SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
______________
Date of Report (Date of earliest event reported):March 13, 1996
THE FAIRCHILD CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 1-6560 34-0728587
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
Washington Dulles International Airport
300 West Service Road
P.O. Box 10803
Chantilly, Virginia__ 22021-9998
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(703) 478-5800
No change
(Former name or former address, if changed since last report)
_______________________________________________________________
_______________________________________________________________
Item 2. Acquisition or Disposition of Assets
As previously disclosed on Form 8-K Item 5 filed with
the Commission on November 20, 1995, the Fairchild Corporation
("Fairchild") and its subsidiaries, RHI Holdings, Inc. ("RHI")
and Fairchild Industries, Inc. ("FII"), entered into an Agree-
ment and Plan of Merger dated as of November 9, 1995 (as
amended, the "Merger Agreement") with Shared Technologies Inc.
("Shared Technologies"). In accordance with the Merger Agree-
ment, Shared Technologies has acquired the telecommunications
systems and service business operated by Fairchild Communica-
tions Services Company ("FCSC").
The acquisition was effected by the merger of FII with and
into Shared Technologies (the "Merger"). Prior to the Merger, FII
transferred all of its assets to, and all of its liabilities were
assumed by, RHI or its subsidiaries other than FII and VSI
Corporation, except for (i) the assets and liabilities of FCSC,
(ii) the outstanding Series A and Series C Preferred Stock of
FII, (iii) $125,000,000 aggregate principal amount of 12-1/4%
Senior Notes due 1999 (the "Senior Notes") of FII and (iv) an
amount of bank and other indebtedness of approximately
$45,819,822.38 (the "Assumed Indebtedness") and commenced a cash
tender offer to purchase all of the outstanding Senior Notes.
Pursuant to the Merger, an amount sufficient to redeem the Series
A and C Preferred Stock at their liquidation value ($45.00 per
share plus accrued and unpaid dividends) was placed with Chemical
Mellon Shareholder Services as Escrow Agent. Also as part of the
Merger, Shared Technologies, as the surviving corporation, (i)
purchased the $125,000,000 aggregate principal amount of Senior
Notes tendered pursuant to the aforesaid tender offer and (ii)
repaid the Assumed Indebtedness in full.
As a result of the Merger, RHI received (i) 6,000,000
shares of Common Stock of Shared Technologies (representing
approximately 41% of the outstanding shares after giving effect
to such issuance), (ii) shares of 6% Cumulative Convertible
Preferred Stock of Shared Technologies having an aggregate
liquidation preference of $25,000,000 (subject to upward
adjustment) and which are convertible into Common Stock of
Shared Technologies at a conversion price of $6.3750 per share
(which, if converted, would represent, together with the other
Common Stock issued to RHI, approximately 42% of the Common
Stock of Shared Technologies on a fully diluted basis) and
(iii) shares of a Special Preferred Stock having an initial
liquidation preference of $20,000,000 (which could accrete up
to a maximum of $30,000,000 over a ten-year period if not ear-
lier redeemed). In connection with its stock ownership,
Fairchild and RHI will have the right to elect four of the
eleven members of the Board of Directors of Shared Technologies
and have agreed, subject to certain exceptions, not to sell any
of such shares for a two-year period.
For a more complete description of the proposed terms
of the Merger and the transactions contemplated thereby, refer-
ence is hereby made to the Merger Agreement including the
amendments thereto (copies of which are filed as exhibits
hereto).
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
(c) Exhibits.
2.1 Agreement and Plan of Merger dated as of November 9,
1995 by and among Fairchild, RHI, FII and Shared
Technologies ("Merger Agreement").*
2.2 Amendment No. 1 to Merger Agreement dated as of
February 2, 1996.
2.3 Amendment No. 2 to Merger Agreement dated as of
February 23, 1996.
2.4 Amendment No. 3 to Merger Agreement dated as of
March 1, 1996.
___________________
* Incorporated by reference from the Registrant's Form 8-K
filed on November 20, 1995.
SIGNATURE
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 hereunto
duly authorized.
THE FAIRCHILD CORPORATION
(Registrant)
By: /s/ Donald E. Miller
------------------------------
Name: Donald E. Miller
Title: Vice President
DATE: March 13, 1996
EXHIBIT INDEX
Sequentially
Exhibit No. Numbered Page
2.1 Agreement and Plan of Merger dated as of
November 9, 1995 by and among
Fairchild, RHI, FII and Shared Technol-
ogies ("Merger Agreement")*............
2.2 Amendment No. 1 to the Merger Agreement
dated as of February 2, 1996...........
2.3 Amendment No. 2 to the Merger Agreement
dated as of February 23, 1996..........
