1996
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JULY 31, 1996 COMMISSION FILE NUMBER 1-6101
ROHR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-1607455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
850 LAGOON DRIVE, CHULA VISTA, CALIFORNIA 91910
(Address of principal executive offices)
(619) 691-4111
(Telephone No.)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
THE STOCK EXCHANGE, LONDON
7% CONVERTIBLE SUBORDINATED NEW YORK STOCK EXCHANGE
DEBENTURES DUE 2012 PACIFIC STOCK EXCHANGE
THE STOCK EXCHANGE, LONDON
7-3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
AT SEPTEMBER 11, 1996, THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT, BASED ON MARKET QUOTATIONS AS OF THAT DATE, WAS
APPROXIMATELY $488,836,132.
AS OF SEPTEMBER 11, 1996, THERE WERE 22,673,290 SHARES OF THE REGISTRANT'S
COMMON STOCK OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE:
------------------------------------
Portions of the following documents are incorporated into this report by
reference:
1. Part II Registrant's Annual Report to Shareholders for fiscal year ended
July 31, 1996.
2. Part III Registrant's definitive Proxy Statement to be filed with the
Securities and Exchange Commission within 120 days after the
close of the fiscal year.
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TABLE OF CONTENTS
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PART I
PAGE
----
Item 1. Business......................... 1
General........................ 1
Products....................... 2
Contracts...................... 4
Subcontractors................. 5
Program Funding................ 6
Principal Customers............ 6
Backlog........................ 6
Competition.................... 7
Raw Materials and Suppliers.... 8
Employees...................... 8
Environmental Matters.......... 8
Research and Development....... 9
Patents and Proprietary
Information.................... 9
Manufacturing.................. 10
Overhaul and Repair Facilities. 10
Miscellaneous.................. 10
Item 2. Properties....................... 10
Item 3. Legal Proceedings................ 12
Item 4. Submission of Matters to a Vote
of Security Holders............. 15
Additional Executive Officers of the
Item Registrant...................... 15
PART II.
Item 5. Market for Registrant's Common
Equity and Related
Stockholder Matters............. 17
Item 6. Selected Financial Data.......... 17
Item 7. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations...................... 17
Item 8. Financial Statements and
Supplementary Data.............. 17
Item 9. Changes in and Disagreements
with Accountants on
Accounting and Financial
Disclosure...................... 17
PART III.
Item 10. Directors and Executive
Officers of the Registrant...... 18
Compliance with
Section 16(a) of the
Securities Exchange
Act of 1934.................... 18
Item 11. Executive Compensation........... 18
Item 12. Security Ownership of Certain
Beneficial Owners and
Management...................... 18
Item 13. Certain Relationships and
Related Transactions............ 19
PART IV.
Item 14. Exhibits, Financial Statement
Schedules, and Reports
on Form 8-K...................... 19
SIGNATURES
Signature Page................... 27
ii
PART 1
ITEM 1. BUSINESS
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GENERAL
Rohr, Inc., (the "Company"), incorporated in Delaware in 1969, is the
successor to a business originally established in 1940 under the name of Rohr
Aircraft Corporation. The Company, a leading aerospace supplier, provides
nacelle and pylon systems integration, design, development, manufacturing, and
support services to the aerospace industry worldwide. The Company focuses its
efforts on the market for commercial aircraft which seat 100 or more passengers.
Its principal products include nacelles, which are the aerodynamic structures or
pods that surround an aircraft's engines; thrust reversers, which are part of
the nacelle system and assist in the deceleration of jet aircraft after landing;
pylons (sometimes referred to as struts) which are the structures that attach
the jet engines or the propulsion system to the aircraft; noise suppression
systems; engine components; and structures for high-temperature environments. In
addition, the Company conducts product research and development in advanced
composites and metals, high-temperature materials, acoustics, and manufacturing
processes for existing and future applications.
The Company sells products and services to the three major commercial
airframe manufacturers (Boeing, Airbus, and McDonnell Douglas) and to the five
major jet engine manufacturers (General Electric, Pratt & Whitney, Rolls-Royce,
CFM International, and International Aero Engines). In addition, the Company has
the right on certain programs to provide customer and product support directly
to airline operators and service centers around the world, including on-site
field services and the sale of spare parts. The Company's commercial and
government (military and space) products represented 92% and 8%, respectively,
of its sales in the fiscal year ended July 31, 1996.
The Company has over 50 years of experience in the aerospace industry.
Originally, the Company operated as a subcontractor to the airframe
manufacturers, building parts to the customer's design. Later, it began to
build to its own designs based on customer specifications. Eventually, the
Company also began operating as a subcontractor to the engine manufacturers who
then provided the engine with nacelle to the airframe manufacturers. In the
1980s, the Company significantly expanded its role in many newer programs by
becoming a systems integrator for nacelle systems with responsibility for the
integration and management of the design, tooling, manufacture, and delivery of
complete nacelle systems, directing the efforts of international consortia in
some cases. As a result of this range of experience, the Company can provide
many different levels of service to its customers depending upon their needs.
The Company can build to the customer's design, assist in that design, or assume
total responsibility for design, manufacture, integration and product support.
In addition, over the last several years, the Company has expanded its services
to the airlines through the direct sale of spare parts, the provision of
technical support and training, and the operation of repair and overhaul
facilities.
1
Products
General. The Company designs and manufactures nacelle systems, nacelle
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components, pylons or struts, non-rotating components for jet engines, and other
components for commercial and military aircraft. A nacelle system generally
includes the nose cowl or inlet, fan cowl, nozzle systems and thrust reverser.
The nacelle houses electrical, mechanical, fluid, and pneumatic systems together
with various panels, firewalls, and supporting structures; the aircraft engine
(which is provided by the customer); and purchased or customer-furnished engine
equipment such as electrical generators, starters, fuel pumps and oil coolers.
The Company also performs engine build-ups ("EBU") by assembling nacelle systems
and the related electrical, mechanical, fluid and pneumatic systems onto core
aircraft engines.
Commercial. The Company has become a systems integrator, with
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responsibility for the integration and management of the design, tooling,
manufacture, and delivery of the complete nacelle or pylon system, including in
some cases sale of spare parts directly to the aircraft operator.
The Company has full systems integration responsibility for the complete
nacelle with thrust reverser, and performs substantial manufacturing for the
McDonnell Douglas MD-80, the Pratt & Whitney PW4000 series engine option for the
McDonnell Douglas MD-11 and the Airbus A310 and A300-600. In some cases, while
retaining full systems integration responsibility for the nacelle and thrust
reverser, the company has subcontracted certain major components. These programs
include the CFM International CFM56-5 nacelle program and the International Aero
Engines (an international consortium) nacelle program (excluding inlet and fan
cowl), both of which engines are being competitively marketed for the Airbus
A319, A320 and A321; the CFM International-powered Airbus A340; and the
McDonnell Douglas MD-90 aircraft. The company also has responsibility for the
wing and tail pylon program for the McDonnell Douglas MD-11 aircraft, and has
subcontracted the wing pylon manufacture and assembly.
The Company manufactures the thrust reverser, nozzle, pylons and fan cowl
for Rolls-Royce engine options for the Boeing 757; the pylon for the Pratt
engine option for the Boeing 757; the nacelle without thrust reverser for the
CF6-80C2, which is the General Electric engine option for the Airbus A310 and
A300-600 and McDonnell Douglas MD-11; the nacelle without thrust reverser for
the CF6-80E1, which is the General Electric engine option for the A330; nacelle
components, including the nose cowl, fan cowl, and extension ring, for the
Boeing 737; and the aft fan case nozzle and plug for the General Electric GE 90
engine option for the Boeing 777. Major components produced by the Company for
the General Electric CF6-80C2 nacelle are also used on the Boeing 747 and 767.
