<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE
QUARTERLY PERIOD ENDED JULY 31, 1997
COMMISSION FILE NUMBER 0-20609
----------------
WHITTAKER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 95-4033076
<S> <C>
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<CAPTION>
1955 N. SURVEYOR AVENUE 93063
SIMI VALLEY, CALIFORNIA
<S> <C>
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(805) 526-5700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 Registrant's
classes of common stock, as of the latest practicable date: 11,149,473 shares,
par value $.01 per share, as of July 31, 1997.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (AS AMENDED ON OCTOBER 14, 1997 TO REVISE NOTE 8)
WHITTAKER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
($ IN 000, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS MONTHS
ENDED JULY 31, ENDED JULY 31,
----------------- ------------------
1997 1996 1997 1996
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Sales................................... $ 48,596 $62,162 $143,383 $154,187
Costs and expenses
Cost of sales......................... 37,482 36,824 97,628 89,208
Engineering and development........... 3,629 6,879 12,259 13,856
Selling, general and administrative... 21,328 24,025 63,554 51,040
Goodwill and other intangibles
impairment charge.................... 8,107 -- 30,175 --
Acquired in-process research and
development.......................... -- -- -- 11,700
Restructuring costs................... -- 866 5,268 1,406
-------- ------- -------- --------
Operating Loss.......................... (21,950) (6,432) (65,501) (13,023)
Interest expense...................... 5,473 3,374 13,849 7,060
Interest income....................... (106) (479) (369) (6,101)
Other (income) expense................ (219) 296 643 342
-------- ------- -------- --------
Loss before benefit for taxes........... (27,098) (9,623) (79,624) (14,324)
Benefit for taxes....................... -- (3,677) -- (5,378)
Net loss................................ $(27,098) $(5,946) $(79,624) $ (8,946)
======== ======= ======== ========
Average common and common equivalent
shares outstanding (000)............... 11,149 11,029 11,136 9,704
======== ======= ======== ========
Loss per share.......................... $ (2.43) $ (0.54) $ (7.15) $ (0.92)
======== ======= ======== ========
</TABLE>
Unaudited
See Notes to Consolidated Condensed Financial Statements
2
<PAGE>
WHITTAKER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($ IN 000)
<TABLE>
<CAPTION>
UNAUDITED
AT JULY 31, AT OCTOBER 31,
1997 1996
----------- --------------
<S> <C> <C>
ASSETS
------
Current Assets
Cash................................................. $ 4,628 $ 1,566
Receivables.......................................... 50,427 74,258
Inventories.......................................... 43,271 46,087
Other current assets................................. 2,380 2,319
Income taxes recoverable............................. 846 5,443
Deferred income taxes................................ 11,833 17,928
-------- --------
Total Current Assets................................. 113,385 147,601
-------- --------
Property and equipment, at cost...................... 59,634 89,787
Less accumulated depreciation and amortization....... (39,553) (46,421)
-------- --------
Net Property and Equipment........................... 20,081 43,366
-------- --------
Other Assets
Goodwill, net of amortization........................ 69,482 95,003
Other intangible assets, net of amortization......... 31,392 45,422
Notes and other noncurrent receivables............... 1,739 2,898
Other noncurrent assets.............................. 11,373 14,065
Net assets held for sale or development.............. 32,391 31,129
-------- --------
Total Other Assets............................... 146,377 188,517
-------- --------
Total Assets..................................... $279,843 $379,484
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Current maturities of long-term debt................. $147,049 $161,482
Accounts payable..................................... 13,279 13,830
Accrued liabilities.................................. 37,186 38,020
-------- --------
Total Current Liabilities............................ 197,514 213,332
-------- --------
Other Liabilities
Long-term debt....................................... 246 453
Other noncurrent liabilities......................... 11,567 12,019
Deferred income taxes................................ 18,286 22,544
-------- --------
Total Other Liabilities.............................. 30,099 35,016
-------- --------
Stockholders' Equity
Capital stock
Preferred stock.................................... 1 1
Common Stock....................................... 111 110
Additional paid-in capital........................... 71,036 70,321
Retained earnings (deficit).......................... (18,918) 60,704
-------- --------
Total Stockholders' Equity....................... 52,230 131,136
-------- --------
Total Liabilities and Stockholders' Equity....... $279,843 $379,484
======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
3
<PAGE>
WHITTAKER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($ IN 000)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS
ENDED JULY 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(79,624) $ (8,946)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization........................... 17,395 12,014
Goodwill and other intangibles impairment charge........ 30,175 --
Net periodic pension expense (income)................... 441 (154)
