<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 24, 1995
WHITTAKER CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 1-5407 95-4033076
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
</TABLE>
10880 Wilshire Boulevard, Los Angeles, California 90024
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(310) 475-9411
<PAGE>
This Form 8-K/A amends Item 7 of that certain Form 8-K dated May 8, 1995
(the "Original Form 8-K") by including the financial statements referred to
below.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
In connection with the business acquisition described in Item 2 of the
Original Form 8-K, attached are the financial statements of the business
acquired for the required periods, consisting of (i) balance sheets of
Hughes LAN Systems, Inc. ("HLS") as of December 31, 1994 and 1993, (ii) the
related statements of operations and accumulated deficit and of cash flows
for each of the three years in the period ended December 31, 1994, (iii)
balance sheets of HLS as of March 31, 1995 and December 31, 1994, and (iv)
the related statements of operations and of cash flows for each of the
three months ended March 31, 1995 and 1994.
(b) Pro forma financial information.
In connection with the business acquisition described in Item 2 of the
Original Form 8-K, attached is the pro forma financial information required
pursuant to Article 11 of Regulation S-X, consisting of condensed combining
statements of operations of Whittaker Corporation and its subsidiaries and
HLS for the year ended October 31, 1994 and the six months ended
April 30, 1995.
(c) Exhibits.
23. Independent Auditors' Consent
2
<PAGE>
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WHITTAKER CORPORATION
By /s/ Richard Levin
-------------------
Richard Levin
Vice President, Chief
Financial Officer and Secretary
Dated: July 7, 1995
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Hughes LAN Systems, Inc.:
We have audited the accompanying balance sheets of Hughes LAN Systems, Inc. (the
Company) as of December 31, 1994 and 1993, and the related statements of
operations and accumulated deficit and of cash flows for each of the three years
in the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Hughes LAN Systems, Inc. at December 31,
1994 and 1993, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in Note 1, the Company has been dependent upon Hughes Aircraft
Company (HAC), its parent, for financial support. Accordingly, the accompanying
financial statements may not necessarily be indicative of the financial
condition or results of operations had the Company operated without the
financial support of HAC. Hughes LAN Systems, Inc. was acquired by Whittaker
Corporation on April 24, 1995.
DELOITTE & TOUCHE LLP
San Jose, California
June 12, 1995
<PAGE>
HUGHES LAN SYSTEMS, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 25 $ 39
Accounts receivable (net of allowance of $70 and 9,232 9,383
$134)
Unbilled receivables 1,014 590
Inventories 8,423 6,373
Other current assets 702 425
--------- --------
Total current assets 19,396 16,810
PROPERTY AND EQUIPMENT - Net 2,769 2,537
OTHER ASSETS 765 565
GOODWILL (net of accumulated amortization of $18,645 28,612 66,903
and $15,354) --------- --------
TOTAL $ 51,542 $ 86,815
========= ========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable $ 5,946 $ 6,048
Accrued liabilities 4,217 3,427
--------- --------
Total current liabilities 10,163 9,475
--------- --------
PAYABLE TO HAC 92,556 73,624
--------- --------
COMMITMENTS (Note 8) - -
SHAREHOLDER'S EQUITY (DEFICIENCY):
Common stock, no par value, 1,000 shares 95,785 95,785
authorized and outstanding
Accumulated deficit (146,962) (92,069)
--------- --------
Total shareholder's equity (deficiency) (51,177) 3,716
--------- --------
TOTAL $ 51,542 $ 86,815
========= ========
</TABLE>
See notes to financial statements.
2
<PAGE>
HUGHES LAN SYSTEMS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
REVENUES:
Product sales $ 35,293 $ 36,812 $ 24,672
Network installations 5,554 12,654 10,499
Support services 4,091 3,852 3,188
--------- --------- --------
Total revenues (including $8,706,
$10,566 and $5,189 from HAC and
affiliates) 44,938 53,318 38,359
--------- --------- --------
COST OF REVENUES:
Product sales 18,681 17,965 13,144
Network installations 4,856 11,107 8,668
Support services 2,255 1,945 1,820
--------- --------- --------
Total cost of revenues 25,792 31,017 23,632
--------- --------- --------
GROSS PROFIT 19,146 22,301 14,727
--------- --------- --------
OPERATING EXPENSES:
Selling and marketing 17,920 15,263 15,590
Research and development 12,053 8,693 5,380
General and administrative 6,850 6,060 7,933
Restructuring - - 11,311
Write-down of goodwill 35,000 - -
--------- --------- --------
Total operating expenses 71,823 30,016 40,214
--------- --------- --------
LOSS FROM OPERATIONS (52,677) (7,715) (25,487)
INTEREST EXPENSE 2,216 5,893 4,190
--------- --------- --------
NET LOSS (54,893) (13,608) (29,677)
ACCUMULATED DEFICIT, Beginning of year (92,069) (78,461) (48,784)
--------- --------- --------
ACCUMULATED DEFICIT, End of year $(146,962) $ (92,069) $(78,461)
========= ========= ========
</TABLE>
See notes to financial statements.
