the Spin-Off, and the Company can
make no assurance as to the timing thereof. In addition, prior to
the consummation of the Spin-Off, the Company may sell,
restructure or otherwise change the assets and liabilities that
will be in Spin-Co, or for other reasons elect not to consummate
the Spin-Off. Consequently, there can be no assurance that the
Spin-Off will occur.
In connection with the Spin-Off, it is anticipated that the
Company will enter into an indemnification agreement pursuant to
which Spin-Co will assume and be solely responsible for all known
and unknown past, present and future claims and liabilities of
any nature relating to the pension matter described under
"Business--Legal Proceedings"; certain environmental liabilities
currently recorded as $7.5 million, but for which it is
reasonably possible the total expense could be $12.3 million on
an undiscounted basis; certain retiree medical cost and
liabilities related to discontinued operations for which the
Company has accrued approximately $31.3 million as of December
28, 1997 (see Note 11 to the Company's Consolidated Financial
Statements); and certain tax liabilities. In addition, the Spin-
Co would also be responsible for all liabilities relating to the
Technologies business and an allocation of corporate expenses.
Responsibility for such liabilities would require significant
commitments.
Should the Spin-Off, as presently contemplated, occur prior
to June of 1999, the Spin-Off will be a taxable transaction to
shareholders of the Company and could result in a material tax
liability to the Company and its shareholders. The amount of the
tax to the Company and its shareholders is uncertain, and if the
tax is material to the Company, the Company may elect not to
consummate the Spin-Off. Because circumstances may change and
because provisions of the Internal Revenue Code of 1986, as
amended, may be further amended from time to time, the Company
may, depending on various factors, restructure or delay the
timing of the Spin-Off to minimize the tax consequences thereof
to the Company and its shareholders.
With the year 2000 approaching, the Company is preparing all
of its computer systems to be Year 2000 compliant. Substantially
all of the systems within the Aerospace Fasteners segment are
currently Year 2000 compliant. The Company expects to replace and
upgrade some systems, which are not Year 2000 compliant, within
the Aerospace Distribution segment and at Fairchild Technologies.
The Company expects all of its systems will be Year 2000
compliant on a timely basis. However, there can be no assurance
that the systems of other companies, on which the Company's
systems rely, will also be timely converted. Management is
currently evaluating the cost of ensuring that all of its systems
are Year 2000 compliant.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, FASB issued two pronouncements, Statement of
Financial Accounting Standards No. 130 ("SFAS 130") "Reporting
Comprehensive Income", and Statement of Financial Accounting
Standards No. 131 ("SFAS 131") "Disclosures about Segments of an
Enterprise and Related Information". SFAS 130 establishes
standards for reporting and display of comprehensive income and
its components in the financial statements. SFAS 131 supersedes
Statement of Financial Accounting Standards No. 14 "Financial
Reporting for Segments of a Business Enterprise" and requires
that a public company report certain information about its
operating segments in annual and interim financial reports. The
Company will adopt SFAS 130 and SFAS 131 in Fiscal 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 10 of Notes to Consolidated
Financial Statements.
Item 4. Submission of Matters to a vote of Security Holders.
The Annual Meeting of Stockholders of the Company was held
on November 20, 1997. Four matters of business were held to vote
for the following purposes: (1) the election of thirteen
directors of the Company for the ensuing year ("Proposal 1"); (2)
the amendments to the 1986 Non-Qualified and Incentive Stock
Option Plan ("Proposal 2"); (3) the approval of grants of stock
options to certain executive officers and employees under the
1986 Non-Qualified and Incentive Stock Option Plan ("Proposal
3"); and (4) the approval of the material terms of performance
goals for Fiscal 1998 Incentive Compensation award for the
Company's Chief Executive Officer ("Proposal 4"). The following
tables provides the shareholder election results in number of
shares:
Proposal 1
Directors Votes For Votes Withheld
- ------------------ ------------- -----------------
Michael T. Alcox 38,456,208 539,985
Melville R. Barlow 38,456,084 540,109
Mortimer M. Caplin 38,425,786 570,407
Colin M. Cohen 38,456,961 539,232
Philip David 38,456,284 539,909
Harold J. Harris 38,456,584 539,609
Daniel Lebard 38,455,584 540,609
Jacques S. Moskovic 38,455,581 540,612
Herbert S. Richey 38,428,284 657,909
Moshe Sanbar 38,462,496 533,697
Robert A. Sharpe 38,456,984 539,209
Eric I. Steiner 38,455,275 540,918
Jeffrey J. Steiner 38,456,661 539,532
Votes For Votes Against Abstain Non-Vote
---------- ------------- ------- ---------
Proposal 2 37,857,321 898,573 35,597 204,702
Proposal 3 37,884,760 859,277 47,454 204,702
Proposal 4 38,442,527 319,400 29,564 204,702
Item 5. Other Information
Articles have appeared in the French press reporting an
inquiry by a French magistrate into certain allegedly improper
business transactions involving Elf Acquitaine, a French
petroleum company, its former chairman and various third parties,
including Maurice Bidermann. In connection with this inquiry,
the magistrate has made inquiry into allegedly improper
transactions between Mr. Steiner and that petroleum company. In
response to the magistrate's request that Mr. Steiner appear in
France as a witness, Mr. Steiner submitted statements concerning
the transactions and has offered to appear in person if certain
arrangements were made. According to the French press, the
magistrate also requested permission to commence an inquiry into
transactions involving another French petroleum company, but her
request was not granted. If the magistrate were to renew her
request, and if it were granted, inquiry into transactions
between such company and Mr. Steiner, could ensue.
Mr. Steiner has recently been cited by a French prosecutor
to appear on May 18, 1998, before the Tribunal de Grande Instance
de Paris, to answer a charge of knowingly benefiting in 1990,
from a misuse by Mr. Bidermann of corporate assets of Societe
Generale Mobiliere et Immobiliere, a French corporation in which
Mr. Bidermann is believed to have been the sole shareholder.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
* 10(y)(iv) Amendment No. 3 dated as of December 19,
1997, to the Credit Agreement dated as of May 27, 1996.
* 10(ag)(ii) Amendment No. 2 dated as of December 23,
1997, to the Interest Rate Hedge Agreement between
Registrant and Citibank, N.A. dated as of August 19, 1997.
* 27 Financial Data Schedules.
* 99 (a)(i) Financial statements, related notes
thereto, including exhibits, of Banner Aerospace, Inc. for the
nine months ended December 31, 1997 (incorporated by reference
to the Banner Aerospace Inc. Form 10-Q for the nine months ended December 31,
1997).
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter
ended December 28, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to the signed on
its behalf by the undersigned hereunto duly authorized.
For THE FAIRCHILD CORPORATION
(Registrant) and as its Chief
Financial Officer:
By: Colin M. Cohen
Senior Vice President and
Chief Financial Officer
Date: February 11, 1998