Acquired in-process research and development............ -- 11,700
Decrease (increase) in income taxes recoverable......... 4,597 (6,253)
Change in deferred taxes................................ 1,837 (4,831)
Changes in operating assets and liabilities:
Decrease in receivables................................. 23,551 8,830
Decrease (increase) in inventories and other current
assets................................................. 2,755 (6,105)
Decrease in accounts payable and other liabilities...... (1,385) (7,637)
-------- --------
Net cash used by operating activities..................... (258) (1,382)
-------- --------
INVESTING ACTIVITIES
Sale of property, plant and equipment..................... 19,307 --
Purchase of property, plant and equipment................. (3,476) (3,428)
Purchased business........................................ -- (69,578)
Net decrease in notes receivable.......................... 1,439 1,122
Increase in assets held for sale or development........... (1,262) (3,254)
Other items, net.......................................... 541 1,119
-------- --------
Net cash provided (used) by investing activities.......... 16,549 (74,019)
-------- --------
FINANCING ACTIVITIES
Borrowings related to new credit agreement................ -- 88,250
Payment of term debt and other decreases in debt, net..... (14,640) (207)
Deferred debt costs....................................... 695 (3,448)
Other items, net.......................................... 716 142
-------- --------
Net cash provided (used) by financing activities.......... (13,229) 84,737
-------- --------
Net increase in cash...................................... 3,062 9,336
Cash at beginning of year................................. 1,566 161
-------- --------
Cash at end of period..................................... $ 4,628 $ 9,497
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest.............................................. $ 12,549 $ 6,687
======== ========
Income taxes.......................................... $ 316 $ 214
======== ========
</TABLE>
Unaudited
See Notes to Consolidated Condensed Financial Statements
4
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated condensed financial statements of Whittaker
Corporation and its subsidiaries ("Whittaker" or the "Company") have been
prepared in conformity with generally accepted accounting principles,
consistent in all material respects with those applied in the Annual Report on
Form 10-K/A for the year ended October 31, 1996. The interim financial
information is unaudited, but reflects all adjustments which are of a normal
recurring nature and, in the opinion of management, necessary to provide a
fair statement of the results for the interim periods presented. The
preparation of financial statements in conformity with generally accepted
accounting principles may require management to make certain estimates and
assumptions that could affect the amounts reported in the financial statements
and accompanying notes. These estimates and assumptions include, among other
things, future costs to complete long-term contracts, valuation of slow moving
or obsolete inventories and amounts of estimated liabilities for contingent
losses and future costs of litigation. Actual costs could differ from these
estimates. The interim financial statements should be read in conjunction with
the financial statements and related notes in the Company's Annual Report on
Form 10-K/A for the year ended October 31, 1996. The results of operations for
interim periods are not necessarily indicative of the results of operations
for the full year.
Primary earnings per share are computed based on the weighted average number
of common and common equivalent shares outstanding except in those periods
where the inclusion of average common equivalent shares would be antidilutive.
Common stock equivalents include Series D Participating Convertible Preferred
Stock ("Series D Preferred Stock") on an if converted basis, and dilutive
employee stock options calculated using the treasury stock method. Fully
diluted earnings per share include the additional potential dilutive effects
of employee stock options under the treasury stock method except in periods
where the inclusion of such additional shares would be antidilutive. The
additional shares outstanding, assuming the conversion of the convertible
debt, are included in all periods where the effect is dilutive. Fully diluted
earnings per share are not presented because the calculations result in
dilution of less than 3%.
NOTE 2. ACQUISITIONS
On April 10, 1996, the Company acquired all of the capital stock of Xyplex,
Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon Company ("Raytheon").
Xyplex is a producer of high-speed internetworking equipment, terminal servers
and shared media products for business local area networks. Xyplex also
provides remote access products that interconnect with phone companies' wide
area networks. The purchase price was $67.5 million in cash, subject to
certain adjustments, and $50.0 million in the form of 1,974,333 newly issued
shares of the Company's common stock. Other direct costs associated with the
acquisition were approximately $1.4 million. The cash paid to Raytheon was
obtained from the Company's existing bank credit agreement which was increased
on April 10, 1996.
The Xyplex acquisition was accounted for as a purchase and the balance sheet
of Xyplex was combined with the Company's balance sheet as of April 30, 1996.