3
<PAGE>
HUGHES LAN SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(54,893) $(13,608) $(29,677)
Reconciliation to net cash used for
operating activities:
Depreciation 1,414 1,765 1,772
Amortization and write-down of 38,290 3,290 3,290
goodwill
Loss on disposal of property 15 50 8
Restructuring charges - - 6,881
Changes in current assets and
liabilities:
Accounts receivable 151 1,813 (4,243)
Unbilled receivables (424) 938 (1,270)
Inventories (2,050) (4,348) (1,235)
Other assets (476) 237 (1,451)
Accounts payable (102) 1,507 (1,525)
Accrued liabilities 790 (3,433) 3,735
-------- -------- --------
Net cash used for operating (17,285) (11,789) (23,715)
activities
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of property and equipment (1,661) (1,486) (2,319)
CASH FLOWS FROM FINANCING ACTIVITIES -
Borrowings from HAC - net 18,932 13,278 26,048
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (14) 3 14
CASH, Beginning of year 39 36 22
-------- -------- --------
CASH, End of year $ 25 $ 39 $ 36
======== ======== ========
</TABLE>
See notes to financial statements.
4
<PAGE>
HUGHES LAN SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
- ------------------------------------------------------------------------------
1. CORPORATE RELATIONSHIP AND BASIS OF PRESENTATION
Hughes LAN Systems, Inc. (the Company) was a wholly-owned subsidiary of
Hughes Aircraft Company (HAC) since 1989. The Company was a member of the
Hughes Network Systems operations and had significant sales to HAC related
companies, as summarized in Note 6. The financial statements may not
necessarily be indicative of the financial condition or results of
operations had the Company operated without the financial support of HAC.
On April 24, 1995, the Company was acquired by Whittaker Corporation, an
unrelated party. As part of this transaction, HAC agreed to contribute to
the capital of the Company all amounts due it or its affiliates as of that
date; accordingly, such amounts are classified as long-term in the
accompanying financial statements.
HAC provided corporate administrative support including treasury, financing
and tax compliance services and assessed the Company a monthly charge for
these administrative support services. The Company borrowed funds on a
revolving basis and paid interest to HAC based upon net assets during 1994
and actual cash usage during 1993 and 1992. The intercompany transactions
and balances are summarized at Note 6.
The Company, along with other HAC subsidiaries, was included in the
consolidated federal income tax return of General Motors Corporation (GM),
the ultimate parent company of HAC. The Company was also included in the
combined HAC California and other state income tax returns. GM and HAC
allocate income tax expense or benefit on a basis generally equivalent to
that which would be recognized on a separate return basis if the Company
filed separate federal and state income tax returns.
2. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION - The Company designs, manufactures, services and
markets hubs for use in conjunction with local and wide area networks. The
primary product, the Enterprise Hub, offers connectivity for Ethernet, Token
Ring, and FDDI networks.
INVENTORIES are stated at the lower of standard cost (which approximates
first-in, first-out cost) or market.
PROPERTY AND EQUIPMENT is stated at cost. Depreciation and amortization are
computed using the straight-line method over estimated useful lives of one
to five years or the lease term, if shorter.
GOODWILL - The excess of the aggregate purchase price over the fair value of
net assets acquired is being amortized over twenty-five years using the
straight-line method. As a result of HAC's decision to offer the Company for
sale separate from the other entities comprising the Hughes Network Systems
operations, the value of goodwill was reduced by $35 million during 1994 to
reflect the Company's estimated market value as a separate entity.
