FY95: FIRST QUARTER
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 30, 1994
COMMISSION FILE NUMBER 1-6101
ROHR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-1607455
(State of other jurisdiction of (I.R.S Employer Identification Number)
incorporation or organization)
850 LAGOON DRIVE, CHULA VISTA, CALIFORNIA 91910
(Address of principal executive offices)
(619) 691-4111
(Registrant's Telephone No.)
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
--- ---
AS OF DECEMBER 9,1994 THERE WERE 18,053,932 SHARES OF THE REGISTRANT'S COMMON
STOCK OUTSTANDING.
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PART 1. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ROHR, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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(in thousands except for share data)
------------------------------------
OCT. 30, JULY 31,
1994 1994
----------- ----------
ASSETS (UNAUDITED)
- ------
Cash and cash equivalents $ 72,265 $ 115,996
Short-term investments 17,568 17,568
Accounts receivable 90,679 93,143
Inventories:
Work-in-process 464,897 444,076
Raw materials, purchased parts and supplies 23,685 23,441
Less customers' progress payments and advances (95,327) (104,321)
----------- -----------
Inventories - net 393,255 363,196
Deferred tax asset 36,353 36,353
Prepaid expenses and other current assets 14,346 18,493
---------- ----------
TOTAL CURRENT ASSETS 624,466 644,749
PROPERTY, PLANT AND EQUIPMENT 498,864 500,037
Less accumulated depreciation and amortization (281,587) (277,974)
----------- -----------
Property, plant and equipment - net 217,277 222,063
INVESTMENT IN LEASES 37,118 37,145
DEFERRED TAX ASSET 95,063 97,135
OTHER ASSETS 55,152 55,755
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$1,029,076 $1,056,847
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Trade accounts and other payables $ 136,639 $ 129,674
Salaries, wages and benefits 32,075 37,100
Taxes on income 1,379 2,343
Current portion of long-term debt 14,660 14,952
---------- ----------
TOTAL CURRENT LIABILITIES 184,753 184,069
LONG-TERM DEBT 574,882 574,038
LONG-TERM PENSION AND POST-RETIREMENT OBLIGATIONS 94,158 125,004
OTHER OBLIGATIONS 26,366 26,827
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value per share, 10 million
shares authorized, none issued - -
Common stock, $1 par value per share, authorized
50,000,000 shares; issued and outstanding
18,053,932 and 18,041,680 shares respectively 18,054 18,042
Additional paid-in capital 102,727 102,598
Retained earnings 84,035 82,168
Minimum pension liability adjustment (55,899) (55,899)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 148,917 146,909
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$1,029,076 $1,056,847
========== ==========
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ROHR, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
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(in thousands except for per share data)
----------------------------------------
FIRST QUARTER ENDED
--------------------
OCT. 30, OCT. 31,
1994 1993
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Sales $192,156 $237,091
Costs and Expenses 170,243 213,064
General & Administrative Expense 6,560 7,460
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Operating Income 15,353 16,567
Interest Income 1,115 312
Interest Expense 14,177 12,151
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Income from Continuing Operations
Before Taxes on Income 2,291 4,728
Taxes (Benefit) on Income 921 (1,033)
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Income from Continuing Operations 1,370 5,761
Income from Discontinued Operations - Net of Taxes 497 302
-------- --------
Net Income $ 1,867 $ 6,063
======== ========
Net Income per Average
Share of Common Stock:
Income from Continuing Operations $ 0.08 $ 0.32
Income from Discontinued Operations 0.02 0.02
-------- --------
Net Income $ 0.10 $ 0.34
======== ========
Cash Dividends per Share
of Common Stock - -
Total Common Stock and
Common Stock Equivalents 18,138 18,004
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ROHR, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
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(in thousands)
--------------
FIRST QUARTER ENDED
---------------------
OCT. 30, OCT. 31,
1994 1993
---------- ---------
OPERATING ACTIVITIES:
Net income $ 1,867 $ 6,063
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,186 5,645
Changes due to (increase) decrease in operating assets:
Accounts receivable 3,269 2,563
Inventories - net (25,790) 7,984
Prepaid expenses and other assets 4,142 (1,389)
Changes due to increase (decrease) in operating
liabilities:
Trade accounts and other payables 2,820 (6,383)
Pension and post-retirement obligations (33,256) 3,416
Taxes on income and deferred taxes 1,108 (697)
Other 2,713 880
-------- --------
Net cash provided by (used in) operating activities (37,941) 18,082
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INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,539) (1,475)
Net advances on discontinued operations (4,269) -
Other 692 (1,230)
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Net cash used in investing activities (5,116) (2,705)
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FINANCING ACTIVITIES:
Repayment of medium-term notes - (35,000)
Long-term borrowings under revolving credit agreement - 56,000
Repayment of borrowings under revolving credit agreement - (46,000)
Other long-term borrowings (repayments) (648) 294
Cash collateral for receivables sales program 19,195 -
Reduction in sales of receivable financing program (20,000) -
Other 779 (379)
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Net cash used in financing activities (674) (25,085)
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DECREASE IN CASH AND CASH EQUIVALENTS (43,731) (9,708)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 115,996 42,186
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 72,265 $ 32,478
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized 14,656 $ 16,100
Cash refunded for income taxes (187) (291)
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ROHR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
The consolidated balance sheet as of October 30, 1994, and statements of
earnings and cash flows for the first quarter ended October 30, 1994, and
October 31, 1993, reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim periods. Financial
results for interim periods are not necessarily indicative of results to be
expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These consolidated financial statements should
be read in conjunction with the financial statements included in the Form 10-K
for the year ended July 31, 1994.