2.4 Amendment No. 3 to the Merger Agreement
dated as of March 1, 1996
___________________
* Incorporated by reference from the Registrant's Form 8-K
filed on November 20, 1995.
THE FAIRCHILD CORPORATION
PRO FORMA CONDENSED SEPARATED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Following unaudited pro forma condensed separated consolidated balance
sheet as of December 31, 1995, and the pro forma condensed separated
consolidated statements of earnings for the year ended June 30, 1995 and the six
months ended December 31, 1995, give effect to the Company's disposition of the
D-M-E Company ("DME") and the merger of its communications services systems
business ("FCS"). The pro forma information is based on the historical financial
statements of the Company, DME and FCS giving effect to the transaction and
assumptions and adjustments specified in the accompanying notes to the pro forma
financial statements.
The unaudited pro forma consolidated statements of the Company are not
necessarily indicative of the results or financial position that actually would
have occurred if the disposition of DME and the merger of FCS had been in effect
since July 1, 1994, nor are they necessarily indicative of future results or
financial position of the Company. The pro forma consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company's June 30, 1995 Form 10-K.
THE FAIRCHILD CORPORATION
PRO FORMA CONDENSED SEPARATED CONSOLIDATED BALANCE SHEET
December 31, 1995
(in thousands)
Historical Pro Forma
----------------------------- ----------------------
ASSETS TFC DME FCS Adjustments TFC
- ------ -------- ---------- --------- ----------- --------
Cash $ 42,967 $ $ 366 $ 74,000 (1)
(74,000)(2) $ 43,333
Accounts receivable 70,241 (11,694) 58,547
Notes receivable-current 171,377 (1) 171,377
Inventories 78,449 (1,271) 77,178
Prepaid expenses and
other current assets 27,092 (2,051) 25,041
Net current assets of
discontinued operations 34,609 (34,166) 443
-------- ---------- --------- --------- --------
Total Current Assets 253,358 (34,166) (14,650) 171,377 375,919
Property, plant and
equipment 228,239 (85,545) 142,694
Accumulated depreciation (98,970) 35,086 (63,884)
Net noncurrent assets of
discontinued operations 85,577 (85,528) 49
Investment in affiliates 70,904 36,500 (3) 107,404
Goodwill 152,184 (25,871) 126,313
Other assets 137,405 (6,910) (5,286)(4) 125,209
-------- ---------- --------- --------- --------
Total Assets $828,697 $(119,694) $(97,890) $202,591 $813,704
======== ========== ========= ========= ========
See Notes to Pro Forma Condensed Separated Financial Statements.
THE FAIRCHILD CORPORATION
PRO FORMA CONDENSED SEPARATED CONSOLIDATED BALANCE SHEET
December 31, 1995
(in thousands)
Historical Pro Forma
----------------------------- ----------------------
LIABILITIES TFC DME FCS Adjustments TFC
- ----------- -------- ---------- --------- ----------- --------
Bank notes payable and
current maturities of
long term debt $100,288 $ $ (367) $(66,603)(2) $ 33,318
Accounts payable 32,323 (9,308) 23,015
Other accrued liabilities 75,816 (8,589) 7,341 (1)
(2,340)(3)
10,000 (3) 82,228
Accrued income tax -- 47,337 (1)
(6,239)(4) 41,098
-------- ---------- --------- --------- ---------
Current Liabilities 208,427 -- (18,264) (10,504) 179,659
Long-term debt, less
current maturities 448,642 (99) (7,397)(2)
(135,313)(3)
(45,820)(3)
10,313 (4) 270,326
Other long-term
liabilities 86,873 (25,126)(3) 61,747
Noncurrent income taxes 38,981 38,981
Redeemable preferred
stock 15,311 (14,901)(3) 410
-------- ---------- --------- --------- ---------
Total Liabilities 798,234 -- (18,363) (228,748) 551,123
Stockholders' equity:
Common stock 2,242 (3,826) (1) 3,826 (1)
1 (3) 2,242
Treasury stock (51,719) (51,719)
Paid-in capital 67,445 (100,084) (23,265) 100,084 (1)
23,265 (3) 67,445
Retained earnings 9,464 (15,784) (56,261) 15,784 (1)
56,261 (3)
71,005 (1)
170,473 (3)
(9,360)(4) 241,582
Net unrealized holding
loss on available-for-
sale securities (120) (120)
Cumulative translation
adjustment 3,151 3,151
-------- ---------- --------- --------- --------
Total Stockholders'
Equity 30,463 (119,694) (79,527) 431,339 262,581
Total Liabilities and
Stockholders' Equity $ 828,697 $(119,694) $(97,890) $202,591 $813,704
========= ========== ========= ========= ========
See Notes to Pro Forma Condensed Separated Financial Statements.