REVENUE RECOGNITION - The Company recognizes product revenue and accrues
warranty and royalty expenses upon shipment. Network installation contract
revenues are recognized using the cost-to-cost
5
<PAGE>
percentage-of-completion method. Unbilled amounts resulting from contracts-
in-process are reclassified to accounts receivable when such amounts are
contractually billable. Support contract revenues are recognized on a
straight-line basis over the contract period.
SOFTWARE DEVELOPMENT COSTS - Development costs incurred in the research and
development of new software products and enhancements to existing software
products are expensed as incurred until technological feasibility has been
established. The Company believes its current process for developing
software is essentially completed concurrently with the establishment of
technological feasibility; accordingly, software costs incurred after the
establishment of technological feasibility have not been material and
therefore have been expensed.
INCOME TAXES - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" which
requires an asset and liability approach to account for income taxes.
FISCAL PERIOD - The Company uses a 52-53 week fiscal year ending on the last
Sunday in December. The fiscal years ended December 25, 1994 consisted of 52
weeks, December 26, 1993 consisted of 53 weeks and December 20, 1992
consisted of 52 weeks and, for convenience, have been presented in the
accompanying financial statements as ending December 31.
3. INVENTORIES
Inventories at December 31 consist of (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Finished goods $3,228 $2,017
Work in process 2,279 1,902
Raw materials 2,916 2,454
------ ------
Total inventories $8,423 $6,373
====== ======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consists of (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Machinery and equipment $ 5,451 $ 5,346
Computer equipment 4,245 3,354
Furniture and fixtures 645 647
Leasehold improvements 177 217
------- -------
Total property and equipment 10,518 9,564
Accumulated depreciation and (7,749) (7,027)
amortization ------- -------
Property and equipment - net $ 2,769 $ 2,537
======= =======
</TABLE>
6
<PAGE>
5. ACCRUED LIABILITIES
Accrued liabilities at December 31 consist of (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Compensation and related benefits $2,172 $1,907
Deferred revenue 1,061 396
Warranty 555 463
Royalties 247 479
Other 182 182
------ ------
Total accrued liabilities $4,217 $3,427
====== ======
</TABLE>
6. RELATED PARTY TRANSACTIONS
It is the Company's practice to offer discounts up to 50% to HAC and its
affiliates. Revenues from HAC and its affiliates were (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Product sales $6,895 $ 9,546 $2,417
Network installations 1,215 846 2,617
Support services 596 174 155
------ ------- ------
Total revenues from related parties $8,706 $10,566 $5,189
====== ======= ======
</TABLE>
At December 31, 1994 and 1993, accounts receivable included $625,000 and
$1,039,000, respectively, of amounts due from HAC and its affiliates.
Included in general and administrative expenses are corporate allocations
from HAC. For the years ended December 31, 1994, 1993 and 1992 these
allocations total $1,355,000, $971,000 and $1,405,000, respectively.
The Company borrows funds on a revolving basis from HAC. Interest at an
annual rate of 3.78% in 1994 and 8.5% in 1993 and 1992 is charged by HAC
based on the Company's net assets during 1994 and actual cash usage during
1993 and 1992. Related interest expense during the fiscal years ended
December 31, 1994, 1993 and 1992 was $2,216,000, $5,883,000 and $4,178,000,
respectively.
7. RESTRUCTURING
As part of a 1992 restructuring of the world-wide operations of HAC, certain
product lines of the Company were discontinued, employment levels were
reduced and facilities consolidated. Details of the related restructuring
charges are as follows (in thousands):
<TABLE>
<S> <C>
Restructuring asset write-downs:
Capitalized software and licenses $ 3,763
Inventories 2,693
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Fixed assets 425
-------
6,881
Accrued costs and expenses:
Severance and other staff reduction 1,613
costs
Excess facilities 1,195
Engineering support of discontinued 1,190
products
Other 432
-------
Total restructuring charges $11,311
=======
</TABLE>
Restructuring costs of $1,953,000 and $2,477,000 were charged against the
reserve in 1993 and 1992, respectively.
8. COMMITMENTS
The Company leases its facilities and certain equipment under noncancelable
operating leases expiring in 1995 through 1999. Rent expense for the years
ended December 31, 1994, 1993 and 1992 totaled $2,012,000, $1,871,000 and
$2,750,000, respectively.
