<PAGE>
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 JANUARY 31, 1994
Commission file number 1-5407
WHITTAKER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-4033076
(State or other jurisdiction of (I.R.S Employer
Incorporation or organization) Identification No.)
10880 Wilshire Boulevard, Los Angeles, California 90024
(Address of principal executive offices) (Zip Code)
(310) 475-9411
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
8,474,176 shares, par value $.01 per share, as of January 31, 1994
<PAGE>
PART I. FINANCIAL INFORMATION
==============================
WHITTAKER CORPORATION
---------------------
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
($ in 000)
<TABLE>
<CAPTION>
For the Three Months
Ended January 31,
--------------------
1994 1993
-------- -------
<S> <C> <C>
Sales...................................... $25,767 $29,280
------- -------
Costs and expenses
Cost of sales............................ 14,185 19,668
Engineering, selling and general
& administrative....................... 7,971 6,091
Interest on long-term debt............... 906 1,032
Other interest expense................... 18 70
Interest income.......................... (156) (211)
------- -------
22,924 26,650
------- -------
Income before provision for taxes and
cumulative effect of accounting change... 2,843 2,630
Provision for taxes........................ 1,135 1,036
------- -------
Income before cumulative effect of
accounting change........................ 1,708 1,594
Cumulative effect as of November 1992 of
change in accounting for income taxes.... - 1,512
------- -------
Net income................................. $ 1,708 $ 3,106
======= =======
Average common and common equivalent
shares outstanding (000)................. 9,462 9,455
======= =======
Earnings per share
Income before effect of accounting change $ .18 $ .17
Cumulative effect of change in accounting
for income taxes....................... - .16
------- -------
Net income.................................. $ .18 $ .33
======= =======
</TABLE>
Unaudited
See Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
WHITTAKER CORPORATION
---------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
($ in 000)
<TABLE>
<CAPTION>
January 31, October 31,
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash..................................... $ 4,198 $ 170
Receivables.............................. 65,187 69,455
Inventories.............................. 28,350 28,147
Income taxes recoverable................. 1,482 3,482
Deferred income taxes.................... 13,407 13,934
Other current assets..................... 1,708 498
-------- --------
Total Current Assets..................... 114,332 115,686
-------- --------
Property and equipment, at cost.......... 68,798 68,416
Less accumulated depreciation............ 33,955 32,803
-------- --------
34,843 35,613
-------- --------
Other Assets:
Goodwill, net of amortization............ 14,471 14,465
Other intangible assets.................. 2,604 2,722
Notes and other noncurrent receivables... 4,984 4,994
Miscellaneous............................ 3,530 3,751
Net assets held for sale................. 24,536 24,638
-------- --------
50,125 50,570
-------- --------
$199,300 $201,869
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt..... $ 6,334 $ 6,362
Accounts payable......................... 8,941 13,930
Accrued liabilities...................... 23,789 21,470
-------- --------
Total Current Liabilities................ 39,064 41,762
-------- --------
Long-Term Debt........................... 56,760 56,782
-------- --------
Other Noncurrent Liabilities............. 7,982 9,943
-------- --------
Deferred Income Taxes.................... 10,036 9,634
-------- --------
Stockholders' Equity:
Capital Stock
Preferred stock......................... 3 3
Common stock............................ 85 85
Additional paid-in capital............... 17,640 17,634
Retained earnings........................ 67,730 66,026
-------- --------
Total Stockholders' Equity............... 85,458 83,748
-------- --------
$199,300 $201,869
======== ========
</TABLE>
Unaudited
See Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
WHITTAKER CORPORATION
---------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
($ in 000)
<TABLE>
<CAPTION>
For the Three Months
Ended January 31,
--------------------
1994 1993
--------- ---------
OPERATING ACTIVITIES
<S> <C> <C>
Net Income......................................... $ 1,708 $ 3,106
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization.................... 1,449 1,409
Income taxes recoverable......................... 2,000 -
Deferred taxes................................... 929 (3,406)
Changes in operating assets and liabilities:
Receivables.................................... 4,172 18,310
Inventories and prepaid expenses............... (1,413) (375)
Accounts payable and other liabilities......... (4,631) (11,945)
------- --------
Net cash provided by operating activities.......... 4,214 7,099
------- --------
INVESTING ACTIVITIES
Purchases of property, plant and equipment......... (410) (340)
Collections of notes receivable.................... 106 525
Other items, net...................................
