FY97: THIRD QUARTER
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended May 4, 1997
Commission File Number 1-6101
ROHR, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1607455
(State of other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
850 LAGOON DRIVE, CHULA VISTA, CALIFORNIA 91910-2098
(Address of principal executive offices)
(619) 691-4111
(Registrant's Telephone No.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of May 22, 1997, there were 25,295,794 shares of the Registrant's common
stock outstanding.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROHR, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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(in thousands except for share data)
------------------------------------
MAY 4, JULY 31,
1997 1996
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(UNAUDITED)
ASSETS
- ------
Cash and cash equivalents $ 55,839 $ 88,403
Short-term investments 11,529 -
Accounts receivable 160,874 129,523
Inventories:
Work-in-process 428,943 423,312
Raw materials, purchased parts and supplies 27,656 26,220
Less customers' progress payments and advances (42,565) (67,165)
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Inventories - net 414,034 382,367
Prepaid expenses and other current assets 8,298 14,587
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TOTAL CURRENT ASSETS 650,574 614,880
PROPERTY, PLANT, AND EQUIPMENT - Net 189,208 196,052
DEFERRED TAX ASSET 139,095 156,863
PREPAID PENSION COSTS 84,823 -
OTHER ASSETS 36,540 64,742
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$ 1,100,240 $ 1,032,537
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LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Trade accounts and other payables $ 161,806 $ 125,974
Salaries, wages, and benefits 33,204 44,094
Deferred income tax liability 56,250 56,250
Current portion of long-term debt 29,679 25,962
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TOTAL CURRENT LIABILITIES 280,939 252,280
LONG-TERM DEBT 452,056 481,481
PENSION AND POST-RETIREMENT OBLIGATIONS - Long-Term 19,693 46,096
OTHER OBLIGATIONS 16,691 17,503
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value per share,
10 million shares authorized, none issued - -
Common stock, $1 par value per share,
authorized 50,000,000 shares; issued and outstanding
25,293,401 and 22,329,793 shares, respectively 25,293 22,330
Additional paid-in capital 189,887 142,656
Retained earnings 115,681 96,622
Minimum pension liability adjustment - (26,431)
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TOTAL SHAREHOLDERS' EQUITY 330,861 235,177
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$ 1,100,240 $ 1,032,537
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Page 1
ROHR, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
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(in thousands except for per share data)
----------------------------------------
THIRD QUARTER ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
MAY 4, APRIL 28, MAY 4, APRIL 28,
1997 1996 1997 1996
----------- ----------- ----------- ----------
Sales $ 249,308 $ 203,711 $ 664,487 $ 534,813
Costs and Expenses 214,360 177,810 581,414 468,414
General & Administrative Expenses 7,127 7,336 20,926 19,311
----------- ----------- ----------- -----------
Operating Income 27,821 18,565 62,147 47,088
Interest Income 1,075 661 3,688 2,321
Interest Expense 10,806 11,491 33,964 36,451
Charge for Exchange of Convertible Notes - 827 - 4,902
----------- ----------- ----------- -----------
Income Before Taxes on Income 18,090 6,908 31,871 8,056
Taxes on Income 7,272 2,778 12,812 3,239
----------- ----------- ----------- -----------
Net Income $ 10,818 $ 4,130 $ 19,059 $ 4,817
=========== =========== =========== ===========
Net Income per Share:
Primary $ 0.42 $ 0.19 $ 0.76 $ 0.24
=========== =========== =========== ===========
Assuming Full Dilution $ 0.39 $ 0.18 $ 0.73 $ 0.24
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Cash Dividends per Share
of Common Stock $ - $ - $ - $ -
=========== =========== =========== ===========
Weighted Average Common Stock and
Common Stock Equivalents Used to
Compute Net Income Per Share 26,053 22,312 25,202 20,168
Page 2
ROHR, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
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(in thousands)
-------------
THIRD QUARTER ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
MAY 4, APRIL 28, MAY 4, APRIL 28,
1997 1996 1997 1996
----------- ----------- ----------- -----------
OPERATING ACTIVITIES:
Net income $ 10,818 $ 4,130 $ 19,059 $ 4,817
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 5,490 5,252 15,839 15,857
Charge for exchange of convertible notes - 827 - 4,902
Changes due to (increase) decrease in operating assets:
Accounts receivable (25,884) (34,385) (51,418) (41,595)
Inventories - net (7,419) 16,911 (31,667) (30,615)
Prepaid expenses and other assets 1,506 (1,030) 6,779 2,904
