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 September 30, 1996
------------------
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
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AlliedSignal Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2640650
------------------------------ ------------------
(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
--------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(201)455-2000
----------------------------------------------------
(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
-------- --------
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 September 30, 1996
- --------------------- ------------------
$1 par value 282,801,308 shares
AlliedSignal Inc.
Index
Page No.
Part I. - Financial Information
Item 1. Condensed Financial Statements:
Consolidated Balance Sheet -
September 30, 1996 and December 31, 1995 3
Consolidated Statement of Income -
Three and Nine Months Ended
September 30, 1996 and 1995 4
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 5
Notes to Financial Statements 6
Report on Review by Independent
Accountants 8
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 9
Part II.- Other Information
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
AlliedSignal Inc.
Consolidated Balance Sheet
(Unaudited)
September 30, December 31,
1996 1995
------------- ------------
(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,801 $ 540
Accounts and notes receivable - net
(Note 2) 1,725 1,751
Inventories - net (Note 3) 2,041 1,991
Other current assets 581 608
------- -------
Total current assets 6,148 4,890
Investments and long-term receivables 514 479
Property, plant and equipment 8,826 9,785
Accumulated depreciation and
amortization (4,729) (5,043)
Cost in excess of net assets of
acquired companies - net 1,383 1,572
Other assets 790 782
------- -------
Total assets $12,932 $12,465
======= =======
LIABILITIES
Current Liabilities:
Accounts payable $ 1,103 $ 1,385
Short-term borrowings 84 397
Commercial paper 722 58
Current maturities of long-term debt 98 189
Accrued liabilities 1,905 1,775
------- -------
Total current liabilities 3,912 3,804
Long-term debt 1,317 1,366
Deferred income taxes 595 551
Postretirement benefit obligations
other than pensions 1,798 1,864
Other liabilities 1,283 1,288
SHAREOWNERS' EQUITY
Capital - common stock issued 358 358
- additional paid-in capital 2,532 2,489
Common stock held in treasury, at cost (1,883) (1,658)
Cumulative translation adjustment 23 61
Unrealized holding gain on equity securities 23 27
Retained earnings 2,974 2,315
------- -------
Total shareowners' equity 4,027 3,592
------- -------
Total liabilities and shareowners' equity $12,932 $12,465
======= =======
Notes to Financial Statements are an integral part of this statement.
3
AlliedSignal Inc.
Consolidated Statement of Income
(Unaudited)
Three Months Nine Months
Ended September 30 Ended September 30
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
(Dollars in millions except
per share amounts)
Net sales $3,348 $3,499 $10,473 $10,548
------ ------ ------- -------
Cost of goods sold (Note 4) 2,598 2,800 8,845 8,449
Selling, general and
administrative expenses 379 369 1,146 1,101
Gain on sale of business
(Note 5) - - (655) -
------ ------ ------- -------
Total costs and expenses 2,977 3,169 9,336 9,550
------ ------ ------- -------
Income from operations 371 330 1,137 998
Equity in income of
affiliated companies 31 38 104 123
Other income (expense)
(Note 4) 26 (3) 59 (21)
Interest and other
financial charges (47) (43) (144) (130)
------ ------- ------- -------
Income before taxes on
income 381 322 1,156 970
Taxes on income 128 105 406 328
------ ------- ------- -------
Net income $ 253 $ 217 $ 750 $ 642
======= ======== ======= =======
Earnings per share of
common stock (Note 6) $ .90 $ .77 $ 2.65 $ 2.26
======= ======== ======= =======
Cash dividends per share
of common stock $.225 $ .195 $ .675 $ .585
======= ======== ======= =======
Notes to Financial Statements are an integral part of this statement.