The role of systems integrator, while broadening the Company's business
base in the commercial aerospace industry, typically requires a substantial
investment in working capital and subjects the Company to increased market risk
relative to the ultimate success of such programs. In those cases where the
Company has in turn, subcontracted the design and production of major components
(CFM56-5, V2500, MD-90, A340 and the wing pylon for the MD-11) to foreign and
domestic companies, some of the risks associated with such programs have been
passed on to those subcontractors. However, the Company's performance and
ultimate profitability on these programs is dependent on the performance of its
subcontractors, including the timeliness and quality of their work, as well as
the ability of the Company to monitor and manage its subcontractors. See
"Subcontractors".
In June 1995, the Company finalized an agreement with Boeing to design,
tool and manufacture the inlet and fan cowls for the Boeing 737-700 aircraft. In
July 1996, the Company delivered the first inlets and fan cowls for the
aircraft.
In February 1996, BMW Rolls-Royce Aero Engines selected the Company to be
the nacelle system integrator for the new MD-95 aircraft. Delivery of
development hardware is scheduled to start in fiscal 1997.
2
In September 1996, the Company announced that it will manufacture
modification kits for the re-engining of existing Boeing 727 aircraft with new
Pratt & Whitney JT8D-217C/219 engines. The program, designated the "Super 27,"
consists of new nacelles, struts, engine mounts and thrust reversers.
Government (Military and Space). For military aircraft, the Company
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manufactures nacelles for the Lockheed C-130 propjet transport aircraft on which
final deliveries of production hardware were completed in fiscal year 1996 and
nacelle components for re-engining of existing Boeing KC-135 military aerial
refueling tankers. For the U.S. space program, the Company substantially
completed deliveries in fiscal year 1996 of solid fuel rocket motor nozzles and
insulated casings which are used on the Titan Space Launch Vehicle. The Company
is providing technical support in designing the engine bay doors for the U.S.
Air Force F-22 tactical fighter aircraft. As a member of the Lockheed Martin
team which was selected in July 1996 by NASA to build and fly a sub-scale
demonstrator X-33 Single-Stage-to-Orbit ("SSTO") reusable launch vehicle, the
Company will be responsible for the SSTO's thermal protection system design,
fabrication and operability improvements. The Company will employ its
proprietary thermal protection system on the entire exterior of the X-33 except
for the rockets, control jets and vertical tails.
The Company's government business has declined in recent years and the
Company expects the percentage of its revenues attributable to government sales
to decline further in future years. The extent of future sales under military
programs is dependent, among other things, upon continued government funding.
Spare Parts. The Company sells spare parts for both military and
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commercial aircraft, including those for aircraft in use but no longer in
production. Such sales from continuing operations were approximately $178.5
million in fiscal 1996, $142.5 million in fiscal 1995, and $148.9 million in
fiscal 1994.
Historically, the Company has sold spare parts for commercial programs to
airframe or engine manufacturers which then resold them to the end user.
However, under several major programs, the Company now has the right to sell
spare parts directly to airlines (although on certain programs royalty payments
to its customers are required). The contracts that grant these rights to the
Company generally require that the Company provide technical and product support
directly to the airlines. Thus, on certain programs, the Company has the right
to provide customer and product support directly to approximately 150 airline
operators and service centers worldwide. The Company's direct sales of spare
parts to the airlines are expected to increase in the future as nacelle programs
on which the Company sells spare parts directly to the airlines mature and as
the aircraft using those nacelles age. Generally, the Company earns a higher
margin on the direct sale of spare parts to airlines than it does on the sale of
spare parts to prime contractors (for resale to the airlines). Prices for
direct spare part sales are higher than prices for spare parts sold to prime
contractors, in part, because of additional costs related to the technical and
customer support activities provided to the airlines.
Other Activities. The Company also manufactures other components for
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military and commercial jet aircraft, including the nozzle and plug used on the
Rolls-Royce-powered versions of the Boeing 747 and 767 and the Airbus A330, and
the acoustical ducts and/or acoustic panels for the Pratt & Whitney engine used
on the McDonnell Douglas MD-80 and the Boeing 757.
3
The Company has been performing nacelle modification and integration
services for Pratt & Whitney, installing Boeing 757 nacelles under a Pratt &
Whitney license, on the PW2000 series engine for use on the former Soviet
Union's IL-96M/T transport aircraft. Pratt & Whitney has entered into a contract
with Boeing for additional nacelles and is negotiating final arrangements with
the Company for additional modification and integration services.
CONTRACTS
Most of the Company's major commercial contracts establish a firm unit price,
subject to cost escalation, over a number of years or, in certain cases, over
the life of the related program. Life-of-program agreements generally entitle
the Company to work as a subcontractor in the program during the entire period
the customer produces its aircraft or engine. While the customer retains the
right to terminate these long-term and life-of-program arrangements, there are
generally significant costs for doing so. The Company has experienced pressures
from customers to reduce prices. In response, the Company has incorporated or
is in the process of incorporating design changes on certain programs, allowing
for a more cost effective manufacture of certain products, and is exerting
pressure on its own suppliers to reduce prices.
The Company's long-term contracts generally contain escalation clauses for
revising prices based on published indices which reflect increases in material
and labor costs. Furthermore, in almost all cases, when a customer orders
production schedule revisions (outside of a range provided in the contract) or
design changes, the contract price is subject to adjustment. These long-term
contracts provide the Company with an opportunity to obtain increased profits if
the Company can perform more efficiently than it assumed at the time of pricing.
Conversely, there is the potential for significant losses if it cannot produce
the product for the agreed upon price.
The Company's other commercial contracts generally provide a fixed price for a
specified number of units which, in many cases, are to be delivered over a
specified period of time. Under these contracts, prices are re-negotiated for
each new order. As a result, the Company has the opportunity to negotiate price
increases for subsequent units ordered if production costs are higher than
expected. The Company's customers, however, may seek price reductions from the
Company in connection with any new orders they place.
On its longer-term contracts, the Company bases initial production prices on
estimates of the average cost for a block of the units which it believes will be
ordered. Generally, production costs on initial units are substantially higher
during the early years of a new contract or program, when the efficiencies
resulting from learning are not yet fully realized, and decline as the program
matures. Learning typically occurs on a program as tasks and production
techniques become more efficient through repetition of the same manufacturing
operation and as management implements actions to simplify product design and
improve tooling and manufacturing techniques. If the customer orders fewer than
the expected number of units within a specified time period, certain of the
Company's contracts have repricing clauses which increase the prices for units
that have already been delivered. However, other contracts do not include such
repricing provisions and force the Company to bear certain market risks. The
Company analyzes the potential market for the products under such contracts and
agrees to prices based on its estimate of the average estimated costs for the
units it expects to deliver under the program.
4
Many of the Company's contracts have provided for the recovery of a specified
amount of nonrecurring, pre-production costs, consisting primarily of design and
tooling costs. In some cases, a significant portion of such pre-production
costs have been advanced by the customer. However, in negotiating some
contracts, the Company has agreed to defer recovery of pre-production costs and
instead to recover a certain amount of such costs with the sale of each
production unit over an agreed number of production units plus spares
equivalents. In addition, on some of these contracts, based on its analysis of
the potential market for the products covered by such contracts, the Company
agreed to amortize pre-production costs over a number of units which was larger
than the anticipated initial fabrication orders without the protection of a
repricing clause or guaranteed quantities of orders. On other commercial
contracts, the Company receives advance payments with orders, or other progress
or advance payments, which assist the Company in meeting its working capital
requirements for inventories. To reduce such funding requirements and market
risks, the Company has subcontracted substantial portions of several of its
programs. See "Subcontractors".