Changes due to increase (decrease) in operating liabilities:
Accounts payable and other liabilities 2,467 (8,631) 24,602 1,346
Pension and post-retirement obligations 1,403 (3,235) (200) 368
Taxes on income and deferred taxes 7,187 2,841 12,278 2,879
Other (1,198) (645) (1,871) 293
----------- ----------- ----------- -----------
Net cash used in operating activities (5,630) (17,965) (6,599) (38,844)
----------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Proceeds from sale of assets 87 2,921 2,455 3,060
Net sale (purchase) of short-term investments 1,382 - (11,529) -
Purchase of Property, Plant, and Equipment (4,247) (2,676) (11,618) (7,912)
Proceeds from sale of Rohr Credit Corporation - - 20,142 -
Other 77 (216) 37 (70)
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Net cash provided by (used in) investing activities (2,701) 29 (513) (4,922)
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FINANCING ACTIVITIES:
Annual principal payment on 9.35% senior notes - (12,025) (12,025) (12,025)
Annual principal payment on 9.33% senior notes - - (8,850) -
Proceeds from Long-term borrowings - 1,106 - 1,106
Increase (decrease) in short-term borrowings - 448 (3,615) 2,427
Repayment of other long-term borrowings (432) (445) (517) (1,379)
Cash collateral for receivable sales program (75) 8,850 (75) 6,351
Other (20) (154) (370) 1,138
----------- ----------- ----------- -----------
Net cash used in financing activities (527) (2,220) (25,452) (2,382)
----------- ----------- ----------- -----------
DECREASE IN CASH AND
CASH EQUIVALENTS (8,858) (20,156) (32,564) (46,148)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 64,697 58,592 88,403 84,584
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 55,839 $ 38,436 $ 55,839 $ 38,436
=========== =========== =========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest, net of amount capitalized $ 13,671 $ 13,863 $ 36,402 $ 38,974
Income taxes 74 94 556 360
Non-cash financing activities:
Exchange of 7.75% convertible notes - (5,614) - (33,735)
Change in equity due to exchange of 7.75%
convertible notes - 6,441 - 38,637
Charge for exchange of convertible notes - (827) - (4,902)
Rohr common stock contribution to defined benefit plans - - 48,000 -
Page 3
ROHR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
The consolidated balance sheet as of May 4, 1997, and statements of earnings and
cash flows for the third quarter and nine months ended May 4, 1997, and April
28, 1996, reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim periods. Financial
results for interim periods are not necessarily indicative of results to be
expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These consolidated financial statements should
be read in conjunction with the financial statements included in the Form 10-K
for the year ended July 31, 1996.
In February 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share." This
statement specifies the computation, presentation, and disclosure requirements
for earnings per share for entities with publicly held common stock. SFAS No.
128 is not in effect for the Company in the third quarter of fiscal 1997, but
will be in effect for financial statements issued for periods ending after
December 15, 1997, including interim periods. The Company does not expect the
adoption of SFAS No. 128 to have a material effect on its net income per share.
CONTINGENCIES
In June 1987, the U.S. District Court of Los Angeles, in U.S. et al, vs.
Stringfellow, granted partial summary judgment against the Company and 14 other
defendants on the issue of liability under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"). This suit alleges that the
defendants are jointly and severally liable for all 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, Conclusions 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
Page 4
follows: 65 percent to the State of California and 10 percent to the
Stringfellow entities, leaving 25 percent to the generator/counterclaimants
(including the Company) and other users of the site (or a maximum of up to 28
percent depending on the allocation of any Stringfellow entity orphan share). On
the state law claims, the special master recommended a 95 percent share for the
State of California, and 5 percent for the Stringfellow entities, leaving 0
percent for the generator/counterclaimants. This special master's finding is
subject to a final decision and appeal. The Company and the 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, may ultimately be 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 at the
site. The Company is the second largest generator of waste by volume disposed at
the site, although it and certain other generators have argued the final
allocation of cleanup costs among generators should not be determined solely by
volume. The largest volume generator of wastes disposed at the Stringfellow site
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.