Future minimum lease payments under noncancelable operating leases are as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
<S> <C>
1995 $1,498
1996 1,325
1997 1,147
1998 960
1999 179
------
Total future minimum lease payments $5,109
======
<CAPTION>
YEARS ENDING DECEMBER 31,
1995 $1,498
1996 1,325
1997 1,147
1998 960
1999 179
------
Total future minimum lease payments $5,109
======
</TABLE>
At December 31, 1994, the Company has approximately $2.3 million of
noncancelable inventory purchase commitments and approximately $2.1 million
of commitments for tenant improvements relating to a new facility which was
subsequently occupied in February 1995.
8
<PAGE>
9. INCOME TAXES
A reconciliation between the Company's effective tax rate and the federal
income tax rate at December 31 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income tax 5.5 5.5 5.6
Valuation allowance (40.5) (40.5) (39.6)
----- ------- -------
Provision for income taxes - % - % - %
===== ======= =======
</TABLE>
The components of deferred tax assets at December 31 consist of (in
thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Deferred tax assets:
Preacquisition net operating loss $ 1,490 $ 1,490
carryforwards
Preacquisition tax credit carryforwards 1,681 1,681
Capitalized software (146) (204)
Inventory and asset write-offs 741 683
Nondeductible accruals and reserves 398 263
Other 178 (21)
------- -------
Gross deferred tax assets 4,342 3,892
Valuation allowance (4,342) (3,892)
------- -------
Net deferred tax assets $ - $ -
======= =======
</TABLE>
Recognition of the tax benefit related to the Company's deferred tax assets
is dependent upon the generation of future taxable income. The Company has
experienced significant losses in its years of operations. As a result of
these losses, management has determined that realization of the deferred tax
assets is not likely and, accordingly, a valuation allowance has been
established for the tax assets. The change in the valuation allowance was a
net increase of $450,000, $536,000 and a net decrease of $174,000 for the
years ended December 31, 1994, 1993 and 1992, respectively.
Had the Company filed its own federal income tax return, deferred tax
benefits relating to net operating loss carryforwards of $5.4 million and
$3.2 million at December 31, 1994 and 1993 would have been included in
deferred tax assets, offset by valuation allowances of the same amounts. The
benefit of these net operating losses has been utilized in the consolidated
return of GM and is therefore not reflected above in the deferred tax
assets.
Prior to the acquisition of the Company by HAC, the Company incurred net
operating loss carryforwards of approximately $4,258,000 for federal tax
purposes that will begin to expire in 2001 and federal business and research
credits of approximately $1,681,000 that begin to expire in 1995. The extent
to which the loss carryforwards can be used to offset future taxable income
may be limited, depending on the extent of ownership changes within any
three-year period.
9
<PAGE>
10. EMPLOYEE BENEFIT PLAN
The Company provides a qualified employee savings and retirement plan to all
eligible employees. The Plan is designed to qualify under Section 401(k) of
the Internal Revenue Code and allows the Company to make discretionary
contributions. The Company contributed approximately $581,000, $478,000 and
$556,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
The Company has no other plans which provide retirement or other post
employment benefits.
11. EXPORT SALES INFORMATION
Export product sales for the years ended December 31, 1994, 1993 and 1992
were approximately $12,560,000, $9,610,000 and $6,466,000, respectively
* * * * *
10
<PAGE>
HUGHES LAN SYSTEMS, INC.
CONDENSED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1995 1994
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 27 $ 25
Accounts receivable (net of allowance 11,348 9,232
of $290 and $70, respectively)
Unbilled receivables 918 1,014
Inventories 7,104 8,423
Other current assets 583 702
--------- ---------
Total current assets 19,980 19,396
PROPERTY AND EQUIPMENT - Net 5,491 2,769
OTHER ASSETS 724 765
GOODWILL (net of accumulated 28,098 28,612
amortization of $19,159 and $18,645) --------- ---------
LIABILITIES AND SHAREHOLDER'S DEFICIENCY
CURRENT LIABILITIES:
Accounts payable $ 8,330 $ 5,946
Accrued liabilities 4,790 4,217
--------- ---------
Total current liabilities 13,120 10,163
--------- ---------
PAYABLE TO HAC 97,190 92,556
--------- ---------
SHAREHOLDER'S DEFICIENCY:
Common stock, no par value, 1,000 95,785 95,785
shares authorized and outstanding
Accumulated deficit (151,802) (146,962)
--------- ---------
Total shareholder's (56,017) (51,177)
deficiency --------- ---------
TOTAL $ 54,293 $ 51,542
========= =========
</TABLE>
See notes to condensed financial statements.
