<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 APRIL 30, 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.
8,484,674 shares, par value $.01 per share, as of April 30, 1994.
<PAGE>
Part I. FINANCIAL INFORMATION
==============================
Whittaker Corporation
-------------------------
Consolidated Condensed Statements of Income
-----------------------------------------------
($ in 000)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended April 30, Ended April 30,
-------------------- ------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales................................... $28,850 $29,261 $54,617 $58,541
------- ------- ------- -------
Costs and expenses
Cost of Sales........................ 17,510 17,577 31,695 37,245
Engineering, selling and
general and administrative......... 7,438 7,301 15,409 13,392
Interest on long-term debt........... 882 1,047 1,788 2,079
Other interest expense............... 18 36 36 106
Interest income...................... (147) (170) (303) (381)
------- ------ ------- -------
25,701 25,791 48,625 52,441
------ ------ ------- -------
Income before provision for taxes
and cumulative effect of
accounting change.................... 3,149 3,470 5,992 6,100
Provision for taxes..................... 1,278 1,336 2,413 2,372
------- ------- ------- -------
Income before cumulative effect of
accounting change.................... 1,871 2,134 3,579 3,728
Cumulative effect as of November 1, 1992
of change in method of accounting
for income taxes..................... -- -- -- 1,512
------- ------- ------- -------
Net income.............................. $ 1,871 $ 2,134 $ 3,579 $ 5,240
======= ======= ======= =======
Average common and common
equivalent shares
outstanding (000).................... 9,485 9,503
======= =======
Earnings per share
Income before effect of
accounting change.................... $.20 $.22 $.38 $ .39
Cumulative effect of
change in accounting for
income taxes......................... -- -- -- .16
------- ------ ------- ------
Net income........................... $ .20 $ .22 $ .38 $ .55
======= ====== ======= =======
</TABLE>
Unaudited
See notes to Consolidated Condensed Financial Statements.
(2)
<PAGE>
Whittaker Corporation
-------------------------
Consolidated Condensed Balance Sheets
-----------------------------------------
($ in 000)
<TABLE>
<CAPTION>
April 30, October 31,
1994 1993
-------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash.................................... $ 616 $ 170
Receivables............................. 68,921 69,455
Inventories............................. 30,549 28,147
Income taxes recoverable................ 1,267 3,482
Deferred income taxes................... 14,424 13,934
Other current assets.................... 5,225 498
------- --------
Total Current Assets.................... 121,002 115,686
------- --------
Property and equipment, at cost......... 72,546 68,416
Less accumulated depreciation........... 34,393 32,803
------- --------
38,153 35,613
------- --------
Other Assets:
Goodwill, net of amortization........... 18,702 14,465
Other intangible assets................. 2,521 2,722
Notes and other noncurrent receivables.. 4,677 4,994
Miscellaneous........................... 2,528 3,751
Net assets held for sale................ 24,536 24,638
-------- --------
52,964 50,570
-------- --------
$212,119 $201,869
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt.... $ 58,836 $ 6,362
Accounts payable........................ 9,306 13,930
Accrued liabilities..................... 23,915 21,470
-------- --------
Total Current Liabilities............... 92,057 41,762
-------- --------
Long-Term Debt.......................... 14,613 56,782
-------- --------
Other Noncurrent Liabilities............ 7,568 9,943
-------- --------
Deferred Income Taxes................... 10,454 9,634
-------- --------
Stockholders' Equity:
Capital Stock
Preferred stock........................ 3 3
Common stock........................... 85 85
Additional paid-in capital.............. 17,740 17,634
Retained earnings....................... 69,599 66,026
-------- --------
Total Stockholders' Equity.............. 87,427 83,748
$212,119 $201,869
======== ========
</TABLE>
Unaudited
See Notes to Consolidated Condensed Financial Statements.
(3)
<PAGE>
Whittaker Corporation
---------------------
Consolidated Condensed Statements of Cash Flows
---------------------------------------------------
($ in 000)
<TABLE>
<CAPTION>
For the Six Months
Ended April 30,
------------------
1994 1993
------- -----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income............................. $ 3,579 5,240
Adjustments to reconcile net income to
net cash
provided (used) by operating
activities:
Depreciation and amortization...... 2,918 2,908
Income taxes recoverable........... 2,215 --
Deferred taxes..................... 330 (3,263)
Change in operating assets and
liabilities:
Receivables...................... 3,951 18,084
Inventories and prepaid expenses. (3,007) 214
Accounts payable and other
liabilities..................... (6,566) (18,010)
------ ------
Net Cash provided by operating
activities............................ 3,420 5,173
------ ------
INVESTING ACTIVITIES
Purchase of property, plant and (1,324) (635)
equipment.............................