THE FAIRCHILD CORPORATION
PRO FORMA CONDENSED SEPARATED CONSOLIDATED STATEMENT OF EARNINGS
For the six months ended December 31, 1995
(in thousands, except per share data)
Historical Pro Forma
------------------------------ ----------------------
TFC DME FCS Adjustments TFC
--------- --------- --------- ----------- ---------
Revenue: (*)
Sales $211,376 $ $(65,028) $146,348
Other income, net 136 136
--------- --------- --------- --------- ---------
211,512 -- (65,028) -- 146,484
Cost and expenses:
Cost of sales 162,141 (49,037) 113,104
Selling, general and
administrative 41,274 (5,863) 35,411
Research and
development 44 44
Amortization of
goodwill 2,378 (357) 2,021
Restructuring 285 285
--------- --------- --------- --------- ---------
206,122 -- (55,257) -- 150,865
Operating income (loss) 5,390 -- (9,771) -- (4,381)
Interest expense 36,047 (43) (13,484)(5) 22,520
Interest income (1,279) (6,855)(5) (8,134)
--------- --------- --------- --------- ---------
Net interest expense
(income) 34,768 -- (43) (20,339) 14,386
Investment income, net 1,912 1,912
Equity in earnings (loss)
of affiliates 1,889 (563)(5) 1,326
Minority interest (1,085) 1,173 (5) 88
-------- --------- --------- --------- ---------
Earnings (loss) from
continuing operations
before taxes (26,662) -- (9,728) 20,949 (15,441)
Income tax provision
(benefit) (9,951) (3,891) 8,605 (5,237)
-------- --------- --------- --------- ---------
Earnings (loss) from
continuing operations $(16,711) $ -- $ (5,837) $ 12,344 $(10,204)
========= ========= ========= ========= =========
Earnings (loss) per share:
Loss from continuing
operations $ (1.04) $ (0.63)
========= =========
Weighted average number
of shares outstanding 16,122 16,122
========= =========
* - Results of DME were included as part of earnings from discontinued
operations for the six months ended December 31, 1995.
See Notes to Pro Forma Condensed Separated Financial Statements.
THE FAIRCHILD CORPORATION
PRO FORMA CONDENSED SEPARATED CONSOLIDATED STATEMENT OF EARNINGS
For the year ended June 30, 1995
(in thousands, except per share data)
Historical Pro Forma
------------------------------ ----------------------
TFC DME FCS Adjustments TFC
-------- ---------- ---------- ----------- ---------
Revenue:
Sales $546,323 $(167,769) $(108,710) $ 269,844
Other income, net 656 396 1,052
-------- ---------- ---------- --------- ---------
546,979 (167,373) (108,710) -- 270,896
Cost and expenses:
Cost of sales 419,290 (110,152) (80,621) 228,517
Selling, general and
administrative 107,226 (30,208) (8,967) 68,051
Research and
development 4,100 (1,114) 2,986
Amortization of
goodwill 6,157 (1,637) (624) 3,896
-------- ---------- ---------- --------- ---------
536,773 (143,111) (90,212) -- 303,450
Operating income (loss) 10,206 (24,262) (18,498) -- (32,554)
Interest expense 71,159 (60) (291) (26,968)(5) 43,840
Interest income (3,389) 18 (13,710)(5) (17,081)
-------- --------- ---------- --------- ---------
Net interest expense
(income) 67,770 (42) (291) (40,678) 26,759
Investment income, net 5,705 5,705
Equity in earnings (loss)
of affiliates 2,369 (762) (1,126)(5) 481
Minority interest (2,449) 156 2,345 (5) 52
-------- --------- ---------- --------- ---------
Earnings (loss) from
continuing operations
before taxes (51,939) (24,826) (18,207) 41,897 (53,075)
Income tax provision
(benefit) (18,019) (10,410) (7,283) 17,209 (18,503)
-------- --------- ---------- --------- ---------
Earnings (loss) from
continuing operations $(33,920) $(14,416) $ (10,924) $ 24,688 $(34,572)
========= ========= ========== ========= =========
Earnings (loss) per share:
Loss from continuing
operations $ (2.11) $ (2.15)
========= =========
Weighted average number
of shares outstanding 16,103 16,103
========= =========
See Notes to Pro Forma Condensed Separated Financial Statements.
THE FAIRCHILD CORPORATION
NOTES TO PRO FORMA CONDENSED SEPARATED CONSOLIDATED FINANCIAL STATEMENTS
On February 22, 1996, the Company completed the sale of DME to Cincinnati
Milacron for $74,000,000 in cash and $171,377,000 in 8% promissory notes which
mature one year following the closing of the sale.