The consolidated statement of earnings for the first quarter ended October 31,
1993, has been restated to separately reflect discontinued operations.
CONTINGENCIES
In June 1987, the U.S. District Court of Los Angeles, in U.S. et al, vs.
Stringfellow, granted partial summary judgment against the Company and 14 other
defendants on the issue of liability under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"). This suit alleges that the
defendants are jointly and severally liable for all damages in connection with
the Stringfellow hazardous waste disposal site in Riverside County, California.
A federal jury and a special master appointed by the federal court found the
State of California also liable for the cleanup costs and, subsequently, the
special master allocated a high percentage of liability to the State of
California. This special master's finding is subject to a final decision and
appeal. The Company is the second largest generator of waste by volume disposed
at the site, although it and certain other generators have argued the final
allocation of cleanup costs among generators should not be determined solely by
volume.
The Company has claims against its comprehensive general liability insurers for
reimbursement of its cleanup costs at the site. These claims are the subject of
separate litigation, although the insurers nevertheless are paying substantially
all of the Company's costs of defense in the actions against the generators of
wastes disposed at the site. Certain of these insurance policies have pollution
exclusion clauses which are being argued as a defense and the insurers are
alleging various other defenses to coverage. The Company has entered settlements
with some of the insurance carriers and is engaged in settlement discussions
with certain others.
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The Company intends to continue to vigorously defend itself in the Stringfellow
matter and believes, based upon currently available information, that the
ultimate resolution will not have a material adverse effect on the financial
position, liquidity, or results of operations of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's analysis of operating results for the first quarters ended October
30, 1994 and October 31, 1993 is presented below. Material developments in the
Company's liquidity and capital resources since July 31, 1994, are also
presented. These discussions should be read in conjunction with the financial
statements and management's discussion and analysis thereof included in the
Company's Form 10-K for the fiscal year ended July 31, 1994.
RESULTS OF OPERATIONS
First Quarter Fiscal Year 1995 Compared to First Quarter Fiscal Year 1994
Sales from continuing operations declined 19% from $237.1 million in the first
quarter of fiscal 1994 to $192.2 million for the same period in fiscal 1995,
primarily due to previously announced delivery rate reductions on several
commercial programs, partially offset by increased government sales of spare
components on the Titan program. The Titan program is scheduled to end in the
latter part of this fiscal year. Commercial sales aggregated 82% and government
sales 18% of the Company's total sales in the first quarter of fiscal year 1995
compared to 89% commercial and 11% government for the comparable period the
prior year. This higher percentage of government sales is not expected to
continue.
The Company reported operating income of $15.4 million, an operating margin of
8.0%, for the first quarter of fiscal 1995. Operating income decreased $1.2
million from the first quarter of fiscal 1994 primarily due to reductions in
delivery rates, partially offset by improved operating profit due to the
Company's continuing cost reduction efforts. General and administrative expenses
declined $0.9 million from $7.5 million for the first quarter of fiscal 1994 to
$6.6 million for the first quarter of fiscal 1995.
Net interest expense was $13.1 million for the first quarter of fiscal 1995
compared to $11.8 million for the first quarter of fiscal 1994. The increase of
$1.3 million was due primarily to the Company's new long-term debt.
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Net income from continuing operations for the first quarter of fiscal 1995 was
$1.4 million or 8 cents per share compared to $5.8 million or 32 cents per share
for the first quarter of fiscal 1994. The first quarter of the prior fiscal year
was positively impacted by the Omnibus Budget Reconciliation Act, which reduced
tax expense and correspondingly increased net income by $2.8 million or 16 cents
a share.
During the fourth quarter of the prior fiscal year, the Company sold and
commenced the transfer of its business jet line of business and accounted for
the sale as a discontinued operation. The purchase agreement requires the
Company to manufacture and deliver certain components and transfer engineering
and tooling through fiscal 1995. Residual income from discontinued operations
totaled $0.5 million or 2 cents per share for the first quarter of fiscal 1995
compared with $0.3 million or 2 cents per share for the same period of the prior
fiscal year.
Total net income for the first quarter of fiscal 1995 was $1.9 million or 10
cents per share as compared with $6.1 million or 34 cents per share for the same
period of the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company significantly improved its liquidity in fiscal 1994 and believes
that it has sufficient resources to meet its needs. At October 30, 1994, the
Company had $89.8 million of cash, cash equivalents and short-term investments.
In addition, the Company has a $110 million revolving credit agreement with no
amounts outstanding at October 30, 1994. The total amount available under this
agreement is reduced by a $16.9 million letter of credit.
