UNITED STATES
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 March 31, 1999
______________
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.
_________________________________________________________________________
(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)
(973)455-2000
_____________________________________________________
(Registrant's telephone number, including area code)
NOT APPLICABLE
_____________________________________________________
(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 April 30, 1999
_______________________ ____________________
$1 par value 552,688,266 shares
AlliedSignal Inc.
Index
______
Part I. - Financial Information Page No.
__________
Item 1. Condensed Financial Statements:
Consolidated Balance Sheet -
March 31, 1999 and December 31, 1998 3
Consolidated Statement of Income -
Three Months Ended March 31, 1999 and 1998 4
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1999 and 1998 5
Notes to Financial Statements 6
Report on Review by Independent
Accountants 9
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 15
Part II.- Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
2
AlliedSignal Inc.
Consolidated Balance Sheet
(Unaudited)
March 31, December 31,
1999 1998
__________ _____________
(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents $ 795 $ 712
Accounts and notes receivable 1,817 1,993
Inventories 2,344 2,332
Other current assets 561 556
______ _____
Total current assets 5,517 5,593
Investments and long-term receivables 1,509 1,488
Property, plant and equipment 9,262 9,358
Accumulated depreciation and
amortization (4,969) (4,961)
Cost in excess of net assets of
acquired companies - net 2,975 2,999
Other assets 1,086 1,083
_______ _______
Total assets $15,380 $15,560
======= =======
LIABILITIES
Current Liabilities:
Accounts payable $ 1,328 $ 1,423
Short-term borrowings 70 80
Commercial paper 1,962 1,773
Current maturities of long-term debt 88 158
Accrued liabilities 1,636 1,751
_______ ______
Total current liabilities 5,084 5,185
Long-term debt 1,457 1,476
Deferred income taxes 806 795
Postretirement benefit obligations
other than pensions 1,722 1,732
Other liabilities 1,014 1,075
SHAREOWNERS' EQUITY
Capital - common stock issued 716 716
- additional paid-in capital 3,109 2,982
Common stock held in treasury, at cost (3,714) (3,413)
Accumulated other nonowner changes (136) (70)
Retained earnings 5,322 5,082
______ _______
Total shareowners' equity 5,297 5,297
______ _______
Total liabilities and shareowners'equity $15,380 $15,560
======= =======
Notes to Financial Statements are an integral part of this statement.
3
AlliedSignal Inc.
Consolidated Statement of Income
(Unaudited)
<CAPTION
Three Months Ended
March 31,
__________
1999 1998
____ ____
(Dollars in millions except
per share amounts)
Net sales $3,596 $3,646
______ _______
Cost of goods sold 2,709 2,809
Selling, general and
administrative expenses 381 398
______ _______
Total costs and expenses 3,090 3,207
______ _______
Income from operations 506 439
Equity in income of affiliated companies 12 34
Other income (expense) 15 (1)
Interest and other financial charges (44) (34)
_______ ________
Income before taxes on income 489 438
Taxes on income 154 138
_______ _______
Net income $ 335 $ 300
======= ========
Earnings per share of common
stock - basic $ .60 $ .53
======= ========
Earnings per share of common stock -
assuming dilution $ .59 $ .52
======= ========
Cash dividends per share of
common stock $ .17 $ .15
====== ========
Notes to Financial Statements are an integral part of this statement.