4
AlliedSignal Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
September 30
-----------------
1996 1995
---- ----
(Dollars in millions)
Cash flows from operating activities:
Net income $ 750 $ 642
Adjustments to reconcile net income to net
cash flows from operating activities:
Gain on sale of business (655) -
Repositioning and other charges 622 -
Depreciation and amortization
(includes goodwill) 473 460
Undistributed earnings of equity affiliates (22) (32)
Deferred taxes 242 206
(Increase) in accounts and notes receivable (227) (29)
(Increase) in inventories (179) (226)
Decrease (increase) in other current assets 21 (20)
Increase (decrease) in accounts payable 26 (154)
(Decrease) in accrued liabilities (79) (177)
Taxes paid on gain on sale of business (121) -
Other (337) (207)
------ ------
Net cash flow provided by operating activities 514 463
------ ------
Cash flows from investing activities:
Expenditures for property, plant and equipment (497) (512)
Proceeds from disposals of property, plant and
equipment 64 26
Decrease in other investments - 26
(Increase) in other investments (6) (2)
Cash paid for acquisitions - net (59) (134)
Proceeds from sales of businesses 1,356 (9)
------- ------
Net cash flow provided by (used for)
investing activities 858 (605)
------- ------
Cash flows from financing activities:
Net increase in commercial paper 664 490
Net (decrease) in short-term borrowings (298) (46)
Proceeds from issuance of common stock 113 82
Proceeds from issuance of long-term debt 10 106
Payments of long-term debt (96) (120)
Repurchases of common stock (308) (170)
Cash dividends on common stock (196) (163)
------- ------
Net cash flow (used for) provided by
financing activities (111) 179
------- ------
Net increase in cash and cash equivalents 1,261 37
Cash and cash equivalents at beginning of year 540 508
------ ------
Cash and cash equivalents at end of period $1,801 $ 545
====== ======
Notes to Financial Statements are an integral part of this statement.
5
AlliedSignal Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in millions except per share amounts)
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
September 30, 1996 and the results of operations for the three and nine
months ended September 30, 1996 and 1995 and the changes in cash flows
for the nine months ended September 30, 1996 and 1995. The results of
operations for the three- and nine-month periods ended
September 30, 1996 should not necessarily be taken as indicative of the
results of operations that may be expected for the entire year 1996.
The financial information as of September 30, 1996 should be read in
conjunction with the financial statements contained in the Company's Form
10-K Annual Report for 1995.
Note 2. Accounts and notes receivable consist of the following:
September 30, December 31,
1996 1995
------------- ------------
Trade $1,308 $1,477
Other 448 308
------ ------
1,756 1,785
Less-Allowance for doubtful
accounts and refunds (31) (34)
------ ------
$1,725 $1,751
====== ======
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:
September 30, December 31,
1996 1995
------------- ------------
Raw materials $ 585 $ 650
Work in process 846 769
Finished products 806 747
Supplies and containers 83 98
------ ------
2,320 2,264
Less - Progress payments (155) (145)
Reduction to LIFO cost basis (124) (128)
------ ------
$2,041 $1,991
====== ======
Note 4. In the second quarter of 1996 the Company recorded a pretax
charge of $277 million relating to the costs of actions to reposition
some of its major business units. The repositioning actions are intended
to enhance the Company's competitiveness and productivity and include
consolidating production facilities, rationalizing manufacturing capacity
and optimizing operational capabilities. As a result, approximately
6,100 positions will be eliminated in some plants and
6
2,900 positions will be added in others, for a net reduction of 3,200
positions. The components of the repositioning charge include asset
write-downs of $136 million, severance costs of $127 million and other
exit costs of $14 million. All of the repositioning actions are expected
to be completed by 1998. In the third quarter of 1996 cash expenditures
for repositioning actions were approximately $5 million, primarily for
severance costs.
In the second quarter of 1996 the Company adopted the provisions of the
American Institute of Certified Public Accountants' Statement of Position
96-1 (SOP 96-1), "Environmental Remediation Liabilities". SOP 96-1
provides additional guidance regarding the manner in which existing
authoritative accounting literature is to be applied to the specific
circumstances of recognizing, measuring and disclosing environmental
remediation liabilities. The adoption of SOP 96-1 resulted in a pretax
charge of $175 million, and is accounted for as a change in estimate.
The Company also recorded other charges primarily related to changes made
in employee benefit programs and in connection with customer and former
employee claims.
Repositioning and other charges totaling $637 million are included as
part of cost of goods sold in the Consolidated Statement of Income for
the nine months ended September 30, 1996. Other income (expense) in the
Consolidated Statement of Income for the nine months ended September 30,
1996 includes a $15 million credit for repositioning and other charges
representing the minority interest share of such charges. The total
pretax impact of the repositioning and other charges for the nine months
ended September 30, 1996 is $622 million (after-tax $359 million, or
$1.27 a share).
