SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 1-8974
AlliedSignal Inc.
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(Exact name of registrant as specified in its charter)
Delaware 22-2640650
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Columbia Road
P.O. Box 4000
Morristown, New Jersey 07962-2497
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(Address of principal executive offices) (Zip Code)
(201)455-2000
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock June 30, 1995
--------------------- -----------------
$1 par value 283,160,355 shares
AlliedSignal Inc.
Index
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Page No.
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Part I. - Financial Information
Item 1. Condensed Financial Statements:
Consolidated Balance Sheet -
June 30, 1995 and December 31, 1994 3
Consolidated Statement of Income -
Three and Six Months Ended June 30, 1995 and 1994 4
Consolidated Statement of Cash Flows-
Six Months Ended June 30, 1995 and 1994 5
Notes to Financial Statements 6
Report on Review by Independent
Accountants 7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8
Part II.- Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
- 2 -
AlliedSignal Inc.
Consolidated Balance Sheet
(Unaudited)
June 30, December 31,
1995 1994
--------- ------------
(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents $ 575 $ 508
Accounts and notes receivable - net
(Note 2) 1,847 1,697
Inventories - net (Note 3) 1,921 1,743
Other current assets 679 637
------ -------
Total current assets 5,022 4,585
Investments and long-term receivables 497 475
Property, plant and equipment 9,285 8,792
Accumulated depreciation and
amortization (4,851) (4,532)
Cost in excess of net assets of
acquired companies - net 1,398 1,349
Other assets 694 652
------ ------
Total assets $12,045 $11,321
======= =======
LIABILITIES
Current Liabilities:
Accounts payable $ 1,255 $ 1,296
Short-term borrowings 100 133
Commercial paper 422 -
Current maturities of long-term debt 183 130
Accrued liabilities 1,870 1,832
------ ------
Total current liabilities 3,830 3,391
Long-term debt 1,304 1,424
Deferred income taxes 462 406
Postretirement benefit obligations
other than pensions 1,848 1,790
Other liabilities 1,256 1,328
SHAREOWNERS' EQUITY
Capital - common stock issued 358 358
- additional paid-in capital 2,472 2,458
Common stock held in treasury, at cost (1,561) (1,505)
Cumulative translation adjustment 102 18
Unrealized holding gain on equity securities 33 40
Retained earnings 1,941 1,613
------ ------
Total shareowners' equity 3,345 2,982
------ ------
Total liabilities and shareowners' equity $12,045 $11,321
======= =======
Notes to Financial Statements are an integral part of this
statement.
- 3 -
AlliedSignal Inc.
Consolidated Statement of Income
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
(Dollars in millions except
per share amounts)
Net sales $3,630 $3,187 $7,049 $6,173
------ ------ ------ ------
Cost of goods sold 2,902 2,541 5,649 4,943
Selling, general and
administrative expenses 374 346 732 660
------ ------ ------ ------
Total costs and expenses 3,276 2,887 6,381 5,603
------ ------ ------ ------
Income from operations 354 300 668 570
Equity in income of affiliated
companies 36 30 85 60
Other income (expense) 1 (3) (18) (16)
Interest and other financial
charges (46) (38) (87) (75)
------- ------ ------- ------
Income before taxes on income 345 289 648 539
Taxes on income 118 93 223 174
------ ------ ------ -----
Net income $ 227 $ 196 $ 425 $ 365
====== ====== ====== ======
Earnings per share of common
stock (Note 4) $ .80 $ .69 $ 1.50 $ 1.29
====== ====== ====== ======
Cash dividends per share of
common stock $ .195 $.1675 $ .390 $.3125
====== ====== ====== ======
Notes to Financial Statements are an integral part of this
statement.