4
AlliedSignal Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
__________
1999 1998
____ ____
(Dollars in millions)
Cash flows from operating activities:
Net income $ 335 $ 300
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 144 153
Undistributed earnings of equity affiliates (3) (5)
Deferred income taxes 43 (22)
Decrease (increase) in accounts and notes receivable 65 (41)
(Increase) in inventories (29) (86)
(Increase) decrease in other current assets (8) 27
(Decrease) in accounts payable (78) (34)
(Decrease) in accrued liabilities (62) (52)
Net taxes paid on sales of businesses - (153)
Other (8) (1)
_____ _____
Net cash provided by operating activities 399 86
_____ _____
Cash flows from investing activities:
Expenditures for property, plant and equipment (112) (124)
Proceeds from disposals of property, plant and
equipment 30 33
(Increase) in investments (3) (1)
Cash paid for acquisitions (7) (38)
Proceeds from sales of businesses 68 144
Decrease in short-term investments - 376
____ ____
Net cash (used for) provided by investing activities (24) 390
_____ _____
Cash flows from financing activities:
Net increase (decrease) in commercial paper 189 (595)
Net (decrease) in short-term borrowings (9) (7)
Proceeds from issuance of common stock 103 46
Proceeds from issuance of long-term debt - 408
Payments of long-term debt (92) (73)
Repurchases of common stock (388) (298)
Cash dividends on common stock (95) (85)
_____ _____
Net cash (used for) financing activities (292) (604)
_____ _____
Net increase (decrease) in cash and cash equivalents 83 (128)
Cash and cash equivalents at beginning of year 712 611
____ _____
Cash and cash equivalents at end of period $ 795 $483
======= ======
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 March 31, 1999 and the results
of operations and cash flows for the three months ended March
31, 1999 and 1998. The results of operations for the three-
month period ended March 31, 1999 should not necessarily be
taken as indicative of the results of operations that may be
expected for the entire year 1999.
The financial information as of March 31, 1999 should be read in
conjunction with the financial statements contained in
AlliedSignal's Form 10-K Annual Report for 1998.
Note 2. Accounts and notes receivable consist of the following:
March 31, December 31,
1999 1998
_________ __________
Trade $1,505 $1,554
Other 348 476
______ ______
1,853 2,030
Less-Allowance for doubtful
accounts and refunds (36) (37)
_______ _______
$1,817 $1,993
======= =======
Note 3. Inventories consist of the following:
<CAPTION March 31, December 31,
1999 1998
_____ _____
Raw materials $ 624 $ 568
Work in process 637 655
Finished products 1,137 1,174
Supplies and containers 91 96
_____ _____
2,489 2,493
Less - Progress payments (42) (54)
Reduction to LIFO cost basis (103) (107)
_______ _______
$2,344 $2,332
====== ======
Note 4. Total nonowner changes in shareowners' equity for the three months
ended March 31, 1999 and 1998 were $269 and $258 million, respectively,
which principally represent net income and foreign currency translation
adjustments.
6
Note 5. Segment financial data follows:
Three Months Ended March 31,
__________________________________________
Net Sales Income from Operations
_________________ ______________________
1999 1998 1999 1998
____ ____ ____ ____
Aerospace Systems $ 1,150 $ 1,130 $205 $195
Specialty Chemicals &
Electronic Solutions 528 598 85 99
Turbine Technologies 863 820 134 88
Performance Polymers 455 527 64 73
Transportation Products 593 546(a) 43 16 (a)
Corporate & Unallocated 7 25(a) (25) (32)(a)
_________ __________ ________ _________
Total $ 3,596 $ 3,646 $506 $439
======= ======== ======= =========
(a) Reclassified to conform with 1999 presentation. Net sales
and income from operations related to residual contracts of the divested
Safety Restraints business are now reported in Corporate & Unallocated.
Note 6. The details of the earnings per share calculations for
the three-month periods ending March 31, 1999 and 1998 follow:
Average Per Share
Income Shares Amount
______ _______ _________
1999
_____
Earnings per share of common
stock - basic $335 556.6 $.60
Dilutive securities:
Stock options 10.6
Restricted stock units .3
____ _____ _____
Earnings per share of common
stock - assuming dilution $335 567.5 $.59
==== ===== ====
1998
____
Earnings per share of common
stock - basic $300 564.3 $.53
Dilutive securities:
Stock options 13.4
Restricted stock units .7
____ ____ ____
Earnings per share of common
stock - assuming dilution $300 578.4 $.52
==== ====== =====
The diluted earnings per share calculation excludes the effect
of stock options when the options' exercise prices exceed the
average market price of the common shares during the period.
For the three-month periods ended March 31, 1999 and 1998, the
number of stock options not included in the computations were
1.9 million and 1.2 million, respectively.
7
Note 7. Subsequent Event
In April 1999, AlliedSignal reached an agreement with Tyco
International Ltd. (Tyco) and AMP Incorporated (AMP), settling
AMP's claim to the gain AlliedSignal realizes on the disposition
of its investment in AMP common stock. AlliedSignal made a
payment to AMP of $50 million, and the parties released all
claims that they had against each other relating to AMP.