Note 5. In April 1996 the Company sold its worldwide hydraulic and anti-
lock braking systems (ABS) businesses (braking business) to Robert Bosch
GmbH, a privately-held German company. The braking business had 1995
sales and income from operations of approximately $2.0 billion and $154
million, respectively. The Company received consideration of $1.5
billion, subject to certain post-closing adjustments. The sale of the
braking business resulted in a gain of $655 million (after-tax $368
million, or $1.30 a share).
Note 6. Based on the weighted average number of shares outstanding
during each period, as follows: three months ended September 30, 1996,
282,850,853 shares, and 1995, 283,105,329 shares; and nine months ended
September 30, 1996, 282,823,767 shares and 1995, 283,603,226 shares. No
dilution results from outstanding common stock equivalents.
7
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 September 30, 1996, and the
consolidated statements of income for the three-month and nine-month
periods ended September 30, 1996 and 1995, and of cash flows for the nine-
month periods ended September 30, 1996 and 1995. 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,
1995, 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, 1996 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, 1995, 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
October 23, 1996
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
---------------------
Third Quarter 1996 Compared with Third Quarter 1995
- ---------------------------------------------------
Net sales in the third quarter of 1996 totaled $3.3 billion, a
decrease of $151 million, or 4%, compared with the third quarter of last
year. Sales were lower reflecting the sale of the Company's braking
business in April 1996. (See Note 5 of Notes to Financial Statements for
further information.) Excluding the divested braking business, net sales
increased $293 million or 10%. Of this increase, $237 million was due to
higher sales volume and $113 million resulted from the consolidation of
recent acquisitions, offset, in part, by a $26 million reduction for
disposed businesses. Selling prices and the impact of foreign exchange
were slightly unfavorable.
Aerospace sales of $1,450 million in the third quarter of 1996
increased $161 million, or 12%, compared with the third quarter of last
year. Substantially higher Engine sales reflected continued strength of
the commercial and military aftermarket and repair and overhaul as well
as increased sales of propulsion engines to the commercial and military
markets. Equipment Systems showed moderate sales growth across most
product lines, especially environmental control systems and landing
systems. Sales volume was strong to original equipment manufacturers and
to the military aftermarket. Government services had substantial sales
gains. Electronic Systems had moderate improvement reflecting the
acquisition of Northrop Grumman's precision products business in January
1996. Commercial Avionics Systems had moderately lower sales reflecting
the completed installation last year of mandated traffic alert and
collision avoidance systems (TCAS) on general aviation aircraft and
production problems, resolved by the end of the third quarter, which
delayed the introduction of new products.
Automotive sales of $891 million in the third quarter of 1996 were
$401 million, or 31%, lower compared with the third quarter of 1995
reflecting the disposition of the Company's braking business in April
1996. Excluding the divested braking business, Automotive's sales
improved by $43 million, or 5%. Safety Restraints had substantially
higher sales volumes of seat belts and airbags in Europe, in part
reflecting production from the Company's new airbag plant in Italy.
Turbocharger sales were also substantially higher, reflecting the
continued popularity of turbodiesel-powered cars in Europe and added
capacity at two of the Company's plants. Friction Materials and Filters
and Spark Plugs sales also improved reflecting strength in the original
equipment market. Sales of Truck Brake Systems declined as increased
aftermarket sales and market share gains were offset by the effect of a
decline in medium- and heavy-duty truck production. North American and
European aftermarket sales were both lower due to soft market conditions.
Engineered Materials sales of $1,005 million in the third quarter of
1996 were $87 million, or 9%, higher compared with the third quarter of
last year. Specialty Chemicals sales increased primarily reflecting the
acquisition of Riedel-de Haen in October 1995. The Polymers business had
higher sales reflecting strong demand for carpet fibers, the acquisitions of
9
Bridgestone/Firestone's industrial polyester fiber plant in Hopewell,
Virginia and a nylon plastics and industrial fibers plant in Rudolstadt,
Germany in the fourth quarter of 1995 and higher sales of plastics.
Sales substantially improved for Environmental Catalysts and Carbon
Materials. Sales for Electronic Materials were significantly lower due
to softness in the printed circuit board industry.