In accordance with practices in the aircraft industry, most of the Company's
commercial orders and contracts are subject to termination at the convenience of
the customer and on many programs the tooling and design prepared by the Company
are either owned by the customer or may be purchased by it at a nominal cost.
The contracts generally provide, upon termination of firm orders, for
reimbursement of costs incurred by the Company, plus a reasonable profit on the
work performed. The costs of terminating an entire contract or program can be
significantly greater for the customer than the costs of terminating specific
firm orders. All of the Company's government contracts are subject to
termination at the convenience of the government. In such a situation, the
Company is entitled to recover the costs it incurred prior to termination, plus
a reasonable profit on the work performed.
Under all contracts, the Company may encounter, and on several programs from
time to time has encountered, preproduction and/or production cost overruns
caused by increased material, labor or overhead costs, design or production
difficulties, increased quality requirements, redefined acceptance criteria on
government programs, and various other factors such as technical and
manufacturing complexity. The Company seeks recovery of such cost overruns from
the customer if they are caused by the action or inaction of the customer;
otherwise, such cost overruns will be, and in many cases have been, borne by the
Company.
Incident to the manufacture and sale by the Company of its products, the
Company is subject to possible liability by reason of (i) warranties against
defects in design, material and workmanship; (ii) potential product liability
responsibility arising out of the use of its products; and (iii) strict
liability arising from the disposal of certain wastes covered by environmental
protection laws. The Company also has varying contractual obligations to
maintain the ability to produce and service spare parts as long as there are
specified numbers of aircraft still in operation. Many of the Company's
contracts provide remedies ranging from actual damages to specified daily
penalties for late deliveries of products.
SUBCONTRACTORS
The competitive market has required the Company to make substantial financial
investments in programs on which it participates. Both to reduce the burden and
risk of such financial investments, and also in some cases to participate in
foreign programs, the Company has further subcontracted the design, development
and production of substantial portions of several of its major components to
other foreign and domestic corporations. In return, those
5
companies provided a portion of the investment and assumed a portion of the risk
associated with various of the Company's programs. The Company's performance and
ultimate profitability on these programs is dependent on the performance of its
subcontractors, including the timeliness and quality of their work, as well as
the ability of the Company to monitor and manage its subcontractors.
PROGRAM FUNDING
The highly competitive nature of the aerospace market has required the Company
to commit substantial financial resources, largely for working capital, to
participate with its customers on certain long-term programs. Those working
capital requirements consist primarily of nonrecurring pre-production costs such
as design and tooling, recurring costs for inventories and accounts receivables.
In some cases, a significant portion of the pre-production costs have been
advanced by the customer. However, in negotiating some contracts, the Company
has agreed to defer recovery of pre-production costs and instead to recover a
certain amount of such costs with the sale of each production unit over an
agreed number of production units plus spares equivalents. On some commercial
contracts, the Company receives advance payments with orders, or other progress
or advance payments, which assist the Company in meeting its working capital
requirements for inventories. On government contracts, the Company receives
progress payments for both pre-production and inventory costs. To reduce both
its pre-production funding requirements and the build-up of program inventories,
the Company has entered into agreements with subcontractors to provide a portion
of the program funding needs and has subcontracted to these entities substantial
portions of many of its programs. See "Subcontractors." Advances and progress
payments have varied in the past and are subject to change in the future based
on changes in both commercial and government procurement practices and
governmental regulations. Any future change could affect the Company's need for
program funding.
Accounts receivable balances vary in accordance with various payment terms and
other factors including the periodic receipt of large payments from customers
for reimbursement of non-recurring costs or for amounts which had been deferred
pending aircraft certification.
The Company's primary sources of program funding have been funds generated
from operations and borrowings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
in the Company's 1996 Annual Report to Shareholders. With respect to new
programs which are developed, the Company anticipates that it may team with
partners, or obtain financial commitments from one or more qualified
subcontractors, prior to entering bids for work.
PRINCIPAL CUSTOMERS
For a discussion of the Company's sales to its principal customers, see "Notes
to the Consolidated Financial Statements" in the Company's 1996 Annual Report to
Shareholders, Note 3--"Accounts Receivable--Sales."
BACKLOG
The Company's backlog is significant to its business because the production of
most Company products involves a long lead time from order to shipment date.
Firm backlog
6
represents the sales price of all undelivered units covered by customer orders.
Firm backlog includes units ordered by a customer although the Company and the
customer have not yet agreed upon a sales price. In such cases, the Company
records in backlog an amount it believes (based upon all available information)
is a reasonable price estimate.
The Company's firm backlog at July 31, 1996, was approximately $1.2 billion,
compared to $1.0 billion at July 31, 1995. Of such backlog, approximately $700
million is scheduled for delivery on or before July 31, 1997, with the balance
to be delivered in subsequent periods. A portion of the Company's expected
sales for fiscal 1997 is not included in firm backlog.
All of the Company's firm backlog is subject to termination or rescheduling at
the customer's convenience. The Company's contracts generally provide for
reimbursement of costs incurred, plus a reasonable profit on such costs, with
respect to any firm orders that are terminated. Historically, it has been rare
for a customer to cancel units in firm backlog because of its obligations to the
Company with respect to such units and its obligations to suppliers of
components other than nacelles and pylons, who frequently are producing
concurrently components for use with the units ordered from the Company.
COMPETITION
The Company's principal competition is Boeing (which in addition to being a
Company customer also manufactures nacelle systems and pylons for its own
aircraft), other significant aerospace corporations who have development and
production experience with respect to portions of the nacelle system, and the
companies to whom the Company has subcontracted various components and who could
(and have) bid on contracts in competition with the Company. Military aerospace
contractors are also potential competitors, as excess capacity created by
reductions in defense spending could cause some of these contractors to look to
expand in commercial markets.
Because of recent reductions in demand in the aircraft manufacturing industry,
excess production capacity exists in the market for a number of the Company's
principal products, which may result in increasingly intense price competition
for orders. While the Company believes it competes effectively, there can be no
assurance that the Company can maintain its share of the market for these
products.
The Company believes that its capabilities and technology, which range from
research and development through component design and testing, flight
certification assistance, component production and integration and airframe
production line assistance, contribute significantly to its market position.
The Company also believes that its contractual rights to participate on programs
for long periods of time or, in some cases, over the life of programs also
contribute to the maintenance of its market position.
Even with respect to its shorter term contracts, the Company is likely to
continue working as a subcontractor for the prime contractors well beyond the
end of the existing shorter term contracts. The Company has long standing
relationships with all of its significant customers. The Company's continued
participation on existing programs provides cost advantages to the prime
contractors because it avoids the cost of disassembling, moving, reassembling
and recalibrating the customized tooling used to manufacture aerospace products
which would be necessary if a program were transferred to a new subcontractor at
the end of a short-term contract. In addition, the delays inherent in such a
transfer are likely to disrupt the prime contractor's own production schedule as
the flow of deliveries from the subcontractor is
7
interrupted during the transfer. It is also generally more expensive for a new
subcontractor to begin producing products in the middle of an existing program
than it is for the Company to continue producing the required products. A new
subcontractor's employees must learn program specific tasks with which the
Company's employees will already be familiar. As a result of all of these
factors, it is unusual for a prime contractor to shift a major aerospace
subcontract from one manufacturer to another at the end of a short-term
contract.
Competitive factors include price, quality of product, design and development
capability combined with the ability to quickly bring a product to market,
ability to consistently achieve scheduled delivery dates, manufacturing
capabilities and capacity, technical expertise of employees, the desire or lack
thereof of airframe and engine manufacturers to produce certain components in-
house, and the willingness, and increasingly the ability, of the Company and
other nacelle manufacturers to accept financial and other risks in connection
with new programs.