Subsequently, AlliedSignal converted its investment in AMP
common stock into Tyco common stock and sold the Tyco common
stock for net cash proceeds of $1.2 billion resulting in a pre-
tax gain of $268 million, net of the settlement payment. These
transactions were recorded in April 1999.
8
Report on Review by Independent Accountants
______________________________________________
To the Shareowners and Directors
of AlliedSignal Inc.
We have reviewed the accompanying consolidated balance sheet of
AlliedSignal Inc. and its subsidiaries as of March 31, 1999, and
the consolidated statements of income and of cash flows for the
three-month periods ended March 31, 1999 and 1998. 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, 1998, and the related consolidated statements of
income, of shareowners' equity and of cash flows for the year
then ended (not presented herein), and in our report dated
February 1, 1999 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, 1998, is fairly stated, in
all material respects, in relation to the consolidated
balance sheet from which it has been derived.
PricewaterhouseCoopers LLP
Florham Park, NJ 07932
May 13, 1999
9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
_________________________________________________
A. Results of Operations - First Quarter 1999 Compared with
First Quarter 1998
____________________________________________________________
Net sales in the first quarter of 1999 were $3,596 million, a
decrease of $50 million, or 1%, compared with the first quarter
of 1998. The decrease resulted from divested businesses of $171
million and lower selling prices of $50 million. Higher sales
resulting from acquisitions of $95 million, volume gains of $74
million and $2 million from the impact of foreign exchange were
a partial offset.
Cost of goods sold as a percent of net sales was 75.3% in the
first quarter of 1999 compared with 77.1% in the first quarter
of 1998. The decrease in the first quarter of 1999 in cost of
goods sold as a percent of net sales principally reflects
results of AlliedSignal's Six Sigma programs to improve
productivity and lower manufacturing and material costs.
Income from operations of $506 million in the first quarter
of 1999 increased by $67 million, or 15%, compared with the
first quarter of 1998. AlliedSignal's operating margin for the
first quarter of 1999 was 14.1%, compared with 12.0% for the
first quarter of 1998. Income from operations is discussed in
detail by segment in the Review of Business Segments section
below.
Equity in income of affiliated companies of $12 million in
the first quarter of 1999 was $22 million, or 65%, lower
compared with the first quarter of 1998, mainly due to decreased
earnings from the UOP process technology joint venture (UOP).
Results for UOP were adversely affected by continued softness in
the petrochemical industry and an unusually low level of royalty
income in the current quarter.
Other income (expense), $15 million income in the first
quarter of 1999, increased by $16 million, compared with the
first quarter of 1998. The increase principally reflects a
favorable impact of foreign exchange hedging and higher
investment income.
Interest and other financial charges of $44 million in the
first quarter of 1999 increased by $10 million, or 29%, compared
with the first quarter of 1998. The increase reflects higher
levels of debt due to the investment in AMP Incorporated,
partially offset by lower interest rates and tax interest
expense.
The effective tax rate was 31.5% for both the first quarter
of 1999 and 1998.
Net income of $335 million, or $0.59 per share, in the first
quarter of 1999 was 12% higher than the prior year's first
quarter net income of $300 million, or $0.52 per share. The
higher net income in the first quarter of 1999 was the result of
improved earnings for Turbine Technologies, Transportation
Products and Aerospace Systems. Specialty Chemicals &
Electronic Solutions and Performance Polymers had lower
earnings.
10
Review of Business Segments
___________________________
Aerospace Systems sales of $1,150 million in the first
quarter of 1999 increased by $20 million, or 2%, compared with
the first quarter of 1998. The increase reflects higher
aftermarket sales, continued strong sales of flight safety
products and the acquisition of a controlling interest in the
Normalair-Garrett Ltd. (NGL) environmental controls joint
venture in June 1998. The increase was partially offset by the
adverse impact on sales resulting from a change from prime
contractor to sub-contractor on a government technical services
contract and the prior year divestiture of the communications
business.