- 4 -
AlliedSignal Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30
----------------
1995 1994
---- ----
(Dollars in millions)
Cash flows from operating activities:
Net income $ 425 $ 365
Adjustments to reconcile net income to net
cash flows from operating activities:
Streamlining and restructuring -- (84)
Depreciation and amortization (includes goodwill) 307 278
Undistributed earnings of equity affiliates (34) 2
Deferred taxes 102 71
(Increase) in accounts and notes receivable (88) (168)
Decrease (increase)in inventories (146) 46
(Increase) in other current assets (36) (31)
Increase (decrease) in accounts payable (98) 15
Increase (decrease) in accrued liabilities 24 (85)
Other (127) (101)
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Net cash flow provided by operating activities 329 308
------ ------
Cash flows from investing activities:
Expenditures for property, plant and equipment (320) (255)
Proceeds from disposals of property, plant and
equipment 20 15
Decrease in other investments 26 7
(Increase) in other investments (2) (9)
Decrease in marketable securities -- 14
Cash paid for acquisitions - net (127) (41)
Proceeds from sales of businesses (9) 135
------ ------
Net cash flow (used for) investing activities (412) (134)
------ ------
Cash flows from financing activities:
Net increase(decrease) in commercial paper 422 (127)
Net increase(decrease) in short-term borrowings (39) 27
Proceeds from issuance of common stock 48 30
Proceeds from issuance of long-term debt 5 2
Payments of long-term debt (86) (122)
Repurchases of common stock (91) (94)
Cash dividends on common stock (109) (87)
Redemption of common stock purchase rights -- (7)
------ ------
Net cash flow provided by (used for)
financing activities 150 (378)
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Net increase (decrease) in cash and cash equivalents 67 (204)
Cash and cash equivalents at beginning of year 508 892
----- -----
Cash and cash equivalents at end of period $ 575 $ 688
===== =====
Notes to Financial Statements are an integral part of this statement.
- 5 -
AlliedSignal Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in Millions)
Note 1. In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments,
consisting only of normal adjustments, necessary to present fairly
the financial position of AlliedSignal Inc. and its consolidated
subsidiaries at June 30, 1995 and the results of operations for the
three and six months ended June 30, 1995 and 1994 and the changes in
cash flows for the six months ended June 30, 1995 and 1994. The
results of operations for the three- and six-month periods ended
June 30, 1995 should not necessarily be taken as indicative of the
results of operations that may be expected for the entire year 1995.
The financial information as of June 30, 1995 should be read in
conjunction with the financial statements contained in the Company's
Form 10-K Annual Report for 1994.
Note 2. Accounts and notes receivable consist of the following:
June 30, December 31,
1995 1994
-------- -----------
Trade $1,669 $1,526
Other 213 204
------ ------
1,882 1,730
Less-Allowance for doubtful
accounts and refunds (35) (33)
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$1,847 $1,697
====== ======
Note 3. Inventories are valued at the lower of cost or market using
the last-in, first-out (LIFO) method for certain qualifying domestic
inventories and the first-in, first-out (FIFO) or the average cost
method for other inventories.
Inventories consist of the following:
June 30, December 31,
1995 1994 (a)
----------- --------------
Raw materials $ 588 $ 488
Work in process 862 761
Finished products 720 711
Supplies and containers 76 70
------ ------
2,246 2,030
Less - Progress payments (200) (160)
Reduction to LIFO cost basis (125) (127)
------- -------
$1,921 $1,743
====== ======
(a) Reclassified for comparative purposes.
Note 4. Based on the weighted average number of shares outstanding
during each period, as follows: three months ended June 30, 1995,
283,946,463 shares, and 1994, 283,264,305 shares; and six months
ended June 30, 1995, 283,856,301 shares, and 1994, 283,856,928
shares. No dilution results from outstanding common stock
equivalents.
- 6 -
Report on Review by Independent Accountants
-------------------------------------------
To the Board of Directors
of AlliedSignal Inc.
We have reviewed the accompanying consolidated balance sheet of
AlliedSignal Inc. and its subsidiaries as of June 30, 1995, and the
consolidated statements of income for the three-month and six-month
periods ended June 30, 1995 and 1994, and of cash flows for the six-
month periods ended June 30, 1995 and 1994. This financial
information is the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the financial information referred to above
for it to be in conformity with generally accepted accounting
principles.