On March 13, 1996, the Company completed the merger of FCS into Shared
Technologies Inc.("STI") with the resulting company named Shared Technologies
Fairchild Inc. ("STCH"). Pursuant to the merger, STCH assumed $223,500,000 of
the Company's existing debt and preferred stock, and has issued to the Company
6,000,000 common shares (equal to approximately 41% of outstanding STCH common
shares immediately following the transaction), as well as $45,000,000 face
amount of newly issued preferred shares. The pro forma financial statements
separate (i) the assets and liabilities of DME and FCS from the Company's
consolidated balance sheets at December 31, 1995, and (ii) the results of
operations of DME and FCS from the Company's consolidated statement of earnings
for the year ended June 30, 1995 and six months ended December 31, 1995. In
separating the entities, the following pro forma adjustments have been made.
(1) Reflects the sale of certain assets and liabilities of DME in exchange
for cash and notes receivable, reduced by costs related to the disposition
(incentive compensation, legal, audit and other associated fees) as follows (in
thousands):
December 31,
1995
------------
Cash $ 74,000
Notes receivable 171,377
Costs related to disposal (7,341)
---------
Net proceeds received 238,036
Carrying value of net assets sold 119,694
---------
Gain before taxes 118,342
Tax provision (40% statutory tax rate) 47,337
---------
Net gain on sale $ 71,005
=========
(2) Cash received was immediately used to reduce bank loans(with
interest rates of approximately 8.73% in fiscal 1995) as follows (in
thousands):
December 31,
1995
------------
Bank notes payable and current maturities
of debt $ 66,603
Long-term debt, less current maturities 7,397
---------
Total $ 74,000
=========
(3) Reflects the merger of FCS into STI, the assumption of certain of the
Company's existing debt and related accrued expenses by STCH, recording accrued
expenses (incentive compensation, legal, etc.) associated with the transaction,
the issuance of equity to the Company, and the resulting non-taxable gain from
the transaction as follows (in thousands):
December 31,
1995
------------
Long-term debt:
12.25% Sr. secured notes $125,000
Premium paid for 12.25% Sr. secured notes 10,313
---------
135,313
Bank debt (8.73% approximating interest
rate in fiscal 1995) 45,820
---------
181,133
Redeemable preferred stock (FII Series A) 14,901
Minority interest (FII Series C preferred
stock) 25,126
Other accrued expenses (interest, dividends) 2,340
---------
Total debt assumed 223,500
Investment in affiliates (the Company's
investment in STCH) 36,500
Less:
Carrying value of net assets exchanged 79,527
Costs related to transaction 10,000
---------
Net gain from merger $170,473
=========
The merger was structured as a reorganization under section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended, resulting in a non-taxable
transaction for the Company.
(4) The sale of DME and assumption of some of the Company's debt by STCH
resulted in an extraordinary loss from the early extinguishment of debt as
follows (in thousands):
December 31,
1995
------------
Premiums paid on 12.25% Sr. Notes (being
recorded as long-term debt in December) $ 10,313
Deferred loan fees written off 5,286
---------
15,599
Tax benefit (40% statutory rate) (6,239)
---------
Extraordinary loss, net $ 9,360
=========
(5) For purposes of presenting the pro forma condensed separated statement
of earnings, the following adjustments (which are expected to be recurring) have
been made (in thousands):
Six Months
Ended Year Ended
December 31, June 30,
1995 1995
------------ ----------
Increase (decrease) in earnings:
Interest expense from revised debt
structures (see Note 2 and Note 3) $ 13,484 $ 26,968
Interest income from notes receivable
(see Note 1) 6,855 13,710
Minority interest (see Note 3) 1,173 2,345
Tax effects of the above adjustments (8,605) (17,209)
Equity in loss of affiliates (*) (563) (1,126)
--------- ---------
Net adjustments $ 12,344 $ 24,688
========= =========
* - 41% of the estimated loss to common shareholders' of STCH adjusted by
preferred stock dividends to be paid by STCH to the Company.
(6) The pro forma statement of earnings has not been adjusted for non-
recurring credits or charges that are expected to be incurred within the ensuing
year. Such non-recurring items omitted from the pro forma statement of earnings
represents (i) the $71,005,000 gain, net of tax, on the sale of DME (see Note
1), (ii) the $170,473,000 non-taxable gain from the merger of FCS into STCH (see
Note 3), and (iii) the $9,360,000 extraordinary loss, net of tax, from the early
extinguishment of debt assumed by the merger (see Note 4).