The transaction resulted in the acquisition of intangible assets valued at
$39.2 million which were being amortized on a straight-line basis over periods
ranging from 5 to 15 years and goodwill of $62.8 million which was being
amortized on a straight-line basis over 20 years. During the third quarter of
1997, the Company reduced the amortization periods for the goodwill and
certain other intangible assets from 20 and 15 years, respectively, to 7 years
(see Note 8). Acquired in-process research and development valued at $11.7
million was expensed at the acquisition date. The Company also assumed accrued
liabilities of $16.6 million at the acquisition date. Prior to closing, Xyplex
forgave the intercompany receivable due from Raytheon. Based on the Company's
current projections, the undiscounted future cash flows from the Xyplex
operation appear sufficient to recover the current carrying value of the
intangible assets and goodwill. The Company intends to continue to evaluate
the performance and cash flow projections of Xyplex as
5
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
well as its technological positioning in the enterprise edge market. There can
be no assurance that such evaluations will not result in the write-off or
acceleration of the amortization of these intangible assets and goodwill in
future periods.
The accompanying consolidated financial statements reflect the operating
results of Xyplex since the effective date of the acquisition. The unaudited
pro forma results of operations for the nine months ended July 31, 1996,
assuming the consummation of the purchase as of November 1, 1995, are
summarized below. The writeoff of acquired in-process research and development
of $11.7 million is not reflected in these results (dollars in thousands
except per share amounts):
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JULY 31, 1996
-------------------
<S> <C>
Net sales............................................. $209,179
Net loss.............................................. $ (7,449)
Loss per share........................................ $ (0.64)
</TABLE>
NOTE 3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JULY
31, OCTOBER 31,
1997 1996
------- -----------
($ IN 000)
<S> <C> <C>
Parts and materials.................................. $25,195 $22,482
Work in process...................................... 16,494 14,162
Finished goods....................................... 3,086 8,349
Costs relating to long-term contracts................ 202 1,289
Unliquidated progress billings....................... (1,706) (195)
------- -------
$43,271 $46,087
======= =======
</TABLE>
NOTE 4. COMMITMENTS AND CONTINGENCIES
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. Consequently, the Company is without
insurance for various risks, including product liability for certain products
it previously manufactured. The Company currently has workers' compensation
insurance and product liability insurance for products it currently
manufactures. 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.
As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of
1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law
enacted to address public health and environmental concerns arising with
respect to the past treatment and disposal of hazardous substances. The
Company is also a potentially responsible party in a number of other actions
brought under state laws patterned after CERCLA. In nearly all of these
matters, the Company contributed a small amount (generally less than 1%) of
the total treated or disposed of waste. In addition to the CERCLA and similar
actions described above, the Company also, from time to time, conducts or
participates in remedial investigations and cleanup activities at facilities
currently or formerly occupied by its operating units. There are also various
other claims and suits pending against the Company.
6
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At July 31, 1997, 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 but excluding the
environmental remediation activities related to its property located in the
City of Santa Clarita, California. 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 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 has made cash expenditures of
approximately $2.4 million for these environmental matters during the nine
months ended July 31, 1997. The Company does not anticipate that these matters
will have a material adverse effect on the Company's financial position, or on
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 and the filing of future environmental
claims which are unknown to the Company at this time represent a potential
exposure for the Company, and the results of operations of the Company in
future periods could be adversely affected if uninsured losses in excess of
amounts recorded were to be incurred.
NOTE 5. LONG-TERM DEBT
On April 10, 1996, the Company increased the amount of its bank credit
facility to $170.0 million. At July 31, 1997, the credit facility consisted of
an $85.0 million revolving credit facility that expires in April 2001 of which
the Company was permitted to utilize $83.0 million, and a $57.2 million term
loan payable as noted below. The interest rate on loans outstanding under the
credit agreement is equal to the agent bank's prime rate plus 3.5% and
interest is payable monthly. The Company is obligated to pay letter of credit
fees which range between 4.125% per annum and 4.625% per annum on the
aggregate amount of outstanding letters of credit and commitment fees on the
unused amount of the revolving credit facility. Additional borrowings under
the credit facility will be used to fund future working capital and other
corporate requirements. At July 31, 1997, the Company had $8.3 million of
letters of credit outstanding and unused and available credit of $0.2 million
under its revolving credit facility. On August 15, 1997, the Company reduced
the letters of credit outstanding under its revolving credit facility to $3.1
million.