RAW MATERIALS AND SUPPLIERS
The principal raw materials used by the Company are sheet, plate, rod, bar,
tubing, and extrusions made of aluminum, steel, Inconel and titanium; electrical
wire; rubber; adhesives; and advanced composite products. The principal
purchased components are aircraft engine equipment, custom machined parts, sheet
metal details, and castings and forgings. All of these items are procured from
commercial sources. Supplies of raw materials and purchased parts historically
have been adequate to meet the requirements of the Company. However, from time
to time, shortages have been encountered, particularly during high industry
production and demand. While the Company endeavors to assure the availability
of multiple sources of supply, there are many instances in which, either because
of a customer requirement or the complexity of the item, the Company may rely on
a single source. The failure of any of these single source suppliers or
subcontractors to meet the Company's needs could seriously delay production on a
program. The Company monitors the delivery performance, product quality and
financial health of its critical suppliers, including all of its single source
suppliers. Over the last ten years, which includes the period from 1987 through
1991 when the Company's sales grew rapidly, there have been occasions of
periodic, short-term delays from suppliers, but none of these delays has had a
material adverse effect on the Company or its ability to deliver products to its
customers.
EMPLOYEES
At July 31, 1996, the Company had approximately 3,800 full-time employees, of
whom approximately 1,016 were represented by the International Association of
Machinists and Aerospace Workers under agreements which expire on February 15,
2000; approximately 110 were represented by the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America under an
agreement which expires on October 29, 2000; and approximately 15 were
represented by the International Union of Operating Engineers under an agreement
which expires on June 25, 2000. The Company considers its relationship with its
employees generally to be satisfactory.
ENVIRONMENTAL MATTERS
As an international aerospace manufacturing corporation, the Company is
subject to foreign, federal, state and local laws and regulations that limit the
discharge of pollutants into the air, soil and water and establish standards for
the treatment, storage and disposal of
8
hazardous wastes. If the Company were to violate or otherwise to have liability
pursuant to any of these laws or regulations, it could be subject to judicial or
administrative enforcement proceedings requiring the Company to investigate the
nature and extent of any pollution it caused, to remediate such pollution, to
install control devices in its manufacturing facilities to reduce the amount of
pollutants entering the environment and to otherwise respond to orders and
requests of the courts and the various regulatory agencies. These proceedings
could result in the Company expending additional funds to satisfy judicial or
regulatory decisions. The Company does not believe that its environmental risks
are materially different from those of comparable manufacturing companies.
Nevertheless, the Company cannot provide assurances that environmental laws will
not adversely affect the Company's operations and financial condition in the
future. Environmental risks are generally excluded from coverage under the
company's current insurance policies. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Environmental Matters" and
"Notes to the Consolidated Financial Statements, Note 8, Commitments and
Contingencies," in the Company's 1996 annual report to shareholders. See, also,
Item 3, "Legal Proceedings," in this report.
The Company is involved in several proceedings and investigations related to
waste disposal sites and other environmental matters. See Item 3, "Legal
Proceedings," for a discussion of these matters, and additional suits and
matters that are pending or have been threatened against the Company.
Based upon presently available information, the Company believes that
aggregate costs in relation to all environmental matters of the Company will not
have a material adverse effect on the Company's financial condition, liquidity,
results of operations or capital expenditures.
RESEARCH AND DEVELOPMENT
The Company's research and development activities are designed to improve its
existing products and manufacturing processes, to enhance the competitiveness of
its new products, and to broaden the Company's aerospace product base.
Most of its product development is funded through regular production contracts
and other agreements, several of which are funded by the U.S. government. The
Company developed the world's first all composite nacelle and its large cascade
thrust reverser under such contracts. The Company also performs self-funded
research and development through which it developed proprietary products which
control noise and prevent ice formation on nacelles.
The Company seeks research and development contracts from the U.S. government
and from commercial customers in targeted areas of interest such as composite
materials and advanced low-cost processing and joining of new materials. From
time to time, the Company also enters into joint research and development
programs with its customers.
PATENTS AND PROPRIETARY INFORMATION
The Company has obtained patents and developed proprietary information which
it believes provide it with a competitive advantage. For example, the Company
holds patents on the DynaRohr family of honeycomb sound attenuation structures,
the state-of-the-art RohrSwirl system which prevents ice formation on the
leading edges of nacelles, and bonding processes for titanium and other metals.
In addition, the Company has developed proprietary information covering such
matters as nacelle design, sound attenuation, bonding of metallic and advanced
9
composite structures, material specifications and manufacturing processes. The
Company protects this information through invention agreements with its
employees and confidentiality agreements with third parties. Although the
Company believes that its patents and proprietary information allow it to
produce superior products, it also believes that the loss of any such patent or
disclosure of any item of proprietary information would not have a material
adverse effect on the Company.
MANUFACTURING
The Company's products are manufactured and assembled at its facilities in the
United States and Europe by an experienced work force. The Company considers
its facilities and equipment generally to be in good operating condition and
adequate for the purpose for which they are being used. In addition, it has a
substantial number of raw material suppliers and numerous subcontractors to
produce components, and in some cases, major assemblies.
The Company's European final assembly sites, which are located adjacent to the
Company's major European customer, Airbus, allow the Company to respond quickly
to customer needs. The Company believes that these European sites provide it
with advantages in obtaining certain contracts with Airbus because they allow
the Company to perform a portion of the required work in Europe.
OVERHAUL AND REPAIR FACILITIES
The Company has three overhaul and repair facilities which have been
officially certified by the Federal Aviation Administration ("FAA") of the U. S.
Department of Transportation to operate as FAA-approved repair stations. The
facilities are located in Fairhope, Alabama; Toulouse, France; and Loyang,
Singapore. The Singapore facility is jointly owned by the Company and Singapore
Aerospace Manufacturing Pte., Ltd. With the recent authorization of the
Singapore facility by the Civil Aviation Authority of Singapore to perform
overhaul and repair work, the Company has the full capability to overhaul and
repair nacelles and thrust reversers for airlines operating virtually anywhere
in the world.
In September 1996 the Company announced plans to expand its current European
overhaul and repair presence by opening an overhaul and repair facility in
Prestwick, Scotland in December 1996.
MISCELLANEOUS
No material portion of the Company's business is considered to be seasonal.
ITEM 2. PROPERTIES
- -------------------
All owned and leased properties of the Company are generally well maintained,
in good operating condition, and are generally adequate and sufficient for the
Company's business. The Company's properties are substantially utilized;
however, due to the downturn in the aerospace industry, the Company has excess
manufacturing capacity. All significant leases (except for leases associated
with industrial revenue bond financings) are renewable at the
10
Company's option on substantially similar terms, except for increases of rent
which must be negotiated in some cases.