From inception to date, the Company has expended approximately $3.9 million on
cleanup costs for this site. The Company also estimates that its future cleanup
expenditures for this site are likely to range from $5 million to $8 million
over and above the sums spent to date, as explained in greater detail in the
Company's Annual Report on Form 10-K for fiscal 1996 in "Management's Discussion
and Analysis of Financial Condition and Results of Analysis -- Environmental
Matters."
The Company intends to continue to vigorously defend itself in the Stringfellow
matter. Based upon the information currently available to it, including the fact
that the Company has reached settlement agreements with its primary
comprehensive general liability insurers with respect to this matter and has
established reserves in connection with its expected future cleanup liabilities,
the Company believes that the ultimate resolution of this matter will not have a
material adverse effect on the financial position, liquidity or results of
operations of the Company.
The Company is involved as plaintiff or defendant in various other legal and
regulatory actions and inquiries incident to its business, none of which are
believed by management to have a material adverse effect on the financial
position, liquidity or results of operations of the Company.
Page 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's analysis of operating results for the third quarter and nine months
ended May 4, 1997, and April 28, 1996, is presented below. Material developments
in the Company's liquidity and capital resources since July 31, 1996, are also
presented. These discussions should be read in conjunction with the financial
statements and notes thereto and Management's Discussion and Analysis thereof
included in the Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1996.
OUTLOOK
As a result of the growth in air travel and the need to replace aging aircraft,
the demand for new commercial aircraft has been increasing. The increased load
factor of commercial aircraft, stable fare structures, and aggressive cost
reduction measures have substantially improved commercial airline profitability.
Airline operators have responded by ordering large quantities of new commercial
aircraft. Industry orders for new commercial jet aircraft in calendar year 1996
were 1,113 compared to 662 and 304 in calendar years 1995 and 1994,
respectively. Industry analysts continue to predict a potentially large
replacement market for commercial aircraft driven by noise legislation and the
need to replace aging fleets.
Delivery rates of commercial aircraft have been accelerating. The Company's
sales for the nine months ending May 4, 1997, reflect this acceleration of
deliveries and fiscal year 1997 sales are anticipated to exceed fiscal year 1996
sales by more than 20 percent. The Company's current projections indicate
that sales will continue to increase in fiscal 1998, although at a reduced rate.
In December 1996, The Boeing Company and McDonnell Douglas Corporation announced
their intent to merge. Boeing produces aircraft which compete with models
produced by McDonnell Douglas. Although Boeing and McDonnell Douglas have said
that they will continue to produce McDonnell Douglas aircraft in response to
customer demand, aerospace analysts differ as to the anticipated effect of the
proposed merger on the future production of McDonnell Douglas aircraft.
Approximately 25 percent of the Company's products, by revenue, are manufactured
for installation on the McDonnell Douglas MD-90, MD-95 (in development), MD-80,
and MD-11 aircraft programs.
Page 6
In its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1997, McDonnell Douglas reported that it had received only 4 percent of the
orders for commercial aircraft during the past year and that several of its long
standing customers have recently chosen Boeing or Airbus Industrie in major
competitions for a significant number of aircraft. In addition, McDonnell
Douglas reported that Delta Airlines, as part of its fleet rationalization
strategy, intends in time to replace all of its current fleet of 16 MD-90
aircraft, and is considering its alternatives for the 15 MD-90 aircraft it has
on firm order. McDonnell Douglas reported that Delta also has many options for
this aircraft. Even though it has an enforceable contract for the firm orders,
McDonnell Douglas reported that it and Delta are forming a joint task force to
seek a business resolution to these firm orders.
As of April 1997, 46 MD-90 aircraft had been delivered by McDonnell Douglas to
its customers. Industry sources indicate that firm orders exist for 101
additional aircraft, and options and/or letters of intent exist for an
additional 85 aircraft (down from 104 aircraft at the end of the prior quarter).
These firm orders, options and/or letters of intent do not reflect any
adjustments for the uncertainties concerning Delta's MD-90 fleet rationalization
strategy discussed above. In light of low recent order activity for the MD-90
aircraft as compared to that of competitive aircraft and the anticipated merger
of McDonnell Douglas and Boeing, several aerospace analysts are less than
optimistic about the future of this aircraft.