Aerospace Systems income from operations of $205 million in
the first quarter of 1999 increased by $10 million, or 5%,
compared with the first quarter of 1998 due principally to
increased sales of higher margin aftermarket and flight safety
products and the acquisition of NGL.
Specialty Chemicals & Electronic Solutions sales of $528
million in the first quarter of 1999 were $70 million, or 12%,
lower compared with the comparable quarter of 1998. The
decrease resulted principally from the divestitures of the
environmental catalyst and European laminates businesses in 1998
and lower sales for laminates due to continued weakness in the
electronics industry. Higher sales of pharmaceutical
intermediates due mainly to the prior year acquisition of
Pharmaceutical Fine Chemicals S. A. were a partial offset.
Specialty Chemicals & Electronic Solutions income from
operations of $85 million in the first quarter of 1999 decreased
by $14 million, or 14%, compared with the first quarter of 1998.
The decrease resulted primarily from the negative impact of
pricing pressures, particularly in the laminates business, and
higher expenses associated with the development of new products
for the pharmaceutical and electronics end-markets. An improved
cost structure, including lower raw material costs, was a
partial offset.
Turbine Technologies sales of $863 million in the first
quarter of 1999 were $43 million, or 5%, higher compared with
the first quarter of 1998. Sales of turbochargers increased
significantly driven by a substantial increase in European sales
due to the turbodiesel's increased penetration of the passenger
car market. Sales for aircraft engines increased slightly due to
higher repair and overhaul sales and increased shipments of
auxiliary power units and propulsion engines to the business
aviation market. Lower original equipment sales of propulsion
engines to the military were a partial offset.
Turbine Technologies income from operations of $134 million
in the first quarter of 1999 increased by $46 million, or 52%,
compared with the first quarter of 1998 driven by higher sales,
improved cost structure and the redeployment of assets to
support development of the turbogenerator and AS900 engine.
Performance Polymers sales of $455 million in the first
quarter of 1999 were $72 million, or 14%, lower compared with
the same period in the prior year. The decrease primarily
reflects the loss of sales resulting from the divestiture of the
phenol business and the exiting of the European carpet fibers
business in 1998. Sales increases for specialty films and
engineering plastics were a partial offset.
Performance Polymers income from operations of $64 million
in the first quarter of 1999 was lower by $9 million, or 12%,
compared with the same period in the prior year. The decrease
reflects weak demand for textile nylon, pricing pressures in
industrial fibers and prior year divestitures. The decrease was
11
partially offset by the benefits of volume increases in
engineering plastics and specialty films, improved cost
structures across the nylon businesses, lower raw material costs
and Six Sigma initiatives, principally at the caprolactam
facility.
Transportation Products sales of $593 million in the first
quarter of 1999 increased by $47 million, or 9%, compared with
the first quarter of 1998. Sales of Prestone car care products
improved substantially due to strong demand for winter related
products. Sales of Fram filters increased significantly,
benefiting from a positive response to increased advertising and
market support for the brand. Truck Brake Systems sales also
improved significantly driven by strong truck builds and
mandated installations of antilock brake systems.
Transportation Products income from operations of $43
million in the first quarter of 1999 improved by $27 million
compared with the first quarter of 1998. The increase
principally reflects strong volume gains for Prestone car care
products, Fram filters and truck brake systems and a reduced
cost structure for these businesses.
B. Financial Condition, Liquidity and Capital Resources
________________________________________________________
Total assets at March 31, 1999 were $15,380 million, a
decrease of $180 million, or 1%, from December 31, 1998.
Cash provided by operating activities of $399 million during
the first quarter of 1999 increased by $313 million compared
with the first quarter of 1998. The increase was due to the
absence in the current quarter of taxes paid on sales of
businesses, improved working capital utilization and higher net
income.
Cash used for investing activities was $24 million during the
first quarter of 1999 compared with cash provided by investing
activities of $390 million during the first quarter of 1998. The
decrease of $414 million in cash flows from investing activities
was due principally to the liquidation in the prior year of
short-term investments of $376 million to fund acquisitions and
repurchases of AlliedSignal's common stock.