The following table sets forth the location, principal use, approximate size
and acreage of the Company's major production facilities. Those which are owned
by the Company and its subsidiaries are owned free of material encumbrances,
except as noted below:
Owned Leased
----------------------------- ----------------------------------
Approximate Approximate
Square Feet Square Feet
Type of of Facility Approximate of Facility Approximate
Location Facility(1) (000) Acreage (000) Acreage
- ----------------------------- ----------- ----------- ------------ ----------- ------------
ALABAMA
Fairhope(2)................ A,B 123 70.6 -- --
Foley(2)................... A,B 343 163.7 -- --
ARKANSAS
Arkadelphia(3)............. A,B 224 65.2 -- --
Heber Springs(2)........... A,B 153 70.5 -- --
Sheridan(2)................ A,B 149 78.0 -- --
CALIFORNIA
Chula Vista................ A,B,C,D 2,743 97.5 11.8 57.5
Moreno Valley(4)........... A,B,C 82 8.9 -- --
Riverside.................. A,B,C,D 1,162 75.3 -- --
FRANCE
Toulouse/St. Martin........ A,B,C 132 7.0 18 3.2
Toulouse/Gramont(2)........ A,B 170 23.0 -- --
GERMANY
Hamburg.................... A,B 28 5.3 -- --
MARYLAND
Hagerstown................. A,B 423 55.7 -- --
TEXAS
San Marcos................. A,B 172 55.0 -- --
----------- ------------ ----------- ------------
Approximate Totals......... 5,904 775.7 29.8 60.7
- -------------
(1) The letters indicated for each location describe the principal (2) Subject to a capital lease.
activities conducted at that location:
A-Office (3) The completion of construction of this facility has
B-Manufacturing been deferred. The Company has taken an impairment write
C-Warehouse down on the facility and anticipates listing it for sale
D-Research and Testing in the near future.
(4) This facility has been vacated and listed for sale.
The above table does not include a 44,000 square foot service center located in
Singapore which is owned jointly by the Company and Singapore Aerospace
Manufacturing Pte. Ltd.
11
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
A. Accounts receivable and inventories include estimated recoveries on
constructive change claims that the Company has asserted with respect to costs
it incurred as a result of government imposed redefined acceptance criteria on
several government subcontracts. In connection with the Grumman F-14
subcontract, the Company filed Appeal No. 47139 (filed February 7, 1994) before
the Armed Service Board of Contract Appeals ("ASBCA"). In connection with the
Boeing E3/E6 subcontract, the Company filed Appeal No. 47430, (filed April 11,
1994) before the ASBCA. In the above appeals, the Company's customers are
sponsors of the claims, the U.S. Navy is the defendant, and the Company is
claiming monetary damages. Management believes that the amounts reflected in
the financial statements are within the range of estimates of the amounts for
which these matters will be resolved. The resolution of these matters may take
several years. See "Notes to the Consolidated Financial Statements, Note 3",
contained in the Company's 1996 Annual Report to Shareholders.
B. In June 1987, the U.S. District Court of Los Angeles, in U.S. et al. vs.
Stringfellow (United States District Court for the Central District of
California, Civil Action No. 83-2501 (JMI)), 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, along with related lawsuits, alleges that the defendants are jointly
and severally liable for all damage in connection with the Stringfellow
hazardous waste disposal site in Riverside County, California. In June 1989, a
federal jury and a special master appointed by the federal court found the State
of California also liable for the cleanup costs. On November 30, 1993, the
special master released his "Findings of Fact, Conclusion of Law and Reporting
Recommendations of the Special Master Regarding the State Share Fact Finding
Hearing". In it, he allocated liability between the State of California and
other parties. As this hearing did not involve the valuation of future tasks and
responsibilities, the order did not specify dollar amounts of liability. The
order, phrased in percentages of liability, recommended allocating liability on
the CERCLA claims as follows: 65% to the State of California and 10% to the
Stringfellow entities, leaving 25% to the generator/counterclaimants (including
the Company) and other users of the site (or a maximum of up to 28% depending on
the allocation of any Stringfellow entity orphan share). On the state law
claims, the special master recommended a 95% share for the State of California,
and 5% for the Stringfellow entities, leaving 0% for the
generator/counterclaimants. The special master's recommendation is subject to a
final decision and appeal. The Company and other generators of wastes disposed
at the Stringfellow site, which include numerous companies with assets and
equity significantly greater than the Company, are jointly and severally liable
for the share of cleanup costs for which the generators, as a group, ultimately
are found to be responsible. Notwithstanding, CERCLA liability is sometimes
allocated among hazardous waste generators who used a waste disposal site based
on the volume of hazardous waste they disposed of at the site. The Company is
the second largest generator of wastes disposed at the site by volume, although
it and certain other generators have argued the final allocation among
generators of their shares of cleanup costs should not be determined solely by
volume. The largest generator of
12
wastes disposed at the Stringfellow site, by volume, has indicated it is
significantly dependent on insurance to fund its share of any cleanup costs, and
that it is in litigation with certain of its insurers. The Company intends to
continue to defend vigorously these matters and believes, based on currently
available information, that the ultimate resolutions of these matters will not
have a material adverse effect on the financial position or results of
operations of the Company.
The Company filed claims against its comprehensive general liability insurers
for reimbursement of its cleanup costs at the Stringfellow site. These claims
are the subject of separate litigation, United Pacific Insurance Co., et al. vs.
Rohr Industries, Inc., et al., No. C634195 in the Los Angeles Superior Court.
The Company has reached settlements with its primary comprehensive general
liability insurance carriers and has retained the right to file future claims
against its excess carriers.
C. In December 1989, the Maryland Department of the Environment ("MDE")
served the Company with a Letter and Consent Order No. CO-90-093. The Consent
Order calls for investigation and remediation of chemicals detected in soil and
ground water at the Company's bonding facility in Hagerstown, Maryland. The
Company and MDE subsequently negotiated a mutually acceptable Consent Order
under which the Company has developed a work plan to determine the nature and
extent of the pollution at the bonding plant. The Company had acquired the
bonding plant from Fairchild Industries, Inc. ("Fairchild"), in September 1987
and Fairchild had agreed to retain responsibility for and to indemnify the
Company against any claims and fees in connection with any hazardous materials
or pollutants released into the environment at or near the bonding plant or any
other property before the closing date of the sale. On March 11, 1993, the
Company and Fairchild executed a settlement agreement pursuant to which
Fairchild substantially reimbursed the Company for past costs relating to
environmental investigations at the bonding plant. The parties also agreed on a
procedure to perform the work required under the MDE Consent Order. Based on
currently available information, the Company believes that the resolution of
this matter will not have a material adverse effect on the financial position or
results of operations of the Company.
D. In July 1994, the Department of Toxic Substances Control of the State of
California Environmental Protection Agency ("DTSC") filed an action against the
Company and other individuals and companies in the U. S. District Court for the
Eastern District of California, Case No. CV-F-94-5683-GEB DLB, seeking, among
other things, recovery of response costs approximating $1.3 million plus
interest and attorney fees. The demand for payment, which is joint and several,
is for expenses allegedly incurred by DTSC personnel in the oversight of the
cleanup of the Rio Bravo deep injection well disposal site in Shafter,
California. The cleanup is currently being conducted by a group of cooperating
potentially responsible parties ("PRPs"), including the Company ("the
Cooperating PRPs"). In January 1996, the DTSC and the Cooperating PRPs settled
the monetary claim for a reduced amount. In addition, the Cooperating PRPs have
agreed to plug and abandon the deep injection well which will resolve the last
remaining cleanup issues. Based on currently available information,
13
the Company believes that the resolution of this matter will not have a material
adverse effect on the financial position or results of operations of the
Company.
E. During fiscal 1993, Region IX of the United States Environmental
Protection Agency ("EPA") named the Company as a generator of hazardous wastes
that were transported to the Casmalia Resources Hazardous Waste Management
Facility (the "Casmalia Site") in Casmalia, California. In July 1996 the
Company and approximately 50 other cooperating generators executed a Consent
Decree and an Administrative Order on Consent which obligated the cooperating
generators to perform, jointly and severally, certain responsive actions at the
Casmalia Site prior to the entry of the Consent Decree. The Company does not
yet know the ability of all other PRPs at this site, which include companies of
substantial assets and equity, to fund their allocable share. Some PRPs have
made preliminary estimates of cleanup costs at this site of approximately $60 to
$70 million and the Company's share (based on estimated, respective volumes of
discharge into such site by all generators, all of which cannot now be known
with certainty) could approximate $1.8 million. Based on currently available
information, the Company believes that the resolution of this matter will not
have a material adverse effect on the financial position or results of
operations of the Company.