At May 4, 1997, the Company's unrecovered investment on the MD-90 program was
$76.7 million in inventoried preproduction and excess-over-average costs, and
$18.1 million in production inventory. The Company's investment in this program
is recovered over the delivery of components for the aircraft. At May 4, 1997,
the Company had delivered components for 61 MD-90 aircraft and has additional
firm orders for components scheduled to be delivered within the next 12 months
for 39 MD-90 aircraft. Assuming these firm orders are delivered but no further
orders are obtained, the Company estimates that it could incur a pre-tax loss
approximating $75 million, which includes investments then remaining in
preproduction and excess-over-average inventory and other potential obligations
related to the program. If the Company ultimately delivers components for the
firm orders, options and letters of intent that McDonnell Douglas has received
(232 aircraft in total), the Company anticipates that it would recover all of
its program costs and not incur a loss. In view of the uncertainty as to the
number of aircraft which may be delivered, the Company decided, during the
second quarter of fiscal 1997, to discontinue the recognition of profits on the
MD-90 program.
The McDonnell Douglas MD-95 program is a new 100 passenger aircraft currently
under development. The Company has invested $41 million for design and
development costs on the
Page 7
MD-95 program through May 4, 1997. The Company anticipates spending an
additional $35 million for preproduction costs through mid 1999, the aircraft's
scheduled Federal Aviation Administration (FAA) certification date. Most of this
remaining $35 million of expenditures will occur prior to the flight test
program, which is scheduled to commence in April, 1998. If the program is
canceled prior to FAA certification, the Company expects substantial recovery of
these costs. If the aircraft is certified and actively marketed, the amount of
these costs and initial production start-up costs recovered by the Company will
depend upon the number of aircraft delivered. To date, there are 50 firm orders
and 50 options from the launch customer, ValuJet.
The Company continues to closely monitor the market demand for both the MD-90
and the MD-95 aircraft and to evaluate the Company's ability to recover its
investment in these programs. In addition, the Company produces nacelles and/or
components for many aircraft that compete with the MD-90 and MD-95, which could
lessen the impact in the long term from reduced sales on these programs.
The McDonnell Douglas MD-11 program, on which the Company provides pylons and
nacelles, and the MD-80 program, on which the Company provides nacelles, have
been in production for several years. The Company has previously recovered its
initial investment on these programs. As a result of the maturity of these
programs and existing contractual provisions, the Company does not expect to
incur any losses in the event of a reduction in program quantity.
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Forward-Looking Information is Subject to Risk and Uncertainty
This document contains forward-looking statements, as defined in the Private
Securities Litigation Reform Act of 1995, that involve risk and uncertainty.
Actual sales in fiscal year 1997 and 1998 may be materially less than the sales
projected in the forward-looking statements if the Company's customers cancel or
delay current orders or reduce the rate at which the Company is building or
expects to build products for such customers. The aggregate operating results
that the Company will experience on the MD-90 program may differ from those
projected in the forward-looking statements if the timing of the Company's sales
on that program occur at a substantially different rate than currently estimated
by the Company, if the Company's manufacturing performance on that program fails
to improve in accordance with the learning curves currently projected by the
Company, if the Company fails to resolve contractual items with its customer and
suppliers as currently anticipated, if spare sales on this program are
substantially different than currently projected by the Company, or if one or
more suppliers to the Company on that program fail to meet their contractual
obligations. The additional preproduction investment that the Company will make
on the MD-95 program may differ from that projected in the forward-looking
statements if the cost of MD-95 product and tooling design, tooling
manufacturing and production planning exceeds the Company's estimates.
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Page 8
RESULTS OF OPERATIONS
Third Quarter Fiscal Year 1997 Compared to Third Quarter Fiscal Year 1996
Sales for the third quarter of fiscal 1997 were $249.3 million, up 22 percent
from the $203.7 million reported for the third quarter of fiscal 1996. The
increased sales resulted primarily from increased deliveries on a number of
commercial programs, reflecting increased customer delivery schedules.
The Company's operating income for the third quarter of fiscal 1997 was $27.8
million, an operating margin of 11.2 percent. Operating income for the same
period of the prior fiscal year was $18.6 million, an operating margin of 9.1
percent. Operating income has improved due to the increase in sales and the
resolution of various program issues as discussed below. Operating income was
adversely impacted by the discontinuance of the recognition of profit on the
MD-90 program in the second quarter of fiscal 1997 due to market uncertainties
as discussed in the "Outlook" section. Historically, operating results for any
period, including the third quarter of fiscal 1997, have included the resolution
of various program issues, the amount of which can vary from period to period.