166 275
Net cash provided (used) by investing activities... ------- --------
(138) 460
------- --------
FINANCING ACTIVITIES
Reduction of debt.................................. (50) (4,048)
Dividends paid..................................... (4) (3)
Proceeds from shares issued under stock plans...... 6 229
------- --------
Net cash used by financing activities.............. (48) (3,822)
------- --------
Net increase in cash............................... 4,028 3,737
Cash at beginning of year.......................... 170 2,822
------- --------
Cash at end of period.............................. $ 4,198 $ 6,559
======= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest......................................... $ 644 $ 1,303
======= ========
Income taxes..................................... $ 43 $ 2,854
======= ========
</TABLE>
Unaudited
See Notes to Consolidated Condensed Financial Statements.
4
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WHITTAKER CORPORATION
---------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
The Consolidated Financial Statements include accounts of Whittaker Corporation
and its subsidiaries. The Consolidated Financial Statements reflect all
adjustments which are, in the opinion of management, necessary to present a fair
statement of the results for the interim periods reported.
Since results of Whittaker's operations in interim periods are not necessarily
indicative of the results for the full year, Whittaker makes no representations
as to the trend of sales and earnings. For further information, refer to the
Consolidated Financial Statements and footnotes thereto included in Whittaker's
annual report on Form 10-K for the year ended October 31, 1993.
Assets held for sale at January 31, 1994 and October 31, 1993 include $22.7
million of land formerly used by a discontinued technology unit. The Company is
in the process of obtaining entitlements -- the right granted by political
authorities to develop real property -- for the land.
Primary earnings per share have been computed based on the weighted average
number of common and common equivalent shares outstanding, after deducting from
net income the dividend requirements on the $5.00 Cumulative Convertible
Preferred Stock. Common stock equivalents include Series D Participating
Convertible Preferred Stock and dilutive employee stock options, calculated
using the treasury stock method.
Inventories consisted of the following:
<TABLE>
<CAPTION>
($ in 000)
January 31, October 31,
1994 1993
----------- -----------
<S> <C> <C>
Raw materials........................... $14,569 $14,477
Work in process......................... 11,714 11,061
Finished goods.......................... 378 483
Costs relating to long term contracts... 1,776 2,426
Unliquidated progress billings.......... (87) (300)
------- -------
$28,350 $28,147
======= =======
</TABLE>
The Company has typically purchased insurance annually. In certain years, after
evaluating the availability and cost of insurance, the Company did not purchase
insurance for certain risks, including workers' compensation and product
liability. Moreover, the Company's insurance carriers have taken the position
that in certain cases the Company is uninsured for environmental matters, a
position that the Company disputes in certain instances. Consequently, the
Company is without insurance for various risks, including product liability for
certain products manufactured in the past. The Company does, however, have
product liability insurance for products it currently manufactures.
The Company is a potentially responsible party in approximately sixteen actions
filed under the Comprehensive Environmental Response
5
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WHITTAKER CORPORATION
---------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
----------------------------------------------------------------
Compensation and Liability Act of 1980 ("CERCLA"). In eight other instances,
the Company is a potential responsible party under state laws patterned after
CERCLA, also imposing liability on parties with respect to hazardous waste
activities.
The environmental matters noted above are attributable to the Company's
previously discontinued operations. In nearly all of these matters, the Company
contributed a small amount (generally less than 1%) of the total treated or
disposed of waste. There are also various other claims and suits pending
against the Company.
At January 31, 1994, the Company provided for its aggregate liability related to
various claims, including uninsured risks and potential claims in connection
with the environmental matters noted above. The portion of liabilities for
contingent losses estimated to be payable after one year is included in "Other
Noncurrent Liabilities" in the balance sheet. The amounts provided on the
Company's books for contingencies, including environmental matters, are recorded
at gross amounts. Because of the uncertainty with respect to the actual amount
of probable insurance recoveries, these potential insurance recoveries are not
taken into account as a reduction of those amounts provided unless an insurance
carrier has agreed to such coverage. The Company does not anticipate that these
matters will have a material adverse effect on the Company's financial position,
or its ability to meet its working capital and capital expenditure needs.
Although the Company has recorded estimated liabilities for contingent losses,
including uninsured risks and claims in connection with environmental matters,
in accordance with generally accepted accounting principles, the absence of or
denial of various insurance coverages represents a potential exposure for the
Company, and the net income of the Company in future periods could be adversely
affected if uninsured losses in excess of amounts recorded were to be incurred.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF
------------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
Results of Operations
- ---------------------
Major damage resulting from the January 17, 1994 Northridge, California
earthquake precluded product shipments and operations at the Company's largest
facility. As a result, sales for the quarter were $25.8 million as compared to
$29.3 million the previous year. It is expected that the sales shortfall effect
will be made up in subsequent quarters.