We have previously audited in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December
31, 1994, and the related consolidated statements of income, of
retained earnings, and of cash flows for the year then ended (not
presented herein), and in our report dated February 1, 1995 we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet information as of December 31,
1994, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
Price Waterhouse LLP
4 Headquarters Plaza North
Morristown, NJ 07962
July 25, 1995
- 7 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
---------------------
Second Quarter 1995 Compared with Second Quarter 1994
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Net sales in the second quarter of 1995 totaled $3.6 billion,
an increase of $443 million, or 14%, compared with the second
quarter of last year. Of this increase, $182 million reflects the
consolidation of recent acquisitions and the impact of dispositions,
$175 million was due to higher sales volumes, $56 million was the
result of favorable foreign exchange rate fluctuations in the
automotive segment and $30 million was due to higher prices in the
engineered materials segment. Automotive's sales increased $228
million, or 18%, engineered materials was $116 million, or 14%,
higher and aerospace had a $99 million, or 9%, gain.
Automotive's sales of braking systems in North America and
Europe grew substantially. Sales of safety restraint systems,
turbochargers, aftermarket products in Europe and truck brake
systems were also strong. Engineered materials' sales of fibers,
particularly industrial polyester and products of the nylon system,
and performance materials were substantially higher. Among the
stronger performing products in performance materials were specialty
chemicals, food packaging films and advanced microelectronics.
Sales of laminate systems, environmental catalysts, engineering
plastics and carbon materials were also strong. Aerospace's
improved sales reflect the acquisition of the Lycoming turbine
engine business in October 1994 and continued strong demand for
safety-related avionics systems, such as windshear detection, ground
proximity warning and collision avoidance systems.
Selling, general and administrative expenses as a percent of
net sales decreased from 10.9% in the second quarter of 1994 to
10.3% in 1995. Expenses increased by $28 million, or 8%, reflecting
in part the impact of acquisitions.
Income from operations of $354 million increased by $54
million, or 18%, compared with the second quarter of last year. The
Company's operating margin for the second quarter of 1995 was 9.8%
compared with 9.4% for the same period last year. Aerospace's
operating income improved by 25%, engineered materials' by 17% and
automotive's by 9%. Operating expense for corporate increased
by $2 million. See the discussion of net income below for
information by segment.
Equity in income of affiliated companies of $36 million
increased by $6 million, or 20%, compared with last year, mainly
because of improved joint venture earnings for Paxon high-density
polyethylene and UOP process technology.
Other income (expense) of $1 million was favorable by $4
million compared with last year's second quarter, reflecting the sale
of an investment, offset somewhat by higher minority interest and
foreign exchange hedging costs.
Interest and other financial charges of $46 million increased
by $8 million, or 21%, from 1994's second quarter, primarily due to
higher average interest rates.
- 8 -
The effective tax rate in the second quarter of 1995 was 34.4%
compared with 32.3% in 1994. The increase is primarily due to
growth in both domestic and foreign earnings that are subject to the
statutory rate.
Aerospace's net income improved to $72 million from $61
million, an increase of 18% compared with the same quarter last
year. This earnings increase resulted from faster-than-anticipated
cost synergies from the Lycoming acquisition and increased demand
for proprietary flight safety systems in the commercial, regional
and business aircraft markets, offset somewhat by lower earnings for
equipment systems. Automotive's net income rose to $65 million from
$60 million, an increase of 8% compared with the same quarter last
year. Earnings were higher for turbochargers, truck brakes,
aftermarket Europe and braking systems. Engineered materials' net
income increased to $105 million from $87 million, an increase of
21% compared with the same quarter last year. Fibers, performance
materials, laminate systems, engineering plastics, environmental
catalysts and carbon materials had improved earnings. The income
contribution from joint ventures was also higher.
Net income in the 1995 second quarter of $227 million, or $0.80
a share, was higher than last year's net income of $196 million, or
$0.69 a share, for the reasons discussed above.
Six Months 1995 Compared with Six Months 1994
---------------------------------------------
Net sales in the first six months of 1995 totaled $7.0 billion,
an increase of $876 million, or 14%, compared with the first six
months of last year. Of this increase, $412 million was due to
higher sales volumes, $319 million reflects the consolidation of
recent acquisitions and the impact of dispositions, $117 million was
the result of favorable foreign exchange rate fluctuations in the
automotive segment and $28 million was due to higher prices in the
engineered materials segment. Automotive's sales increased $478
million, or 20%, engineered materials was $249 million, or 16%,
higher and aerospace had a $149 million, or 7%, gain.