Of significance to the third quarter of fiscal 1997 was the resolution of claims
against the U.S. Navy on the E3/E6 program, resulting in increased sales and
operating profit of $3.5 million.
Net interest expense was $9.7 million for the third quarter of fiscal 1997
compared to $10.8 million for the same period of the prior fiscal year. Interest
income increased reflecting higher levels of invested funds, while interest
expense declined primarily as a result of reduced debt levels.
During the third quarter of the prior fiscal year, the Company negotiated the
exchange of 600,000 shares of the Company's common stock for $5.6 million of its
7.75% Convertible Subordinated Notes due 2004. The shares of common stock issued
in the exchange in excess of the shares required for conversion were valued at
$0.8 million, which was expensed during the third quarter of the prior year.
Net income for the third quarter of fiscal 1997 was $10.8 million or 42 cents
per share. This compares to net income of $4.1 million or 19 cents per share for
the third quarter of the prior fiscal year. The charge due to the exchange of
the convertible notes, as discussed above, reduced net income by $0.5 million or
2 cents per share in the third quarter of the prior fiscal year.
Page 9
First Nine Months of Fiscal 1997 Compared to First Nine Months of Fiscal 1996
In the first nine months of fiscal 1997 sales increased to $664.5 million, up 24
percent from the $534.8 million reported for the first nine months of fiscal
1996. The increase in sales resulted from increased deliveries on a number of
commercial programs, particularly the Airbus Industrie A320 and A340 and the
McDonnell Douglas MD-90 programs.
Operating income for the first nine months of fiscal 1997 was $62.1 million, an
operating margin of 9.4 percent. Operating income for the same period of the
prior year was $47.1 million, an operating margin of 8.8 percent. Operating
income has improved due to the increase in sales and the resolution of various
program issues as discussed below. Operating income was adversely impacted by
the discontinuance of the recognition of profit on the MD-90 program during the
second quarter of fiscal 1997 due to market uncertainties as discussed in the
"Outlook" section. Historically, operating results for any period, including the
first nine months of fiscal 1997, have included the resolution of various
program issues, the amount of which can vary from period to period. The first
nine months of fiscal 1997 benefited from the resolution of contractual issues
on the E3/E6 and Titan programs.
Net interest expense declined from $34.1 million in the first nine months of
fiscal 1996 to $30.3 million in the first nine months of this fiscal year.
Interest income increased due to higher levels of invested funds, while interest
expense declined primarily as a result of reduced debt levels.
As discussed above, during the first nine months of the prior fiscal year, the
Company incurred a charge of $4.9 million resulting from the exchange of 3.6
million shares of the Company's stock for $33.7 million of its 7.75% Convertible
Subordinated Notes due 2004.
Net income for the first nine months of fiscal 1997 was $19.1 million or 76
cents per share. During the same period of the prior year, the Company reported
net income of $4.8 million or 24 cents per share. The charge due to the exchange
of the convertible notes reduced net income by $2.9 million or 15 cents per
share in the first nine months of the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
On May 4, 1997, the Company had $67.4 million of cash, cash equivalents, and
short-term investments. The Company has requested and received proposals from
several banks for a replacement for its prior revolving credit agreement, which
expired on April 25, 1997, as scheduled. The Company is evaluating these
proposals in light of its requirements and expects to have a satisfactory credit
agreement in place prior to any need for funds from such agreement.
Page 10
Over the next several years, the Company expects to increase its investment in
production inventory in connection with increased deliveries on existing
programs. The Company continues to seek business opportunities which would
require future investments. The Company believes that its financial resources
will be adequate to meet such requirements during such period.
Net cash used in operating activities for the third quarter of fiscal year 1997
was $5.6 million compared to $18.0 million for the third quarter of the prior
fiscal year. Net cash used in operating activities for the first nine months of
fiscal 1997 was $6.6 million compared to $38.8 million for the same period of
the prior fiscal year. Contributing to the use of cash in the first nine months
of fiscal 1997 was an increase in inventory and receivables, reflecting an
increased level of sales activity. Net cash provided by operations is subject to
significant variations from period to period.