11
<PAGE>
HUGHES LAN SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
1995 1994
<S> <C> <C>
REVENUES:
Product sales $ 9,375 $ 7,400
Network installations 1,339 502
Support services 1,000 817
------- -------
Total revenues 11,714 8,719
------- -------
COST OF REVENUES:
Product sales 6,427 3,609
Network installations 1,139 609
Support services 475 484
------- -------
Total cost of revenues 8,041 4,702
------- -------
GROSS PROFIT 3,673 4,017
------- -------
OPERATING EXPENSES:
Selling and marketing 3,626 4,310
Research and development 2,240 2,725
General and administrative 1,770 1,853
------- -------
Total operating expenses 7,636 8,888
------- -------
LOSS FROM OPERATIONS (3,963) (4,871)
INTEREST EXPENSE 877 496
------- -------
NET LOSS $(4,840) $(5,367)
======= =======
</TABLE>
See notes to condensed financial statements.
12
<PAGE>
HUGHES LAN SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,840) $(5,367)
Reconciliation to net cash used for
operating activities:
Depreciation 470 355
Amortization of goodwill 514 823
Changes in current assets and
liabilities:
Accounts receivable (2,116) 2,438
Unbilled receivables 96 66
Inventories 1,319 (376)
Other assets 160 (553)
Accounts payable 2,384 275
Accrued liabilities 573 52
------- -------
Net cash used for operating (1,440) (2,287)
activities
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of property and equipment (3,192) (559)
CASH FLOWS FROM FINANCING ACTIVITIES -
Borrowings from HAC, net 4,634 2,824
------- -------
NET INCREASE (DECREASE) IN CASH 2 (22)
CASH, Beginning of period 25 39
------- -------
CASH, End of period $ 27 $ 17
======= =======
</TABLE>
See notes to condensed financial statements.
13
<PAGE>
HUGHES LAN SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. CORPORATE RELATIONSHIP
Hughes LAN Systems, Inc. (the Company) was a wholly-owned subsidiary of
Hughes Aircraft Company (HAC) since 1989. The financial statements may
not necessarily be indicative of the financial condition or results of
operations had the Company operated without the financial support of HAC.
On April 24, 1995, the Company was acquired by Whittaker Corporation, an
unrelated party. As part of this transaction, HAC agreed to contribute to
the capital of the Company all amounts due it or its affiliates as of that
date; accordingly, such amounts are classified as long-term in the
accompanying financial statements.
2. BASIS OF PRESENTATION
While the quarterly financial information contained in this filing is
unaudited, the financial statements presented reflect all adjustments
(consisting only of normal recurring accruals) which the Company considers
necessary for a fair presentation of the results of operations for the
interim periods covered and of the financial condition of the Company at
the date of the interim balance sheet. The results for interim periods
are not necessarily indicative of the results of the entire year. The
information included in this report should be read in conjunction with the
Company's audited financial statements and notes thereto.
3. FISCAL PERIOD
The Company uses a 52-53 week fiscal year ending on the last Sunday in
December. The fiscal year ended December 25, 1994 consisted of 52 weeks.
The three months ended March 19, 1995 and March 20, 1994 each consisted
of 12 weeks. For convenience the period ends have been presented as
ending December 31 and March 31, accordingly.
4. INVENTORIES
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
<S> <C> <C>
Finished goods $3,026 $3,228
Work in process 1,818 2,279
Raw materials 2,260 2,916
------ ------
Total inventories $7,104 $8,423
====== ======
</TABLE>
* * * * *
14
<PAGE>
Item 7(b). Pro Forma Financial Information
WHITTAKER CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
On April 24, 1995, Whittaker Corporation acquired all of the stock of Hughes LAN
Systems, Inc. (HLS) from Hughes Aircraft Company (HAC). The Company paid
approximately $16 million in cash, subject to adjustment, a 7% convertible
subordinated note in the principal amount of $15 million, and contingent
payments based on the revenues from sales of certain HLS products during the
period November 1, 1995 through October 31, 1999.
The following unaudited pro forma condensed combining statements of operations
of Whittaker Corporation and its subsidiaries and Hughes Lan Systems, Inc.