Cost of goods sold, as a percent of sales, decreased from 80.0% in
the third quarter of 1995 to 77.6% in the third quarter of 1996, mainly
due to the sale of the high-cost braking systems business and lower
manufacturing and material costs.
Income from operations of $371 million in the third quarter of 1996
increased $41 million, or 12%, compared with last year's third quarter.
Aerospace's income from operations increased 18% and Engineered Materials
improved 5%, while Automotive's income from operations was the same as
last year. The Company's operating margin for the third quarter of 1996
was 11.1% compared with 9.4% for the same period last year. 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 6.0% compared with the
third quarter of 1995.
Equity in income of affiliated companies of $31 million decreased $7
million, or 18%, mainly due to the Company's exit from its high-density
polyethylene (HDPE) joint venture in December 1995 and lower earnings
from Knorr-Bremse AG's European truck brake systems joint venture. A
partial offset was higher earnings from the Company's UOP process
technology joint venture.
Other income (expense), $26 million income in the third quarter of
1996, improved by $29 million compared with the same quarter last year
due to higher interest income, reflected in the Corporate and Unallocated
segment, primarily from the investment of cash received from the sale of
the braking business and lower minority interest expense.
Interest and other financial charges of $47 million increased by $4
million, or 9%, compared to the same quarter last year due to higher
levels of short-term debt.
Net income of $253 million, or $0.90 a share, in the third quarter
of 1996 was 17% higher than last year's net income of $217 million, or
$0.77 a share.
Aerospace net income improved to $98 million from $81 million, an
increase of $17 million, or 21%, compared with the same quarter last
year. Strong sales growth and productivity improvements resulted in
substantially higher earnings for the Equipment Systems and Engines
businesses. Government Services and Electronic Systems also had income
gains. Commercial Avionics Systems had substantially lower earnings,
primarily reflecting lower sales and production difficulties which were
resolved by the end of the third quarter.
Automotive net income declined to $40 million from $45 million in
the prior year, a $5 million, or 11%, decrease. The decrease reflects
the absence of net income from the disposed braking systems business.
However, income was higher
10
for Friction Materials, Turbochargers, Safety Restraints and Filters
and Spark Plugs mainly reflecting productivity initiatives. North
American Aftermarket net income was also higher because of lower
distribution costs. Truck Brake Systems, mainly in Europe, and European
Aftermarket had slightly lower earnings, reflecting the impact of weak
economic conditions.
Engineered Materials net income increased to $102 million from $100
million, a $2 million, or 2%, increase. Income improved due to
substantially higher earnings for Specialty Chemicals, reflecting higher
sales and a strong contribution from the UOP joint venture which
benefited from exceptionally strong sales of catalyst products. Net
income was also higher for Polymers reflecting volume strength for carpet
fibers and lower raw material costs for industrial fibers. A partial
offset was the absence of earnings from the HDPE joint venture and lower
income from Electronic Materials and Environmental Catalysts.
Nine Months 1996 Compared with Nine Months 1995
- -----------------------------------------------
Net sales in the first nine months of 1996 totaled $10.5 billion, a
decrease of $75 million, or 1%, compared with the first nine months of
last year. Sales were lower reflecting the sale of the Company's braking
business in April 1996. (See Note 5 of Notes to Financial Statements for
further information.) Excluding the divested braking business, net sales
increased $839 million, or 9%. Of this increase, $510 million was due to
higher sales volume and $455 million resulted from the consolidation of
recent acquisitions, offset, in part, by a $91 million reduction for
disposed businesses. Selling prices and the impact of foreign exchange
were slightly unfavorable.
Aerospace sales of $4,120 million in the first nine months of 1996
increased $465 million, or 13%, compared with the first nine months of
1995. Engines had significantly higher sales of aftermarket parts,
increased repair and overhaul activity and strong shipments of propulsion
engines. Equipment Systems showed strong sales growth with gains across
most product lines, especially engine systems and accessories,
environmental control systems and landing systems, driven by commercial
and military aftermarket strength and higher sales to original equipment
manufacturers. The acquisition of a majority interest in a European
supplier of aircraft heat exchange equipment, in July 1995, also
contributed to Equipment Systems' higher sales. Sales for Electronic
Systems also increased reflecting the acquisition of the precision
products business in January 1996 and the improvement in output for
certain programs. Government Services also improved, but Commercial
Avionics Systems' sales were moderately lower reflecting the completed
installation last year of mandated TCAS on general aviation aircraft and
production problems, resolved by the end of the third quarter, which
delayed the introduction of new products.