F. By letter dated July 14, 1994, the Company was notified by the State of
Washington's Department of Ecology that the Department believes the Company to
be a "potentially liable person" ("PLP") under the Model Toxics Control Act of
the Revised Code of Washington. The Company is alleged to have arranged for the
disposal or treatment of a hazardous substance or arranged with a transporter
for disposal or treatment of a hazardous substance at a facility in Washington
known as the Yakima Railroad Area. The Department has made a written
determination that the Company is a PLP. In June 1996, the Department advised
the Company that it has been drafting a uniform settlement offer to be extended
individually to the PLPs, specifically, those who, like the Company, allegedly
shipped carbon to the site. The settlement will be based on pounds of PCE-
containing carbon shipped to the site. The Department anticipates that the
settlement program will be ready to implement in or about September 1996. Based
on currently available information, the Company believes that the resolution of
this matter will not have a material adverse effect on the financial position or
results of operations of the Company.
G. In July 1996 the United States Environmental Protection Agency ('EPA")
advised the Company that it was working under the Superfund program to
investigate and clean up contamination from hazardous substances, particularly
polychlorinated biphenyls (PCBs), volatile organic compounds (VOCs), and waste
oils from the Hayford Bridge Groundwater Superfund Site located in St. Charles,
Missouri. The EPA further advised the Company that business records from the
site operator indicated that the Company sent materials to the facility for
services which may have included recycling, reclamation, generation, disposal,
treatment, storage, chemical processing, manufacture or other handling. The EPA
further requested the Company to respond to an information request concerning
the Company's use of the facility between 1963 and 1989. The Company is
currently researching its records in order to respond to the
14
information request. Based on currently available information, the Company
believes that the resolution of this matter will not have a material adverse
effect on the financial position or results of operations of the Company.
H. From time to time, various environmental regulatory agencies request
that the Company conduct certain investigations on the nature and extent of
pollution, if any, at its various facilities. For example, such a request may
follow the spill of a reportable quantity of certain chemicals. At other times,
the request follows the removal, replacement or closure of an underground
storage tank pursuant to applicable regulations. At present, the Company's Chula
Vista facility is conducting certain investigations pursuant to discussions with
the San Diego County Department of Health Services, Hazardous Materials
Management Division and the San Diego Regional Water Quality Control Board. The
Company intends to cooperate fully with the various regulatory agencies.
I. In addition to the litigation discussed above, from time to time the
Company is a defendant in lawsuits involving (i) claims based on the Company's
alleged negligence or strict liability as a manufacturer in the design or
manufacture of various products; (ii) claims based upon environmental protection
laws; and (iii) claims based on the alleged wrongful termination of its
employees due to, among other things, discrimination based on race, age, sex,
national origin, handicap status, sexual preference, etc. The Company believes
that in those types of cases now pending, or in claims known by the Company to
be asserted against it whether or not reduced to a legal proceeding, it either
has no material liability or any such liability is adequately covered by its
reserves or its liability insurance, subject to certain deductible amounts. The
Company is aware that various of its insurers may assert, and in some such cases
have asserted, that their insurance coverage does not provide protection against
punitive damages in any specific lawsuit. While there can be no assurances that
the Company will not ultimately be found liable for material punitive damages,
the Company does not now believe that it has an exposure to any material
liability for punitive damages.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
There is no information required to be submitted by the Company under this
Item.
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------------------------
As of September 11, 1996, the executive officers of the Company, in addition
to R. H. Rau, President and Chief Executive Officer, referred to at Item 10,
Part III, were as follows:
LAURENCE A. CHAPMAN, Senior Vice President and Chief Financial Officer, age
47, joined the Company in May 1994. Prior to that and since 1981, he worked
for Westinghouse Electric Company ("Westinghouse"). He had been the Vice
President and Treasurer of Westinghouse since January 1992. He was
previously the Chief Financial Officer of Westinghouse Financial Services,
Inc., a wholly-
15
owned subsidiary of Westinghouse. Prior to that, Mr. Chapman held positions in
Corporate Finance and Corporate Planning with Westinghouse.
JOHN R. JOHNSON, Senior Vice President, Programs, Technical Resources, and
Quality Assurance, age 59, has served in his present position since January
1994. Prior to that and since September 1979, he has served in other senior
management positions, including Senior Vice President, Programs and Support
from March 1993 to January 1994; Vice President, Government Business from
February 1990 to February 1993; Vice President, Planning from May 1989 to
February 1990; and Vice President, Manufacturing, Chula Vista, from April
1986 to May 1989. He joined the Company in September 1979.
RICHARD W. MADSEN, Vice President, General Counsel and Secretary, age 57,
has served in his present position since December 5, 1987. Prior to that and
since August 1979, he served as Secretary and head of the legal function, and
has been an employee of the Company since 1974.
ALVIN L. MAJORS, Vice President and Controller (Chief Accounting Officer),
age 56, has served in his present position since May 1989. Prior to that and
since December 1987 he served as the Company's Controller. Prior to that and
since 1971, he has served in other senior management positions. He has been
an employee of the Company since 1971.
DAVID R. WATSON, Senior Vice President - Customer Support and Business
Development, age 45, has served in his present position since March 1994,
assuming the title of Senior Vice President in June 1994. Prior to that and
since May 1991, he served as Vice President, Commercial Programs. In May
1989, he assumed the position of Vice President and General Manager of the
Company's Riverside facility. He has been an employee since February 1988
when he joined the Company as Vice President, Quality Assurance.
GRAYDON A. WETZLER, Senior Vice President, Operations, age 54, has served
in his present position since January 1994. Prior to that and since July
1993, he served as Vice President, Technical and Quality Assurance. From
November 1990 to July 1993, he served as Vice President Quality/Product
Assurance. From April 1987 to November 1990, he served as Vice President -
Management Information Systems. He has served in other senior management
positions. He has been an employee of the Company since 1979.
The terms of office of Messrs. Chapman and Madsen expire on December 7, 1996.
The initial three-year term of Mr. Rau's Employment Agreement terminated on July
31, 1996; however, the agreement is automatically extended for successive
periods of one year each unless the Board of Directors gives one year's advance
written notice of its intention to terminate the agreement. The other executive
officers named above serve at the pleasure of the Chief Executive Officer.
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
Although a cash dividend has not been paid since 1975, a 2-for-1 stock
dividend was paid in December 1985. Currently, under the terms of certain
covenants in several of the Company's principal financing agreements, the
Company may not pay cash dividends until after April 25, 1997. Thereafter, the
Company's ability to pay cash dividends is restricted substantially.
Other information required by this Item is set forth in the section headed
"Rohr Profile" in the Registrant's Annual Report to Shareholders for the fiscal
year ended July 31, 1996, and such information is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
The information required by this Item is set forth in the section headed
"Selected Financial Data" in the Company's Annual Report to Shareholders for the
fiscal year ended July 31, 1996, and such information is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- -------------
The information required by this Item is set forth in the section headed
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report to Shareholders for the fiscal year
ended July 31, 1996, and such information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The information required by this Item is set forth in the section headed
"Consolidated Balance Sheets," "Consolidated Statements of Operations,"
"Consolidated Statements of Shareholders' Equity," "Consolidated Statements of
Cash Flows," and "Notes to the Consolidated Financial Statements" in the
Company's Annual Report to Shareholders for the fiscal year ended July 31, 1996,
and such information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
There is no information required to be submitted by the Company under this
Item.