(HLS) for the year ended October 31, 1994 and the six months ended April 30,
1995 have been prepared to illustrate the effect of the business combination
which is being accounted for as a purchase, as though the business combination
occurred on November 1, 1993 and November 1, 1994, in the pro forma statements
of operations. The pro forma adjustments and the assumptions on which they are
based are described in the accompanying Notes to Whittaker Corporation Unaudited
Pro Forma Condensed Combining Financial Statements. Because the Acquisition of
HLS was completed prior to April 30, 1995, the balance sheet of HLS is included
in the consolidated balance sheet of Whittaker Corporation as of April 30, 1995
which is included in its Form 10-Q for the period ended April 30, 1995.
The Whittaker Corporation unaudited pro forma condensed combining statements of
operations are presented for illustrative purposes only and are not necessarily
indicative of the consolidated results of operations of Whittaker Corporation
that would have been reported had the business combination occurred on the dates
indicated, nor do they represent a forecast of the consolidated results of
operations of Whittaker Corporation for any future period. Furthermore, no
effect has been given in the Whittaker Corporation unaudited pro forma condensed
combining statements of operations for operating and synergistic benefits that
may be realized through the combination of the entities. The Whittaker
Corporation unaudited pro forma condensed combining statements of operations,
including the Notes thereto, should be read in conjunction with the historical
consolidated financial statements of Whittaker Corporation and HLS which are
incorporated herein by reference and included herein, respectively.
15
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
WHITTAKER HLS
OCTOBER 31, DECEMBER 31, PRO FORMA PRO FORMA
1994 1994 ADJUSTMENTS COMBINED
----------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Sales $126,448 $ 44,938 $171,386
-------- -------- -------- --------
Costs and expenses
Cost of sales 73,286 25,792 $ 881 (1) 99,959
Engineering, selling and
general and administrative 33,149 36,823 (3,290)(2) 67,520
Write-down of goodwill 35,000 (35,000)(2) 0
Interest on long-term debt 3,967 2,030 (3) 5,997
Other interest 82 2,216 (2,216)(3) 82
Interest income (568) (568)
-------- -------- -------- --------
109,916 99,831 (36,757) 172,990
-------- -------- -------- --------
Income (loss) before
provision for taxes 16,532 (54,893) 36,757 (1,604)
Provision (benefit) for taxes 6,471 (6,471)(4) 0
-------- -------- -------- --------
Net income (loss) $ 10,061 ($54,893) $ 43,228 ($1,604)
======== ======== ======== ========
Earnings (loss) per share $1.06 ($0.19)
======== ========
Average common and common
equivalent shares outstanding 9,502 8,481
======== ========
</TABLE>
(1) Reflects the additional amortization and depreciation of developed
technology and property, plant and equipment identified in the purchase
price allocation.
(2) Reflects the elimination of amortization and writedown of goodwill
recorded in the historical financial statements and the additional
amortization of goodwill identified in the purchase price allocation.
(3) Reflects the elimination of interest charged by HAC during the period and
the additional interest expense on convertible notes and bank borrowings
used to fund the acquisition by Whittaker.
(4) Reflects the tax benefit of operating losses incurred by HLS during the
period limited to Whittaker's pre tax income.
See accompanying notes to unaudited pro forma condensed combining statement of
operations.
16
<PAGE>
Unaudited Pro Forma Condensed Combining Statement of Operations
For the Six Months Ended
April 30, 1995
(In thousands)
<TABLE>
<CAPTION>
Whittaker HLS
April 30, March 31, Pro Forma Pro Forma
1995 1995 Adjustments Combined
---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Sales $58,368 $25,060 $83,428
------- ------- ------ -------
Costs and expenses
Cost of sales 35,087 16,189 $ 220 (1) 51,496
Engineering, selling and
general and administrative 14,841 16,810 (514)(2) 31,332
195 (2)
Acquired in-process research
and development 3,250 (3,250)(4) 0
Interest on long-term debt 2,414 1,078 (3) 3,492
Other interest 43 1,016 (1,016)(3) 43
Interest income (330) (330)
------- ------- ------- -------
55,305 34,015 (3,287) 86,033
------- ------- ------- -------
Income (loss) before provision for taxes 3,063 (8,955) 3,287 (2,605)
Provision (benefit) for taxes 1,188 (1,188)(5) 0
------- ------- ------- -------
Net income (loss) $ 1,875 ($8,955) $ 4,475 ($2,605)
======= ======= ======= =======
Earnings (loss) per share $0.20 ($0.31)
======= =======
Average common and common
equivalent shares outstanding 9,585 8,498
======= =======
</TABLE>
(1) Reflects the additional amortization and depreciation of developed
technology and property, plant and equipment identified in the purchase
price allocation.