Automotive sales of $3,322 million in the first nine months of 1996
had a $833 million, or 20%, decrease compared with the first nine months
of last year. Excluding the divested braking business, Automotive's
sales increased $81 million, or 3%. Safety Restraints and Turbochargers
had significantly higher sales volumes in Europe, although turbocharger
sales were lower in Japan and North America. European Aftermarket and
Friction Materials sales in Europe were impacted by weak economic
conditions and sales of North American Truck Brake Systems were lower
primarily because of decreasing medium- and heavy-duty truck build
volume. Friction Materials and Safety Restraints in North America and
Filters and Spark Plugs had higher sales.
11
Engineered Materials sales of $3,027 million in the first nine
months of 1996 were $289 million, or 11%, higher compared with the first
nine months of 1995. Specialty Chemicals sales increased mainly
reflecting the acquisition of Riedel-de Haen in October 1995. The
Polymers business had higher sales of industrial fibers and engineering
plastics products primarily due to acquisitions in the fourth quarter of
1995. Sales also improved for Environmental Catalysts and Carbon
Materials. Sales for Electronic Materials were moderately lower due to
softness in the printed circuit board industry.
Cost of goods sold, as a percent of sales, increased from 80.1% in
the first nine months of 1995 to 84.4% in the first nine months of 1996
as the current period includes repositioning and other charges totaling
$637 million. (See Note 4 of Notes to Financial Statements for further
information.) Excluding repositioning and other charges, cost of goods
sold, as a percent of sales, was 78.4% for the first nine months of 1996.
Gain on sale of business represents the pretax gain of $655 million
on the sale of the braking business in April 1996. (See Note 5 of Notes
to Financial Statements for further information.)
Income from operations of $1,137 million in the first nine months of
1996 increased $139 million, or 14%, compared with last year's first nine
months. The current period includes the pretax gain of $655 million on
the sale of the braking business and repositioning and other charges
totaling $637 million (special items). Excluding the impact of these
special items, Aerospace's income from operations increased 19% and
Engineered Materials improved 13%, but Automotive's income from
operations decreased 10%. The Company's operating margin, adjusted for
special items, for the first nine months of 1996 was 10.7% compared with
9.5% for the same period last year. See the discussion of net income
below for information by segment.
Productivity of the Company's businesses improved by 5.5% compared
with last year's first nine months.
Equity in income of affiliated companies of $104 million decreased
by $19 million, or 15%, compared with last year mainly because the
Company exited from its HDPE joint venture in December 1995 and because
of lower earnings from Knorr-Bremse AG's European truck brake systems
joint venture. A partial offset was higher earnings from the UOP joint
venture.
Other income (expense), $59 million income in the nine months of
1996, improved by $80 million compared with the same period last year
mainly due to increased interest income, included in the Corporate and
Unallocated segment, primarily reflecting the investment of cash received
from the sale of the braking business, higher foreign exchange costs in
the same period last year and the minority interest share of the
repositioning and other charges. This was partially offset by the
absence of a 1995 gain from the sale of an investment.
Interest and other financial charges of $144 million in the first
nine months of 1996 increased by $14 million, or 11%, compared with the
same period last year due to higher levels of short-term debt.
12
The effective tax rate in the first nine months of 1996 was 35.1%
compared with 33.9% in 1995. The increase is principally due to a higher
tax rate on the gain from the sale of the braking systems business.
Net income of $750 million, or $2.65 a share, in the first nine
months of 1996 was 17% higher than last year's net income of $642
million, or $2.26 a share. Adjusted for special items, net income for the
first nine months of 1996 was $741 million, or $2.62 a share, increases
of 15% and 16%, respectively, over the prior year. A discussion of the
operations of the business segments follows. Adjusted net income (see
table below) for the segments excludes the impact of the special items.
(Dollars in millions.)