Purchased Business..................... (13,517) --
Collections of notes receivable........ 296 712
Other items, net....................... 1,167 956
------ ------
Net Cash provided (used) by investing
activities............................ (13,378) 1,033
------ ------
FINANCING ACTIVITIES
Net increase (decrease) in debt........ 10,305 (9,191)
Dividends Paid......................... (7) (6)
Proceeds from shares issued under 106 331
stock plans........................... ------ ------
Net cash provided (used) by financing
activities............................ 10,404 (8,866)
------ -----
Net increase (decrease) in cash........ 446 (2,660)
Cash at beginning of year.............. 170 2,822
------ -------
Cash at end of period.................. $ 616 $ 162
======= =======
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest............................. $1,864 $ 2,057
====== =======
Income taxes......................... $1,721 $ 5,676
====== =======
</TABLE>
Unaudited
See Notes to Consolidated Condensed Financial Statements.
(4)
<PAGE>
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 April 30, 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)
April 30, October 31,
1994 1993
--------- ----------
<S> <C> <C>
Raw materials........................... $15,920 $14,477
Work in process......................... 11,814 11,061
Finished goods.......................... 1,547 483
Costs relating to long term contracts... 1,580 2,426
Unliquidated progress billings.......... (312) (300)
------- -------
$30,549 $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 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.
(5)
<PAGE>
WHITTAKER CORPORATION
---------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Continued)
At April 30, 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
- - ---------------------
As a result of major damage from the January 17, 1994, Northridge, California
earthquake and certain of the other factors noted below, sales for the first
six months of 1994 were $54.6 million as compared to $58.5 million the previous
year.
In addition to the sales shortfall, the Company set up a $2.5 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 Six Months of 1994 to Six Months of 1993
- - ------------------------------------------------------
Sales for the first six months of 1994 decreased by $3.9 million from the
comparable 1993 period, reflecting the sale of the pyrotechnics devices unit in
the third quarter of fiscal 1993, the effect of the Northridge earthquake on
sales of cable products and defense electronic products, and reduced sales of
high-energy-density batteries and aircraft fluid controls. Partially offsetting
these sales decreases was a $4.0 million claim recovery for a terminated
contract and the effect of an acquisition made in the second quarter of 1994.
Cost of sales as a percentage of sales decreased in the first six months of 1994
due primarily to a $4.0 million claim recovery ($3.5 million net of cost) in the
first quarter of 1994 and a change in product mix, partially offset by the
establishment of a $1.5 million reserve. The increase in operating expenses
(engineering, selling and general and administrative 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 a result of acquisitions made in
1993. Interest expense was lower in the first six months of 1994 as a result of
reduced amortization of debt issuance costs.
Comparison of Second Quarter of 1994 to Second Quarter of 1993
- - --------------------------------------------------------------
Sales for the second quarter of 1994 decreased by $.4 million from the
comparable 1993 period, reflecting the sale of the pyrotechnics devices unit in
the third quarter of fiscal 1993, reduced sales of high-energy-density
batteries, support services, and the effect of the Northridge earthquake on the
sales of cable products and defense electronic products. Substantially
offsetting these sales decreases was the effect of an acquisition made in the
second quarter of 1994 and increased sales of aircraft fluid controls.
Cost of sales as a percentage of sales increased slightly in the second quarter
of 1994 due primarily to the establishment of a $.7 million reserve. The
increase in operating expenses was due primarily to increased bidding and
proposal costs and increased marketing and research and development costs as the
result of acquisitions made in 1993. Partially offsetting these increases was a
reduction of headcount throughout the operations. Interest expense was lower in
the second quarter of 1994 as a result of reduced amortization of debt issuance
costs.
(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 April 30, 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 affect 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.