Contributing to cash flow from investing activities in the first nine months of
fiscal 1997 was the collection of a note receivable of $20.1 million from the
sale of Rohr Credit Corporation, which was completed in the fourth quarter of
fiscal 1996. Cash of $11.5 million was used in investing activities for the
purchase of short-term investments.
The Company's total financings declined to $541.5 million on May 4, 1997,
compared to $569.2 million on July 31, 1996. Total financings decreased due to
the principal payments made during the second quarter of 1997 of $12.0 million
on the 9.35% Senior Notes and $8.9 million on the 9.33% Senior Notes. Total
financings include balance sheet debt, a $40.0 million ongoing accounts
receivable sales program, and $19.8 million of equipment leases.
Accounts receivable increased from $129.5 million on July 31, 1996, to $160.9
million on May 4, 1997. This increase is due primarily to an increase in sales.
In addition, a change in customer mix and the timing of deliveries and payments
from customers contributed to the increase in receivables.
The Company's net inventory increased from $382.4 million on July 31, 1996, to
$414.0 million on May 4, 1997. The inventory increase is primarily due to a
build-up of production inventory in preparation for higher deliveries, an
increase in preproduction investment on the MD-95 program, and the reduction of
advances from customers.
On October 31, 1996, the Company completed the previously announced contribution
of Company common stock valued at $48.0 million to its primary pension plans.
This contribution resulted in the Company's primary pension plans achieving a
fully funded status on such date. This contribution, which is reflected as a
prepaid asset, allowed the Company to reverse the liability and deferred asset
related to the underfunded position, and to eliminate the $26.4 million
Page 11
charge to shareholders' equity, net of the tax benefit of $17.8 million. In
addition to the stock contribution, the Company also made a cash contribution of
$3.9 million during the first quarter of fiscal 1997. The pension plans' funded
status is primarily impacted by discount rates (adjusted annually to reflect
then prevailing market interest rates), market performance of plan assets, the
granting of additional benefits, changes in actuarial assumptions, including
mortality assumptions, and funding made by the Company during the year.
The Company's contribution of stock to its pension plans increased shareholders'
equity by $73.9 million, net of the anticipated registration cost. This resulted
in an improvement to the Company's debt-to-equity ratio to 1.5 to 1 on May 4,
1997, down from 2.2 to 1 on July 31, 1996. This improved ratio enhances the
Company's ability to negotiate a new bank credit agreement (currently in
process) under more favorable terms. In addition, the stock contribution
improved the Company's future liquidity by reducing future cash funding
requirements and also by reducing the benefit plans' annual expense due to the
actuarially expected return on the increased assets and reduced future Pension
Benefit Guarantee Corporation insurance premiums.
Capital expenditures for property, plant, and equipment is projected to
approximate $15 million for fiscal 1997 and will be financed by internally
generated cash flow.
The Company's firm backlog, which includes the sales price of all undelivered
units covered by customers' orders for which the Company has production
authorization, was approximately $1.4 billion and $1.2 billion on May 4, 1997,
and July 31, 1996, respectively. Approximately $260 million of the $1.4 billion
backlog is scheduled to be delivered in the remainder of fiscal 1997. (Sales
during any period include sales which were not part of backlog at the end of the
prior period.) Customer orders in firm backlog are subject to rescheduling
and/or termination for customer convenience; however, in certain cases the
Company is entitled to an equitable adjustment in contract amounts.
Page 12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Index to Exhibits:
*10.2 Rohr, Inc., Supplemental Retirement Plan (Restated 1997)
*10.9 Rohr, Inc., Executive Deferred Compensation Plan
*11.1 Calculation of Primary Net Income Per Share of Common Stock
*11.2 Calculation of Fully Diluted Net Income Per Share of Common
Stock
*27. Financial Data Schedule (Filed with EDGAR filing only.)
(b) Reports on Form 8-K:
There were no reports on Form 8-K during this period.
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*Exhibits filed with this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ROHR, INC.
May 28, 1997 By: S/ L. A. CHAPMAN
-----------------------------
L. A. Chapman
Senior Vice President and
Chief Financial Officer
May 28, 1997 By: S/ A. L. MAJORS
-----------------------------
A. L. Majors
Vice President and Controller
(Chief Accounting Officer)
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