17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The information required under this Item is set forth in the section headed
"Election of Directors" in the Company's Proxy Statement for the 1996 Annual
Meeting of Shareholders for fiscal year ended July 31, 1996, and such
information is incorporated herein by reference. See also "Additional Item" at
Part I of this report.
Compliance with Section 16(a) of The Securities Exchange Act of 1934
- --------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10 percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
New York Stock Exchange. Officers, directors and greater than 10-percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on its review of the copies
of such forms received by it, or written representations from certain reporting
persons that no such forms were required for those persons, the Company believes
that, during fiscal year 1996, all filing requirements applicable to its
officers, directors, and greater than 10-percent beneficial owners were complied
with, except Mr. Rau, the Company's President and Chief Executive Officer, filed
a Form 4 in June 1996 reporting (i) the receipt of a grant of 40,000 shares of
the Company's common stock in 1993 (previously disclosed in the Company's Proxy
Statements since 1993) and (ii) the acquisition of 2,850 shares of the Company's
common stock by his wife in fiscal year 1995.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The information required by this Item is set forth in the section headed
"Executive Compensation and Other Information" and in the section headed
"Directors' Beneficial Ownership and Compensation" in the Company's Proxy
Statement for the 1996 Annual Meeting of Shareholders for fiscal year ended July
31, 1996, and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information required by this Item is set forth in the table headed
"Beneficial Ownership of Shares" in the Company's Proxy Statement for the 1996
Annual Meeting of Shareholders for fiscal year ended July 31, 1996, and such
information is incorporated herein by reference.
18
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
There is no information required to be submitted by the Company under this
Item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
The following consolidated financial statements of the Company and
consolidated subsidiaries, included in the Company's 1996 Annual Report to
Shareholders, are incorporated by reference in Item 8:
(a) 1. Financial Statements
--------------------
Consolidated Balance Sheets at July 31, 1996, and 1995
Consolidated Statements of Operations for Years Ended
July 31, 1996, 1995, and 1994
Consolidated Statements of Shareholders' Equity for
Years Ended July 31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows for Years
Ended July 31, 1996, 1995, and 1994
Notes to the Consolidated Financial Statements
(a) 2. Financial Statement Schedules
-----------------------------
The following consolidated financial statement schedule of the
Company and subsidiaries is included in Part IV of this report.
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, not
required under the instructions or the information is included in the
financial statements or notes thereto.
(a) 3. Index to Exhibits
-----------------
3.1 Restated Certificate of Incorporation of Rohr Industries, Inc.,
dated December 7, 1985, incorporated herein by reference to
Exhibit 3.1 filed with Form 10-K for fiscal year ended July 31,
1986.
3.2 Certificate of Designations of Series C Junior Participating
Cumulative Preferred Stock $1.00 Par Value of Rohr Industries,
Inc., dated August 15, 1986.
19
incorporated herein by reference to Exhibit 3.2 filed with Form
10-K for fiscal year ended July 31, 1986.
3.3 Certificate of Amendment to Restated Certificate of
Incorporation, dated December 9, 1986, incorporated herein by
reference to Exhibit 3.3 filed with Form 10-K for fiscal year
ended July 31, 1987.
3.4 Certificate of Amendment to Restated Certificate of
Incorporation, dated December 10, 1991, incorporated herein by
reference to Exhibit II filed with Form 8-K dated as of December
7, 1991.
3.5 Bylaws, as amended December 3, 1994, incorporated herein by
reference to Exhibit 3.8 filed with Form 10-Q for period ended
January 29, 1995.
4.1 Indenture, dated as of March 1, 1987, between Rohr Industries,
Inc., and Bankers Trust Company, trustee, relating to 9 1/4%
subordinated debentures, incorporated herein by reference to
Exhibit 4.1 filed with Form 10-Q for period ended May 2, 1993.
4.2 Indenture, dated as of October 15, 1987, between Rohr Industries,
Inc., and Bankers Trust Company, trustee, relating to 7%
convertible subordinated debentures, incorporated herein by
reference to Exhibit 4.2 filed with Form 10-Q for period ended
May 2, 1993.
4.3 Indenture, dated as of May 15, 1994, between Rohr, Inc., and IBJ
Schroder Bank and Trust Company, trustee, relating to 11 5/8%
senior notes, incorporated herein by reference to Exhibit 4.5
filed with Form 10-Q for period ended May 1, 1994.
4.4 Indenture, dated as of May 15, 1994, between Rohr, Inc., and The
Bank of New York, trustee, relating to 7 3/4% convertible
subordinated notes, incorporated herein by reference to Exhibit
4.6 filed with Form 10-Q for period ended May 1, 1994.
4.5 Amended and Restated Note Agreement, dated as of January 1, 1996,
relating to the 9.35% Series A Senior Notes due January 29, 2000,
the 9.35% Series B Senior Notes due January 29, 2000, and the
9.33% Series C Senior Notes due December 15, 2001, incorporated
herein by reference to Exhibit 4.5.2 filed with Form 10-Q for
period ended January 28, 1996.
4.7 Amended and Restated Rights Agreement, dated as of April 6, 1990,
incorporated herein by reference to Item 7 of Form 8-K dated as
of April 6, 1990.
4.7.1 Amendment No. 1 to Amended and Restated Rights Agreement,
incorporated herein by reference to Exhibit 4.7, filed with Form
10-Q for period ended January 28, 1996.
20
10.1 Rohr Industries, Inc., Directors Retirement Plan, as amended
through the Seventh Amendment, incorporated herein by reference
to Exhibits 10.1 through 10.7, as set forth in Form 10-K for
fiscal year ended July 31, 1994.
10.2 Rohr Industries, Inc., Supplemental Retirement Plan (Restated
1983), as amended through the Twenty-seventh Amendment,
incorporated herein by reference to Exhibits 10.2.1 through
10.2.27, as set forth in Form 10-K for fiscal year ended July 31,
1994.
10.2.28 Twenty-eighth Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), dated April 7, 1995,
incorporated herein by reference to Exhibit 10.2.28, filed with
Form 10-K for fiscal year ended July 31, 1995.
10.2.29 Twenty-ninth Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), dated April 7, 1995,
incorporated herein by reference to Exhibit 10.2.29, filed with
Form 10-K for fiscal year ended July 31, 1995.
10.2.30 Thirtieth Amendment to Rohr Industries, Inc., Supplemental
Retirement Plan (Restated 1983), dated July 24, 1995,
incorporated herein by reference to Exhibit 10.2.30, filed with
Form 10-K for fiscal year ended July 31, 1995.
*10.2.31 Thirty-First Amendment to Rohr, Inc. Supplemental Retirement
Plan, dated September 13, 1996.
*10.2.32 Thirty-Second Amendment to Rohr, Inc. Supplemental Retirement
Plan, dated September 13, 1996.
10.3 Rohr, Inc. 1991 Stock Compensation for Non-Employee Directors,
incorporated by reference to Exhibit 10.5 filed with Form 10-K
for fiscal year ended July 31, 1992.
10.4 Rohr Industries, Inc., Management Incentive Plan (Restated 1982),
as amended through the Fifteenth Amendment, incorporated herein
by reference to Exhibits 10.4.1 through 10.4.15, as set forth in
Form 10-K for fiscal year ended July 31, 1994.
*10.4.1 Sixteenth Amendment to Rohr, Inc. Management Incentive Plan
(Restated 1982), dated June 7, 1996.
*10.4.2 Seventeenth Amendment to Rohr Industries, Inc. Management
Incentive Plan (Restated 1982), dated September 13, 1996.
10.5 Rohr Industries, Inc., 1988 Non-Employee Director Stock Option
Plan, incorporated herein by reference to Exhibit 10.17 filed
with Form 10-K for fiscal year ended July 31, 1989.