Nine Months Ended September 30
-------------------------------------------
Net Income Special Items Adjusted
as Reported (Gains)/Losses Net Income
----------- -------------- ----------
Aerospace
1996 $ 80 $ 179 $ 259
1995 209 - 209
------- ------- -------
Increase/(Decrease) $ (129) $ 179 $ 50
======= ======= =======
Automotive
1996 $ 481 $ (319) $ 162
1995 172 - 172
------ -------- -------
Increase/(Decrease) $ 309 $ (319) $ (10)
====== ======== =======
Engineered Materials
1996 $ 258 $ 71 $ 329
1995 299 - 299
------- ------- -------
Increase/(Decrease) $ (41) $ 71 $ 30
======= ======= =======
Aerospace adjusted net income improved to $259 million from $209
million, an increase of $50 million, or 24%, compared with the same
period last year. Strong sales growth and improvements in productivity
resulted in substantially higher earnings for Equipment Systems and a
significant increase for the Engines business. Electronic Systems and
Government Services also improved, but Commercial Avionics Systems had
substantially reduced earnings due to lower sales and production
problems, resolved by the end of the third quarter, which delayed the
introduction of new products.
Automotive adjusted net income decreased to $162 million from $172
million a year ago, a $10 million, or 6%, decrease. The decrease
reflects the absence of net income from the disposed braking systems
business. Partial offsets were higher income for Safety Restraints,
North American Aftermarket, Turbochargers, Filters and Spark Plugs and
Friction Materials.
Engineered Materials adjusted net income increased to $329 million
from $299 million, a $30 million, or 10%, increase. The increase
reflects substantially higher earnings from Specialty Chemicals. Net
income was also higher for the Polymers business, mainly reflecting
improvements for industrial and carpet fibers, and Electronic Materials,
with income gains for
13
microelectronic materials. Fluorine Products was also favorable.
A partial offset was the absence of earnings from the HDPE joint
venture and lower income for Environmental Catalysts.
Financial Condition
-------------------
September 30, 1996 Compared with December 31, 1995
- --------------------------------------------------
On September 30, 1996 the Company had $1,801 million in cash and
cash equivalents, compared with $540 million at year-end 1995. The
substantial increase primarily reflects the cash consideration received
from the sale of the braking business. It is expected that the proceeds
will ultimately be used to grow the Company's higher-margin businesses
and to pursue acquisitions that will expand or complement the Company's
business portfolio. The current ratio at September 30, 1996 was 1.6X
compared with 1.3X at year-end 1995.
The Company's long-term debt on September 30, 1996 was $1,317
million, a reduction of $49 million compared with year-end 1995. Total
debt of $2,221 million on September 30, 1996 was $211 million higher than
at year-end, reflecting an increase in outstanding commercial paper. The
Company's total debt as a percent of capital decreased slightly from
33.7% at year-end 1995 to 33.2% at September 30, 1996.
During the first nine months of 1996, the Company made capital
expenditures of $497 million, compared with $512 million in the
corresponding period in 1995. Spending for the nine month period was as
follows: aerospace-$77 million, automotive-$156 million, engineered
materials-$225 million and corporate-$39 million.
During the first nine months of 1996, the Company repurchased 5.6
million shares of common stock for $319 million. Common stock is
repurchased to meet the expected requirements for shares issued under
employee benefit plans and a shareowner dividend reinvestment plan. At
September 30, 1996 the Company was authorized to repurchase 2.5 million
shares of common stock.
During the second quarter of 1996, the Company recorded a
repositioning provision of $277 million which included $136 million in
non-cash charges related to asset write-downs and $141 million of charges
to be settled in cash, primarily related to severance costs. All of the
repositioning actions are expected to be completed by 1998 and will not
materially impact the Company's liquidity. Upon completion, the
repositioning actions are expected to generate additional annual income
from operations of approximately $200 million.
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.
14
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:
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 September 30, 1996.
15
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.
November 7, 1996 By: /s/ Nancy A. Garvey
-----------------------
Nancy A. Garvey
Vice President and Controller
(on behalf of the Registrant
and as the Registrant's
Principal Accounting Officer)
16
EXHIBIT INDEX
Exhibit Number Description
2 Omitted (Inapplicable)
4 Omitted (Inapplicable)
10 Omitted (Inapplicable)
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)