(2) Reflects the elimination of amortization and writedown of goodwill recorded
in the historical financial statements and the additional amortization of
goodwill identified in the purchase price allocation.
(3) Reflects the elimination of interest charged by HAC during the period and
the additional interest expense on convertible notes and bank borrowings
which were used to fund the acquisition by Whittaker.
(4) Reflects elimination of acquired in-process research and development which
is directly a result of the acquisition.
(5) Reflects the tax benefit of operating losses incurred by HLS during the
period limited to Whittaker's pre tax income.
See accompanying notes to unaudited pro forma condensed combining statements of
operations.
17
<PAGE>
NOTES TO WHITTAKER CORPORATION PRO FORMA
CONDENSED COMBINED STATEMENTS OF OPERATIONS
A. The Whittaker Corporation unaudited pro forma combining statements of
operations and the related notes give effect to the business combination as a
purchase. The unaudited pro forma condensed combining statements of operations
of Whittaker Corporation and its subsidiaries and Hughes Lan Systems, Inc. (HLS)
for the year ended October 31, 1994 and the six months ended April 30, 1995,
assumes that the business combination occurred on November 1, 1993 and November
1, 1994. HLS's historical financial statements are for fiscal years ended
December 31 and accordingly, the historical information for the calendar
quarters of HLS has been combined with the fiscal quarters of Whittaker
Corporation for the purpose of the pro forma presentation.
All interim financial data used to develop the Whittaker unaudited pro
forma combining statements of operations is unaudited, but in the opinion of
Whittaker's management, reflects all adjustments necessary (consisting only of
normal recurring entries) for a fair presentation thereof. However, it should
be understood that accounting measurements at interim dates may be less precise
than at year end.
The preliminary allocation of the purchase price among the identifiable
tangible and intangible assets, as reflected in the accompanying pro forma
statements of operations, was based on an analysis of the fair value of those
assets. The Company continues to analyze the assets acquired and liabilities
assumed and further adjustments to the purchase price and changes in the
allocation of the purchase price may occur. Acquired in-process research and
development was analyzed through interviews and analysis of data concerning each
HLS developmental project. Expected future cash flows of each such project were
discounted to present value taking into account risks associated with the
inherent difficulties and uncertainties in completing the project, and thereby
achieving technological feasibility, and risks related to the viability of and
potential changes in future markets. This analysis resulted in approximately
$3.25 million for acquired in-process research and development, which, under
generally accepted accounting principles, was expensed immediately upon the
completion of the acquisition in the period ended April 30, 1995 and reflected
in the historical statement of income of Whittaker for that period. This amount
was eliminated in the pro forma statement of operations as it represents a
material non-recurring charge.
Developed technology was analyzed using the same methodology and resulted
in an estimated value of $3.25 million, which is being amortized over five
years. Goodwill, which is related to the ongoing value of the acquired network
communications business, is being amortized over 20 years.
Whittaker expects to incur additional non-recurring charges during the
remainder of its fiscal year related to the elimination of duplicate facilities,
relocation and severance costs, and other integration costs. These amounts have
not yet been finalized and are not reflected in the accompanying pro forma
statement of operations.
B. The pro forma combined primary earnings (loss) per share have been
based on the weighted average number of common shares outstanding during the
periods, after increasing the net loss for the dividend requirements on
Whittaker's outstanding $5.00 Cumulative Preferred Stock. Common stock
equivalents are not dilutive for the pro forma periods presented. The exercise
of the conversion option on the 7% convertible subordinated note issued in the
acquisition is not considered dilutive for purposes of calculating fully diluted
earnings per share.
18
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Nos.
2-74481, 2-97149, 2-76480, 2-70806, 33-35762, 33-35763, 33-52295 and 33-58323 on
Form S-8 and Registration Statement No. 33-04320 on Forms S-8 and S-4 of
Whittaker Corporation, of our report dated June 12, 1995 relating to the
financial statements of Hughes LAN Systems, Inc. appearing in this Current
Report on Form 8-K/A of Whittaker Corporation dated July 7, 1995.
DELOITTE & TOUCHE LLP
San Jose, California
July 7, 1995