Automotive benefited from growing sales of braking systems in
North America and Europe, strong worldwide sales of safety
restraints and turbochargers, higher aftermarket sales primarily in
Europe and expanded sales of medium and heavy truck brakes in North
America. Sales volumes were higher for most engineered materials
business units, including fibers, performance materials, laminate
systems, environmental catalysts, fluorine products, engineering
plastics and carbon materials. Aerospace's sales increased
reflecting the acquisition of the Lycoming turbine engine business
in October 1994 and continued strong demand for safety-related
avionics systems, such as windshear detection, ground proximity
warning and collision avoidance systems. This increase was somewhat
offset by lower sales to the government, where comparisons were
adversely affected by a one-time contract settlement in the first
quarter of 1994 and, in 1995, by delays in government electronics
systems' shipments.
Selling, general and administrative expenses as a percent of
net sales decreased from 10.7% in 1994 to 10.4% in 1995. Expenses
increased by $72 million, or 11%, reflecting in part the impact of
acquisitions.
Income from operations of $668 million increased by $98
million, or 17%, compared with last year's first six months. The
Company's operating margin for
- 9 -
the first six months of 1995 was 9.5%, compared with 9.2% for the same
period last year. Engineered materials' operating income improved by 20%,
automotive's by 17% and aerospace's by 16%. Operating expense for corporate
increased by $12 million. See the discussion of net income below for
information by segment.
Productivity (the constant dollar basis relationship of sales
to costs) of the Company's businesses improved by 5.4% compared with
last year's first six months.
Equity in income of affiliated companies of $85 million
increased by $25 million, or 42%, compared with last year, mainly
because of improved joint venture earnings for Paxon high-density
polyethylene, UOP process technology and Atlantic Research hybrid
inflator technology.
Other income (expense) of $(18) million was unfavorable by $2
million, or 13%, compared with last year's first six months, mainly
due to higher minority interest and foreign exchange hedging costs
and lower dividend and interest income, somewhat offset by the sale
of an investment.
Interest and other financial charges of $87 million increased
by $12 million, or 16%, from 1994's first six months, primarily
reflecting higher average interest rates.
The effective tax rate in the first six months of 1995 was
34.5% compared with 32.4% in 1994. The increase is primarily due to
growth in both domestic and foreign earnings that are subject to the
statutory rate.
Aerospace's net income improved to $128 million from $113
million, an increase of 13% compared with the same period last
year. Earnings increased for engines because of cost synergies
realized from the Lycoming acquisition and commercial avionics
systems due to continued strong demand for safety-related avionics
systems, but were lower on sales to the government. Automotive's
net income rose to $127 million from $106 million, an increase of
20% compared with the same six months of 1994. Net income was
higher for braking systems, turbochargers, truck braking systems,
aftermarket Europe and for filters and spark plugs. The Company
continues to benefit from strong AlliedSignal content on better
selling vehicles, including sport utility vehicles, minivans, the
Ford Taurus and F-150 pickup trucks as well as medium and heavy
trucks. Engineered materials' net income increased to $199 million
from $165 million, an increase of 21% compared with the same period
last year. Net income was higher for performance materials, fibers,
environmental catalysts, engineering plastics, laminate systems and
carbon materials. Income improved in the six month period due to
volume and price increases, partly offset by higher raw material
prices. There was also a substantial increase in net income from
joint ventures.
Net income in the first six months of 1995 of $425 million, or
$1.50 a share, was substantially higher than last year's net income
of $365 million, or $1.29 a share, for the reasons discussed above.
- 10 -
Financial Condition
-------------------
June 30, 1995 Compared with December 31, 1994
---------------------------------------------
On June 30, 1995 the Company had $575 million in cash and cash
equivalents, compared with $508 million at year-end 1994. The
current ratio at June 30, 1995 was 1.3X, compared with 1.4X at year-
end 1994.
On June 30, 1995 the Company's long-term debt amounted to
$1,304 million, $120 million lower than at year-end 1994. Total
debt of $2,009 million on June 30, 1995 was $322 million higher than
at year-end, mainly reflecting an increase in commercial paper outstanding.
The Company's total debt as a percent of capital increased from 34.1% at
year-end to 35.4% at June 30, 1995.