The Company's obligations under the credit agreement are secured by a pledge
of shares of stock of subsidiaries of the Company, accounts receivable,
inventory, equipment, intellectual property and other assets of the Company
and its subsidiaries. The agreement includes four financial ratio covenants
with respect to the Company's financial leverage, cash flow, and net worth. At
July 31, 1997, the Company was not in compliance with any of the financial
ratio covenants. The Company has obtained a waiver of the defaults up to, but
not including December 31, 1997. The waiver dated as of July 31, 1997 requires
the Company to make, in addition to previously scheduled quarterly principal
payments, additional principal payments on the term loan by September 30,
1997, in an aggregate amount of not less than $20 million and to pay a fee on
November 3, 1997 equal to the greater of 1.5% of the total credit agreement
commitment on October 31, 1997 or $750,000. In addition, the waiver permits
the Company to retain 50 percent of the net cash proceeds from certain asset
sales which, prior to the waiver, would have been applied in their entirety to
repay the term loan.
There can be no assurance that in future periods the Company will be in
compliance with any of the financial ratio covenants contained in its credit
agreement, or that, after expiration of the current waiver on December 31,
1997, additional waivers of the financial covenants will be obtained. There
can be no assurance that any future waivers would contain terms which would be
as favorable to the Company as, or would materially differ from, waivers
granted in the past. Consequently, bank debt in the amount of $119.3 million,
which otherwise would have been classified as noncurrent, has been classified
as current. Acceleration of the debt under the credit agreement by the bank
lending group upon the Company's failure, after December 31, 1997, to comply
7
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
with any of the financial ratio covenants noted above would be an event of
default under the $15 million 7% convertible subordinated note issued to
Hughes Electronics Corporation. Because of this possible cross default, the
entire $15 million principal balance of the 7% convertible subordinated note
has been classified as current debt.
Under the Company's 7% convertible subordinated note, the Company may not
pay or declare cash dividends or redeem shares of the Company if the Company's
tangible net worth is less than $15 million. As of July 31, 1996, the
Company's tangible net worth was less than $15 million and the Company has not
paid or declared dividends (including the quarterly dividend for the Series D
Preferred Stock) or redeemed shares since that date. However, dividends on the
Series D Preferred Stock have been accrued since that date.
In order to reduce the risk of higher interest expense under the Company's
credit agreement that could result from an increase in the level of market
interest rates, the Company in June 1996 purchased an interest rate cap with
an initial notional amount of $42.5 million. Under the terms of the interest
rate cap, the Company will receive a payment at the end of each quarterly
period, as defined in the interest rate cap agreement, if three-month LIBOR at
the beginning of the period exceeds 7.5%. The amount of such payment will be
the interest for such period on the notional amount of the interest rate cap
at the beginning of such period calculated using an interest rate equal to the
positive difference, if any, between LIBOR at the beginning of such period and
7.5%. The interest rate cap expires in July 1999. The cost of this interest
rate cap is being amortized over its 37-month term. At July 31, 1997, the
unamortized cost was $174,000.
On February 26, 1997, the Company concluded the sale and leaseback of its
Simi Valley facilities. The net proceeds of $17.4 million from the sale were
used to prepay term debt under the Company's credit agreement. The initial
lease term covers a 15 year period ending February 28, 2012 and calls for rent
escalations of 6% every three years beginning with the fourth year.
NOTE 6. BUSINESS SEGMENTS
The Company develops specialized aerospace and electronics technologies to
create products and customer solutions for aircraft, defense, communications
and industrial markets. The Company operates in two business segments:
Aerospace, which designs, manufactures, and distributes a wide variety of
fluid control devices and fire detection systems, as well as defense
electronics products and systems, and Communications, which designs, develops,
and markets a comprehensive line of networking products and services.
Operating profit (loss) is total revenue less operating expenses. General
corporate expenses have not been allocated to the business segments and are
shown as a separate expense element of operating profit (loss) to reconcile to
consolidated operating profit (loss). The Communications segment 1997 three
months and nine months operating results include a cumulative adjustment of
$8.1 million related to the reduction of the amortization lives of the
goodwill and certain other intangible assets recorded in connection with the
1996 acquisition of Xyplex, Inc. (see Note 8). The nine month 1997
Communications segment operating results also include an impairment charge of
$22.1 million related to the goodwill and other intangibles recorded in
connection with the 1995 acquisition of Hughes LAN Systems, Inc. (see Note 8).
Communications segment operating results for the first nine months of 1997
include restructuring costs of $5.3 million (see Note 7). Inventory writedowns
in connection with the restructuring efforts and asset writedowns and other
write-offs also negatively impacted the Communications segment 1997 three
months and nine months operating results by $6.3 million and $9.0 million,
respectively. The Aerospace segment 1997 operating results for the three
months and nine months include $0.8 million and $2.8 million, respectively,
for one-time charges in connection with the move of the Concord, California
operation to Simi Valley, California and other inventory write-offs.