In addition to the sales shortfall, the Company set up a $1.8 million provision
for the estimated deductible portion of its earthquake insurance and other
reserves. Partially offsetting the sales shortfall and the establishment of the
reserves was the approximately $3.5 million pre-tax income effect of a claim
recovery for a terminated contract.
Comparison of First Quarter of 1994 to First Quarter of 1993
- ------------------------------------------------------------
Sales for the first quarter of 1994 decreased by $3.5 million from the
comparable 1993 period, reflecting the above-noted earthquake effect on the
sales of defense electronic products and cable products, the sale of the
pyrotechnics devices unit in the third quarter of fiscal 1993, and reduced sales
of support services and aircraft fluid controls. Partially offsetting these
sales decreases was the positive sales effect of $4.0 million from the claim
recovery for a terminated contract.
Cost of sales as a percentage of sales decreased in the first quarter of 1994
due primarily to the $4.0 million claim recovery ($3.5 million net of cost)
partially offset by the establishment of a $.8 million reserve. The increase in
operating expenses was due primarily to a $1.0 million charge for the estimated
deductible portion of the Company's earthquake insurance, increased bidding and
proposal costs and increased marketing and research and development costs as the
result of acquisitions made in 1993. Partially offsetting these was a reduction
of headcount throughout the operations. Interest expense was lower in the first
quarter of 1994 as a result of a lower level of debt and lower interest rates.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF
------------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION (Continued)
----------------------------------------------
Financial Condition
- -------------------
The Company has typically purchased insurance annually. In certain years, after
evaluating the availability and cost of insurance, the Company did not purchase
insurance for certain risks, including workers' compensation and product
liability. Moreover, the Company's insurance carriers have taken the position
that in certain cases the Company is uninsured for environmental matters, a
position that the Company disputes in certain instances. Consequently, the
Company is without insurance for various risks, including product liability for
certain products manufactured in the past. The Company does, however, have
insurance for products it currently manufactures.
The Company is a potentially responsible party in approximately sixteen actions
filed under the Comprehensive Environmental Response Compensation and Liability
Act of 1980 ("CERCLA"). In eight other instances, the Company is a potentially
responsible party under state laws patterned after CERCLA, also imposing
liability on parties with respect to hazardous waste activities.
The environmental matters noted above are attributable to the Company's
previously discontinued operations. In nearly all of these matters, the Company
contributed a small amount (generally less than 1%) of the total treated or
disposed of waste. There are also various other claims and suits pending
against the Company.
At January 31, 1994, the Company had provided for its aggregate liability
related to various claims, including uninsured risks and potential claims in
connection with the environmental matters noted above. The amounts provided on
the Company's books for contingencies, including environmental matters, are
recorded at gross amounts. Because of the uncertainty with respect to the
actual amount of probable insurance recoveries, these potential insurance
recoveries are not taken into account as a reduction of those amounts provided
unless an insurance carrier has agreed to such coverage. The Company does not
anticipate that these matters will have a material adverse effect on the
Company's financial position, or its ability to meet its working capital and
capital expenditure needs. Although the Company has recorded estimated
liabilities for contingent losses, including uninsured risks and claims in
connection with environmental matters, in accordance with generally accepted
accounting principles, the absence of or denial of various insurance coverages
represents a potential exposure for the Company, and the net income of the
Company in future periods could be adversely affected if uninsured losses in
excess of amounts recorded were to be incurred.
Net receivables of $65.2 million are down from $69.5 million at year end 1993
primarily reflecting the decreased volume in the commercial aerospace and
electronics businesses. Partially offsetting this was the $4.0 million claim
recovery set up as a receivable. Accounts payable decreased by $4.9 million,
reflecting payment of liabilities
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF
------------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION (Continued)
----------------------------------------------
established at October 31, 1993 and reduced purchasing levels due to lower sales
volume and backlog. Accrued liabilities at January 31, 1994 were $23.8 million
up from $21.5 million at October 31, 1993 primarily reflecting the $1.0 million
earthquake related reserve and increased employee incentive compensation
accruals.