The Company entered into two new credit agreements (the "Five-
Year" and "364-Day" Credit Agreements) dated as of June 30, 1995,
with commitments aggregating $750 million. These agreements
replaced a $900 million aggregate arrangement and have terms similar
to the terms of the prior arrangement. The funds available under
the Five-Year and 364-Day Credit Agreements may be used for any
corporate purpose.
During the first six months of 1995, the Company made capital
expenditures of $320 million, compared with $255 million in the
corresponding period in 1994. Spending for the 1995 six month period
was as follows: aerospace-$63 million; automotive-$108 million;
engineered materials-$133 million, and corporate-$16 million. The
Company's total capital expenditures in 1995 are currently projected
at about $700 million.
During the first six months of 1995, the Company repurchased
2.4 million shares of common stock for $95 million. Common stock is
repurchased to meet the expected requirements for shares issued
under employee benefit plans and a shareowner dividend reinvestment
plan. At June 30, 1995, the Company was authorized to repurchase
11.2 million shares of common stock.
The Company intends to acquire three separate chemical
businesses costing approximately $380 million. The businesses
include a polyester fibers plant in Virginia, a nylon plastics and
fibers plant in Germany and a specialty chemicals plant also in
Germany. The Company also plans to invest about $100 million during
the next three years to expand and upgrade the nylon plastics and
fibers facility.
Review by Independent Accountants
---------------------------------
The "Independent Accountants' Report" included herein is not a
"report" or "part of a Registration Statement" prepared or certified
by an independent accountant within the meanings of Section 7 and 11
of the Securities Act of 1933, and the accountants' Section 11
liability does not extend to such report.
- 11 -
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed with this
Form 10-Q:
10.1 Five-Year Credit Agreement dated as of June 30,
1995 by and between AlliedSignal Inc., a Delaware
corporation, the banks, financial institutions and
other institutional lenders listed on the signature
pages thereof (the "Lenders"), Citibank, N.A., as
agent, and ABN Amro Bank N.V. and Morgan Guaranty
Trust Company of New York, as co-agents, for the
Lenders
10.2 364-Day Credit Agreement dated as of June 30, 1995
by and between AlliedSignal Inc., a Delaware
corporation, the banks, financial institutions and
other institutional lenders listed on the signature
pages thereof (the "Lenders"), Citibank, N.A., as
agent, and ABN Amro Bank N.V. and Morgan Guaranty Trust
Company of New York, as co-agents, for the Lenders
15 Independent Accountants' Acknowledgment Letter as to
the incorporation of their report relating to unaudited
interim financial statements
27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed by
the Company during the quarter ended June 30, 1995.
- 12 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AlliedSignal Inc.
August 9, 1995 By: /s/ G. Peter D'Aloia
----------------------
G. Peter D'Aloia
Vice President and Controller
(on behalf of the Registrant
and as the Registrant's
Principal Accounting Officer)
- 13 -
EXHIBIT INDEX
Exhibit Description
Number
2 Omitted (Inapplicable)
4 Omitted (Inapplicable)
10.1 Five-Year Credit Agreement
dated as of June 30, 1995 by
and between AlliedSignal
Inc., a Delaware
corporation, the banks,
financial institutions and
other institutional lenders
listed on the signature
pages thereof (the
"Lenders"), Citibank, N.A.,
as agent, and ABN Amro Bank
N.V. and Morgan Guaranty
Trust Company of New York,
as co-agents, for the
Lenders
10.2 364-Day Credit Agreement
dated as of June 30, 1995 by
and between AlliedSignal
Inc., a Delaware
corporation, the banks,
financial institutions and
other institutional lenders
listed on the signature
pages thereof (the
"Lenders"), Citibank, N.A.,
as agent, and ABN Amro Bank
N.V. and Morgan Guaranty
Trust Company of New York,
as co-agents, for the
Lenders
11 Omitted (Inapplicable)
15 Independent Accountants'
Acknowledgment Letter as to
the incorporation of their
report relating to unaudited
interim financial statements
18 Omitted (Inapplicable)
19 Omitted (Inapplicable)
22 Omitted (Inapplicable)
23 Omitted (Inapplicable)
24 Omitted (Inapplicable)
27 Financial Data Schedule
99 Omitted (Inapplicable)