Other current assets of $5.2 million are up from $.5 million at year-end 1993
primarily reflecting the insured cost of repairs related to the Northridge
earthquake. Accounts payable decreased by $4.6 million, reflecting payment of
liabilities established at October 31, 1993 and reduced purchasing levels due to
lower sales volume. Accrued liabilities at April 30, 1994, were $23.9 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 six months of fiscal 1994, $72.0 million of borrowings
and $13.5 million of letters of credit were outstanding under the Company's
$95.5 million bank credit facility.
At the end of the second quarter of fiscal 1994, the Company had outstanding
approximately $.9 million of capital expenditure commitments for the replacement
and upgrading of existing plant and equipment at the Company's various
facilities. Funds for these and other capital expenditures are expected to be
provided from operations.
(8)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF
------------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
(Continued)
Capital expenditures are limited to specified annual amounts by covenants in the
Company's credit agreement. It is anticipated that the amounts under the
covenants will be sufficient to allow the Company to continue to maintain and
upgrade existing facilities.
By the end of fiscal 1992, the Company's divestiture program was substantially
completed. Remaining to be divested is a 996 acre parcel of land located in
Santa Clarita, California which was used, until 1987, by the Company's former
Bermite division. The Company is in the process of obtaining entitlements --
the right granted by political authorities to develop real property -- for the
land.
The outlook for future sales is somewhat difficult to predict as it depends to a
significant extent on (i) the magnitude and duration of the world-wide economic
slowdown and its effect on product demand by the airline industry and aircraft
manufacturers, and (ii ) the shrinking U.S. defense budget and related
reductions and terminations of U.S. Government defense contracts. The
aerospace market place is currently in the process of undergoing a major
upheaval, not only in terms of size, but also in terms of product emphasis.
Because of the foregoing, past Company performance may not be a reliable
indicator of future performance.
(9)
<PAGE>
EXHIBITS TO PART I
------------------
I(a) Calculation of Earnings Per Share.
(10)
<PAGE>
Exhibit I(a)
WHITTAKER CORPORATION
---------------------
Calculation of Earnings Per Share
---------------------------------
($ In 000)
<TABLE>
<CAPTION>
For the Six Months
Ended April 30,
------------------
1994 1993
------- ---------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings
- - --------
Net Income............................ $3,579 $5,240
Deduct:
Dividend on $5.00 Cumulative
Convertible Preferred Stock........ (6) (6)
------ ------
Net income used in primary earnings
per share calculations............. $3,573 $5,234
====== ======
Average Common and Common Equivalent Shares (in 000)
- - ----------------------------------------------------
Weighted average number of common shares
outstanding............................... 8,476 8,199
Common equivalent shares:
Series D Participating Convertible
Preferred Stock....................... 292 324
Stock options included under
treasury stock method................. 717 980
------ ------
TOTAL...................................... 9,485 9,503
Primary Earnings Per Share................. $ .38 $ .55*
====== ======
</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 Six Months
Ended April 30,
------------------
1994 1993
-------- ---------
<S> <C> <C>
FULLY DILUTED EARNINGS PER SHARE
EARNINGS
- - --------
Net income used in primary earnings
per share calculations................. $3,573 $5,234
Adjustments............................. -- --
Net income used in fully diluted
earnings
per share calculations................. $3,573 $5,234
====== ======
Average Shares Used to Calculate Fully
- - ----------------------------------------
Diluted Earnings Per Share (in 000)
- - ----------------------------------------
Average common and common equivalent
shares (above)......................... 9,485 9,503
Add:
Additional stock options included
under treasury stock method.......... -- 17
------ ------
TOTAL.................................. 9,485 9,520
====== ======
Fully Diluted Earnings Per Share........ $ .38 $ .55*
====== ======
</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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of the registrant was held
on March 25, 1994.
(c) At the annual meeting, stockholders voted on the election of
Class II Directors and on ratification of Ernst & Young as the company's
independent auditors. The votes cast with respect to each of the two
nominees and the ratification of the appointment of the auditors were as
follows:
<TABLE>
<CAPTION>
Against
or Broker
For Withheld Abstentions Non-Votes
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Jack L. Hancock 7,002,253 47,687 -- --
Edward R. Muller 7,020,887 9,184 19,869 --
Ratification of the 6,980,311 69,629 -- --
appointment of auditors
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11. Statements re computation of per share earnings for the six
months ended April 30, 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
April 30, 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: June 10, 1994 By: /s/ RICHARD LEVIN
-----------------------------
Richard Levin, Vice President
Chief Financial Officer
(14)