At the end of the first three months of fiscal 1994, $61.5 million of borrowings
and $13.4 million of letters of credit were outstanding under the Company's
$97.0 million bank credit facility.
At the end of the first quarter of fiscal 1994, the Company had outstanding
approximately $1.5 million of capital expenditure commitments for the
replacement and upgrading of existing plant and equipment at the Company's
various facilities. Funds for these and other capital expenditures are expected
to be provided from operations.
Capital expenditures are limited to specified annual amounts by covenants under
the Company's credit agreement. It is anticipated that the amounts under the
covenants will be sufficient to allow the Company to continue to maintain and
upgrade existing facilities.
By the end of fiscal 1992, the Company's divestiture program was substantially
completed. Remaining to be divested is a 976 acre parcel of land, located in
Santa Clarita, California, which was used until 1987, by the Company's former
Bermite division. The Company is in the process of obtaining entitlements --
the right granted by political authorities to develop real property -- for the
land.
The outlook for future sales is somewhat difficult to predict as it depends to a
significant extent on (i) the magnitude and duration of the world-wide economic
slowdown and its effect on product demand by the airline industry and aircraft
manufacturers, and (ii) the shrinking U.S. defense budget and related reductions
and terminations of U.S. Government defense contracts. The aerospace market
place is currently in the process of undergoing a major upheaval, not only in
terms of size, but also in terms of product emphasis. Because of the foregoing,
past Company performance may not be a reliable indicator of future performance.
9
<PAGE>
EXHIBITS TO PART I
------------------
I(a) Calculation of Earnings Per Share.
10
<PAGE>
Exhibit I(a)
WHITTAKER CORPORATION
---------------------
CALCULATION OF EARNINGS PER SHARE
---------------------------------
($ in 000)
<TABLE>
<CAPTION>
For the Three Months
Ended January 31,
--------------------
1994 1993
------ ------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings
- --------
Net income............................................ $1,708 $3,106*
Deduct:
Dividend on $5.00 Cumulative
Convertible Preferred Stock....................... (3) (3)
------ ------
Net income used in primary
earnings per share calculations..................... $1,705 $3,103
====== ======
Average Common and Common Equivalent Shares (in 000)
- ----------------------------------------------------
Weighted average number of common
shares outstanding.................................. 8,473 8,180
Common equivalent shares:
Series D Participating Convertible Preferred
Stock.......................................... 292 324
Stock options included under treasury stock
method......................................... 697 951
------ ------
TOTAL................................................. 9,462 9,455
====== ======
Primary Earnings Per Share............................ $ .18 $ .33*
====== ======
</TABLE>
*Includes $1,512, or $.16 per share, for change in method of accounting for
income taxes.
Unaudited
11
<PAGE>
Exhibit I(a)
WHITTAKER CORPORATION
---------------------
CALCULATION OF EARNINGS PER SHARE - (CONTINUED)
-----------------------------------------------
($ in 000)
<TABLE>
<CAPTION>
For the Three Months
Ended January 31,
--------------------
1994 1993
------ ------
<S> <C> <C>
FULLY DILUTED EARNINGS PER SHARE
Earnings
- --------
Net income used in primary earnings
per share calculations............................. $1,705 $3,103*
Adjustments.......................................... - -
------ ------
Net income used in fully diluted earnings
per share calculations............................. $1,705 $3,103
====== ======
Average Shares Used to Calculate Fully Diluted
- ----------------------------------------------
Earnings Per Share (in 000)
---------------------------
Average common and common equivalent
shares (above)..................................... 9,462 9,455
Add:
Additional stock options included
under treasury stock method..................... 83 108
------ ------
TOTAL.......................................... 9,545 9,563
====== ======
Fully Diluted Earnings Per Share..................... $ .18 $ .32*
====== ======
</TABLE>
Note: Fully diluted earnings per share are not presented in the
Consolidated Condensed Statements of Income since the
calculations result in dilution of less than 3%.
*Includes $1,512, or $.16 per share, for change in method of accounting for
income taxes.
Unaudited
12
<PAGE>
PART II. OTHER INFORMATION
---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
11. Statement re computation of per share
earnings for the three months ended
January 31, 1994 (Exhibit I(a) of Part I
to this Form 10-Q).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed for the fiscal
quarter ended January 31, 1994.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITTAKER CORPORATION
Date: March 7, 1994 By: /s/ Ronald E. Wittman
------------- --------------------------------
Ronald E. Wittman, Controller
(Chief Accounting Officer)
14