10.6 Performance Unit Plan as amended through January 7, 1993,
incorporated herein by reference to Exhibit 10.13, filed with
Form 10-Q for period ended May 2, 1993.
21
10.7 Employment Agreement with Robert H. Rau, incorporated herein by
reference to Exhibit 10.12, filed with Form 10-Q for period ended
May 2, 1993.
*10.7.1 First Amendment to Employment Agreement with Robert H. Rau.
10.8 Employment Agreement with L. A. Chapman, incorporated herein by
reference to Exhibit 10.12, filed with Form 10-K for fiscal year
ended July 31, 1994.
10.13 Credit Agreement, dated as of April 26, 1989, among Rohr
Industries, Inc., as Borrower, and Citibank, N. A., Bankers Trust
Company, The First National Bank of Chicago and Wells Fargo Bank,
N. A., and Citibank, N.A., as Agent, as amended through the
Seventh Amendment, incorporated herein by reference to Exhibits
10.13 through 10.13.7, as set forth in Form 10-K for the fiscal
year ended July 31, 1994.
10.13.8 Eighth Amendment to Credit Agreement, dated as of November 29,
1994, incorporated herein by reference to Exhibit 10.13.8, filed
with Form 10-K for fiscal year ended July 31, 1995.
10.13.9 Ninth Amendment to Credit Agreement, dated as of June 30, 1995,
incorporated herein by reference to Exhibit 10.13.9, filed with
Form 10-K for fiscal year ended July 31, 1995.
10.13.10 Tenth Amendment to Credit Agreement, dated as of November 17,
1995, incorporated herein by reference to Exhibit 10.13.10, filed
with Form 10-Q for period ended January 28, 1996.
10.13.11 Eleventh Amendment to Credit Agreement, dated as of January 15,
1996, incorporated herein by reference to Exhibit 10.13.11, filed
with Form 10-Q for period ended January 28, 1996.
10.14 Lease Agreements, dated as of September 14, 1992, by and between
Rohr, Inc., as lessor, and State Street Bank and Trust Company of
California, National Association and W. Jeffrey Kramer, Trustees,
as lessee, incorporated herein by reference to Exhibit 10.22
filed with Form 10-K for fiscal year ended July 31, 1992.
10.15 Sublease Agreements, dated as of September 14, 1992, by and
between State Street Bank and Trust Company of California,
National Association and W. Jeffrey Kramer, Trustees, as
sublessor, and Rohr, Inc., as sublessee, as amended, supplemented
and modified through July 31, 1994, incorporated herein by
reference to Exhibits 10.15 through 10.15.5, as set forth in Form
10-K for the fiscal year ended July 31, 1994.
10.15.6 Third Amendment Agreement, dated as of November 29, 1994, to
Sublease Agreement, dated as of September 14, 1992, incorporated
herein by reference to Exhibit 10.15.6, filed with Form 10-K for
fiscal year ended July 31, 1995.
22
10.15.7 Fourth Amendment Agreement, dated as of June 30, 1995, to
Sublease Agreement, dated as of September 14, 1992, incorporated
herein by reference to Exhibit 10.15.7, filed with Form 10-K for
fiscal year ended July 31, 1995.
10.15.8 Fifth Amendment Agreement, dated as of November 17, 1995, to
Sublease Agreement, dated as of September 14, 1992, incorporated
herein by reference to Exhibit 10.15.8, filed with Form 10-Q for
period ended January 28, 1996.
10.15.9 Sixth Amendment Agreement, dated as of January 19, 1996, to
Sublease Agreement, dated as of September 14, 1992, incorporated
herein by reference to Exhibit 10.15.9, filed with Form 10-Q for
period ended January 28, 1996.
10.16 Pooling and Servicing Agreement, dated as of December 23, 1992,
among Rohr, Inc., RI Receivables, Inc., and Bankers Trust
Company, as Trustee, as amended through the Second Amendment,
incorporated herein by reference to Exhibits 10.16, through
10.16.2, as set forth in Form 10-K for the fiscal year ended
July 31, 1994.
10.17 Receivables Purchase Agreement, dated as of December 23, 1992,
among Rohr, Inc., and RI Receivables, Inc., incorporated herein
by reference to Exhibit 10.11, filed with Form 10-Q for period
ended May 2, 1993.
*11.1 Calculation of Primary Earnings per Share.
*11.2 Calculation of Fully Diluted Earnings per Share.
*13 Annual Report to Shareholders for fiscal year ended July 31,
1996. (The Annual Report, except for the portions thereof which
are expressly incorporated by reference in the Form 10-K, is
being furnished for the information of the Commission and is not
to be deemed "filed" as part of the Form 10-K.)
*23. Consent of Deloitte & Touche.
*27. Financial Data Schedule. (Filed with EDGAR filing only.)
(b) Reports on Form 8-K for Fourth Quarter of Fiscal 1996
-----------------------------------------------------
There were no reports on Form 8-K filed by the Company for the fourth
quarter of fiscal 1996.
(c) Exhibits required by Item 601 of Regulation S-K
-----------------------------------------------
See Subparagraph (a) above.
23
(d) Financial Statements required by Regulation S-X
-----------------------------------------------
See Subparagraph (a) and (b) above.
- ---------------
* Exhibits filed with this report.
24
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Rohr, Inc.:
We have audited the consolidated financial statements of Rohr, Inc., as of July
31, 1996 and 1995, and for each of the three years in the period ended July 31,
1996, and have issued our report thereon dated September 11, 1996; such
consolidated financial statements and report are included in your 1996 Annual
Report to Shareholders and are incorporated herein by reference. Our audits
also included the financial statement schedule of Rohr, Inc., listed in Item
14(a)(2). This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Deloitte & Touche L L P
San Diego, California
September 11, 1996
25
ROHR, INC., AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JULY 31, 1996, 1995, AND 1994
(dollars in thousands)
Charged Balance
Balance at to Costs at
beginning and Accounts end of
of period Expenses written off period
________ ________ _______ _______
Reserve for bad debts:
1996 $12,922 $ 128 $ -- $13,050
1995 21,422 (8,500) 12,922
1994 11,122 10,300 -- 21,422
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ROHR, INC.
(Registrant)
By: /s/ R. H. Rau
-------------
R. H. Rau
President and Chief Executive Officer
By: /s/ L. A. Chapman
-----------------
L. A. Chapman
Senior Vice President and Chief
Financial Officer
By: /s/ A. L. Majors
----------------
A. L. Majors
Vice President and Controller
(Chief Accounting Officer)
Date: September 11, 1996
27
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
- -------------------- --------- ------------------
/s/ W. Barnes Director SEPTEMBER 11, 1996
- -------------
W. Barnes
/s/ E. E. Covert Director SEPTEMBER 11, 1996
- ----------------
E. E. Covert
/s/ S. F. Iacobellis Director SEPTEMBER 11, 1996
- --------------------
S. F. Iacobellis
/s/ V. N. Marafino Director SEPTEMBER 11, 1996
- ------------------
V. N. Marafino
/s/ D. Larry Moore Director SEPTEMBER 11, 1996
- ------------------
D. Larry Moore
/s/ R. M. Price Director SEPTEMBER 11, 1996
- ---------------
R. M. Price
/s/ R. H. Rau Director SEPTEMBER 11, 1996
- -------------
R. H. Rau
/s/ W. P. Sommers Director SEPTEMBER 11, 1996
- -----------------
W. P. Sommers
/s/ J. D. Steele Director SEPTEMBER 11, 1996
- ----------------
J. D. Steele
/s/ J. R. Wilson Director SEPTEMBER 11, 1996
- ----------------
J. R. Wilson
28