AlliedSignal continuously assesses the relative strength
of each business in its portfolio as to strategic fit, market
position and profit contribution in order to upgrade its
combined portfolio and identify operating units that will most
benefit from increased investment. AlliedSignal identifies
acquisition candidates that will further its strategic plan and
strengthen its existing core businesses. AlliedSignal also
identifies operating units that do not fit into its long-term
strategic plan based on their market position, relative
profitability or growth potential. These operating units are
considered for potential divestiture, restructuring or other
repositioning action. During the first
quarter of 1999, AlliedSignal sold certain non-strategic
businesses and other assets.
Cash used for financing activities was $292 million during
the first quarter of 1999 compared with $604 million during the
comparable period in the prior year. The decrease of $312
million in cash used for financing activities relates to an
increase of $355 million in net proceeds from debt partially
offset by an increase of $33 million in net stock repurchases.
AlliedSignal's long-term debt on March 31, 1999 was $1,457
million, a decrease of $19 million, or 1%, compared with year-
end 1998. Total debt of $3,577 million at March 31, 1999 was
$90 million, or 3%, higher than at December 31, 1998. AlliedSignal's
total debt
12
as a percent of capital at March 31,
1999 was 37.3%, compared with 36.7% at year-end 1998.
During the first three months of 1999, AlliedSignal
repurchased 8.2 million shares of common stock for $353 million
in connection with its stock repurchase programs. At March 31,
1999, AlliedSignal was authorized to repurchase 49.4 million
additional shares of its common stock under these programs.
In April 1999, AlliedSignal announced that it has realigned
its Aerospace business to strengthen its market and customer
focus, making it easier for customers to benefit from a wide
variety of integrated products and services. The new
organization will drive increased efficiencies through better
use of resources, optimized supply chain management and
elimination of redundant costs. Management is currently
formulating a detailed plan to effect these and other actions.
These actions will result in a charge against second quarter
earnings.
C. Other Matters
--------------
Year 2000
---------
Computer programs and embedded computer chips that are not
Year 2000 compliant are unable to distinguish between the
calendar year 1900 and the calendar year 2000. AlliedSignal
recognizes the need to ensure that its business operations will
not be adversely affected by the upcoming calendar year 2000 and
is cognizant of the time sensitive nature of the Year 2000
problem.
We have assessed how our businesses may be impacted by the Year
2000 problem and have implemented a comprehensive plan to
address all known aspects of the Year 2000 problem: information
systems (both critical information systems, the failure of which
could have a material effect on our operations and noncritical
information systems), production and facilities equipment,
products, customers and suppliers (both high-impact suppliers,
suppliers who would materially impact our operations if they
were unable to provide supplies or services on a timely basis,
and other suppliers).
We completed an inventory of and assessed the impact of the
Year 2000 problem with respect to our information systems,
production and facilities equipment, products, customers and
suppliers. Based on the results of the assessment, we
prioritized the various projects to remedy potential Year 2000
problems. We developed and implemented plans to remediate known
Year 2000 problems. Testing to ensure that the remediation was
successfully completed is part of the remediation process. We
have developed contingency plans and trained specialist teams to
implement such contingency plans to address any Year 2000
problems which are unexpected or are not remedied in a timely
manner under our remediation plans.
The following table sets forth the estimated dates for
substantially completing assessment, development of remediation
plans and remediation with respect to the various aspects of the
Year 2000 problem:
13
Development of
Remediation
Assessment Plan Remediation
______________________________________________________________________________
Critical Information Systems SC SC SC
Other Information Systems SC SC SC
Production and Facilities
Equipment SC SC SC
Products SC SC SC
Customers SC SC SC
High Impact Suppliers SC SC SC
Other Suppliers SC SC 6/30/99
____________________________________________________________________________
SC=Substantially Complete
The remediation plans for information systems involved a
combination of software modifications, upgrades and
replacements. The remediation plans for production and
facilities equipment involved a combination of software or
hardware modifications, upgrades and replacements, or changes to
operating procedures to circumvent equipment failures caused by
the Year 2000 problem. The remediation plans for products
involved modifying software and/or hardware contained in
products, or issuing service letters or other industry standard
communications providing customers with instructions on
correcting Year 2000 issues in our products. The remediation
plans for suppliers (including financial institutions,
governmental agencies and public utilities) and customers
involved obtaining information about their Year 2000 programs
through surveys, meetings and other communication, the
evaluation of the information received and the development of
appropriate responses. While remediation with respect to
customers and high impact suppliers is substantially complete
and we expect that remediation with respect to other suppliers
will be completed by June 30, 1999, we can provide no assurance
that the Year 2000 problem will be successfully corrected by
suppliers and customers in a timely manner.