Net cash used in operating activities for the first quarter of fiscal year 1995
was $37.9 million compared to net cash provided by operating activities of $18.1
million for the first quarter of the prior fiscal year. Contributing to the use
of cash in the first quarter of fiscal 1995 was a $36 million contribution to
the Company's pension plans and an increase in inventory caused by investments
in preproduction engineering and tooling, discussed below. Net cash provided by
operations is subject to significant variations from period to period.
The Company's total financings (balance sheet debt plus off-balance sheet
financings) aggregated $669.9 million at October 30, 1994, a decrease of $1.2
million from July 31, 1994. The Company is a party to a $40.0 million accounts
receivable facility, down from $60 million at July 31, 1994. Under this
facility, which is treated as an off-balance sheet financing, the Company sells
receivables from specified customers on an on-going basis. Due to the slowdown
in the aerospace industry, the amount of outstanding receivables from these
customers falls from time to time below levels required to support the facility.
As a result, the
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Company has elected to deposit cash collateral when necessary to support the
facility and has withdrawn such cash when it is no longer required to be
deposited. At October 30, 1994, $7.3 million of cash collateral was on deposit.
The Company is also a party to certain equipment leases, treated as off-balance
sheet financings, totaling $47.7 million at October 30, 1994. Subsequent to the
end of the first quarter, the Company restructured a major sale leaseback
agreement, reducing the size of this financing by approximately $22 million. In
connection with this restructuring, the equipment lessors released their
interest in certain Company equipment and receivables and released the Company
from its potential obligation to prepay up to $10 million of equipment lease
rentals.
The Company's net inventory increased from $363.2 million at July 31, 1994 to
$393.2 million at October 30, 1994. Pre-production inventory continued to
increase primarily due to the start up of the MD-90 program, change activity on
the A340 program, and investment in cost reduction efforts on the V2500 and
PW4000 programs.
The Company's firm backlog, which includes the sales price of all undelivered
units covered by customers' orders for which the Company has production
authorization, was approximately $1.1 billion at October 30, 1994, compared to
$1.2 billion at July 31, 1994. Approximately $0.5 billion of the $1.1 billion
backlog is expected to be delivered in the remainder of fiscal year 1995. (Sales
during any period includes sales which were not part of backlog at the end of
the prior period.) Customer orders in firm backlog are subject to rescheduling
and/or termination for customer convenience; however, in certain cases the
Company is entitled to an equitable adjustment in contract amounts. The Company
has an additional $2.4 billion in anticipated backlog, which represents the
sales price of units which the Company expects that its customers will order
under existing contracts and the Company will deliver within seven years.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Shareholders on Saturday, December 3,
1994, at the offices of the Company in Chula Vista, California. Of the
18,053,932 shares eligible to vote at the meeting, 15,423,132 shares were
represented. Messrs. Wayne M. Hoffman, Robert M. Price, and Jack D. Steele were
elected as directors for three-year terms expiring at the Annual Meeting in
1997; each received in excess of 15.2 million affirmative votes. Messrs. Wallace
W. Booth and James J. Kerley stepped down from the Board because each had
reached the mandatory retirement age for directors. The shareholders ratified
the appointment of Messrs. Sam F. Iacobellis and James R. Wilson to fill the
unexpired terms of Messrs. Kerley and Booth which expire in 1996; each received
in excess of 15.2 million affirmative votes. Directors whose term of office
continued after the meeting included Messrs. Robert H. Rau, William P. Sommers,
Wallace Barnes, Eugene E. Covert, and D. Larry Moore.
The shareholders also approved the selection of Deloitte & Touche LLP as the
Company's independent auditors for fiscal 1995. The selection of Deloitte &
Touche LLP was approved, receiving 15,275,493 affirmative votes, 99,228 negative
votes and 48,411 abstentions.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Index to Exhibits:
*10.1 Assignments of Leasehold and Subleasehold Interests;
Amendments of Lease Supplement No. 1, Equipment Schedule and
Waiver and Modification Agreement; and Releases of Security
Interest, dated as of October 31, 1994.
10.2 Pretax Savings Plan for the Salaried Employees of Rohr, Inc.,
incorporated herein by reference to Exhibit 4.1, filed with
Registration Statement No. 33-56529.
*11.1 Calculation of Primary Net Income Per Share of Common Stock
*11.2 Calculation of Fully Diluted Net Income Per Share of Common
Stock
*27. Financial Data Schedule. (Filed with EDGAR filing only.)
(b) Reports on Form 8-K
There were no reports on Form 8-K during this period.
(c) Exhibits required by Item 601 of Regulation S-K:
See subparagraph (a) above.
(d) Financial Statements required by Regulation S-X:
See subparagraphs (a) and (b) above.
___________________________
*Exhibits filed with this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROHR, INC.
December 13, 1994 By:/S/ L. A. CHAPMAN
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L. A. Chapman
Senior Vice President, Chief Financial
Officer and Treasurer
December 13, 1994 By:/S/ A. L. MAJORS
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A. L. Majors
Vice President and Controller
(Chief Accounting Officer)
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