Our estimate of the total cost for Year 2000 compliance is $150
million, of which $122 million has been incurred through March
31, 1999. The estimated cost of $150 million includes
approximately $130 million for assessment, planning and
remediation activities which are expected to be substantially
completed in the first half of 1999 and approximately $20
million for monitoring of remediation which has been completed
and the development of and preparation for contingency plans
which will be expended primarily during 1999. These estimates do
not include our potential share of costs for Year 2000 issues by
partnerships and joint ventures in which we participate but are
not the operator. Incremental spending has not been and is not
expected to be material because most Year 2000 compliance costs
have been met with amounts that are normally budgeted for
procurement and maintenance of our information systems and
production and facilities equipment. The redirection of
spending from procurement of information systems and production
and facilities equipment to implementation of Year 2000
compliance plans may have in some instances delayed productivity
improvements.
We believe that the Year 2000 issue will not cause material
operational problems for us. However, if we have not been
successful in identifying all material Year 2000 problems, or
the assessment and remediation of identified Year 2000 problems
has not corrected such problems in a timely manner, there may be
an interruption in, or failure of certain normal business
activities or operations. Such interruptions or failures could
have a material adverse impact on our consolidated results of
operations and financial position or on our relationships with
customers, suppliers or others.
14
Euro Conversion
_______________
On January 1, 1999, certain member countries of the European
Union established fixed conversion rates between their existing
currencies and the European Union's common currency (Euro). The
transition period for the introduction of the Euro is between
January 1, 1999 and January 1, 2002. AlliedSignal is presently
identifying and ensuring that all Euro conversion compliance
issues are addressed. Although we cannot predict the overall
impact of the Euro conversion at this time, we do not expect
that the Euro conversion will have a material adverse effect on
our consolidated results of operations.
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
__________________________________________________________
See AlliedSignal's most recent annual report filed on Form
10-K (Item 7A). Except for the disposition of the AMP
investment, described in Note 7 on Page 8 of this Form 10-Q, there
has been no material change in this information.
15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareowners of
AlliedSignal held on April 26, 1999, the following matters
set forth in AlliedSignal's Proxy Statement dated March 9,
1999, which was filed with the Securities and Exchange
Commission pursuant to Regulation 14A under the Securities
Exchange Act of 1934, were voted upon with the results
indicated below.
(1) The nominees listed below were elected
directors for a three-year term ending at the 2002 Annual Meeting with
the respective votes set forth opposite their names:
FOR WITHHELD
Hans W. Becherer 474,026,417 12,190,127
Marshall N. Carter 474,260,701 11,955,843
Robert P. Luciano 473,969,539 12,247,005
Robert B. Palmer 459,394,221 26,822,323
John R. Stafford 473,010,059 13,206,485
(2) A proposal seeking approval of the
appointment of PricewaterhouseCoopers LLP as independent
accountants for 1999 was approved, with 479,028,269 votes
cast FOR, 3,574,765 votes cast AGAINST and 3,613,510 abstentions;
(3) A shareowner proposal regarding CEO
compensation was not approved, with 50,917,056 votes cast
FOR, 374,917,903 votes cast AGAINST, 8,816,638 abstentions
and 51,564,947 broker non-votes;
(4) A shareowner proposal regarding the annual
election of directors was not approved, with 211,180,204
votes cast FOR, 215,207,409 votes cast AGAINST, 8,263,984
abstentions and 51,564,947 broker non-votes.
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
during the three months ended March 31, 1999.
16
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.
Date: May 13, 1999 By: /s/ Richard J. Diemer, Jr.
__________________________
Richard J. Diemer, Jr.
Vice President and Controller
(on behalf of the Registrant
and as the Registrant's
Principal Accounting Officer)
17
EXHIBIT INDEX
Exhibit Number Description
2 Omitted (Inapplicable)
3 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)
18