8
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Information about the Company's operations by business segment for the
periods ended July 31, 1997 and 1996 follows ($ in thousands):
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED JULY
JULY 31, 31,
----------------- ------------------
1997 1996 1997 1996
-------- ------- -------- --------
<S> <C> <C> <C> <C>
SALES:
Aerospace............................... $ 26,243 $30,550 $ 75,700 $ 93,056
Communications.......................... 22,353 31,612 67,683 61,131
-------- ------- -------- --------
$ 48,596 $62,162 $143,383 $154,187
======== ======= ======== ========
OPERATING PROFIT (LOSS):
Aerospace............................... $ 969 $ 4,885 $ 6,678 $ 17,139
Communications.......................... (20,377) (8,292) (64,024) (23,093)
Corporate and Other..................... (2,542) (3,025) (8,155) (7,069)
-------- ------- -------- --------
$(21,950) $(6,432) $(65,501) $(13,023)
======== ======= ======== ========
</TABLE>
NOTE 7. RESTRUCTURING COSTS
During the first nine months of 1997, the Company's Communications segment
recognized restructuring costs aggregating $5.3 million. This charge was taken
to cover the costs of closing its Santa Clara, California facility and
integrating that operation into its Littleton, Massachusetts facility. These
costs include severance payments to approximately 75 employees, the write-down
of idle fixed assets to net realizable value and other costs associated with
the closedown of the Santa Clara facility. The Enterprise Hub product line
formerly sold and supported from the Santa Clara facility will be sold through
Xyplex Networks sales channels and will continue to be supported from the
Littleton facility. During the first nine months of 1997, charges made against
the restructuring reserve included severance payments of $2.2 million, fixed
asset writedowns of $1.5 million, site closing costs of $0.6 million and other
costs of $1.0 million.
NOTE 8. IMPAIRMENT CHARGE
In April 1995, the Company acquired all of the stock of Hughes LAN Systems,
Inc. The subsidiary was renamed Whittaker Communications, Inc. ("WCI").
Goodwill and intangible assets were recorded at the date of acquisition to
recognize the fact that the acquisition of the Enterprise Hub product line and
systems integration business was a key early step in the build-up and market
positioning of the Company's communications business and the second phase of
its transition from sole dependence on its aerospace and defense business.
During 1996, revenue from these product lines declined and operating losses
increased due to delays of key product enhancements, increased competition and
key employee attrition. During the first quarter of 1997, in an effort to
restructure the communications segment and reverse the continuing decline in
revenue and the continuing increase in operating losses from the Enterprise
Hub products and system integration business, the Company decided to close the
Santa Clara operation of WCI and integrate that operation into the operation
of Xyplex, Inc., which the Company acquired from Raytheon Company in April,
1996. Nevertheless, revenues continued to decline to de minimus levels and
operating losses continued to be incurred. In consideration of this continued
deterioration the Company determined that the goodwill and other intangibles
previously recorded had no remaining value and therefore recognized a goodwill
and other intangible asset impairment charge of $22.1 million in April 1997.
9
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the April 1996 acquisition of Xyplex, Inc., the Company
acquired goodwill and other intangible assets of $62.8 million and $39.2
million, respectively. These assets were being amortized, on a straight-line
basis, over periods of 20 years in the case of goodwill and five to 15 years
in the case of other intangible assets. During the third quarter of 1997, the
Company reduced the amortization periods for goodwill and certain other
intangible assets from 20 and 15 years, respectively, to seven years. This
adjustment resulted in an $8.1 million goodwill and other intangible asset
impairment charge which represents the increased amortization from the date of
acquisition to the beginning of the third quarter of 1997. Included in the
1997 third quarter and nine-month operating results is additional amortization
expense of $1.8 million representing the effects of the change subsequent to
the second quarter of 1997. The Company intends to continue to evaluate the
performance and cash flow projections of Xyplex as well as the technological
positioning of Xyplex in the enterprise edge market. There can be no assurance
that such evaluations will not result in additional write-offs of goodwill and
other intangibles in future periods. Such evaluations are based on the
continued operation of Xyplex. The Company is considering, among other
strategic options, the disposition of Xyplex. It is likely that such a sale
would result in the recognition of a loss.
NOTE 9. SUBSEQUENT EVENT
On September 4, 1997, the Company entered into an agreement, subject to
certain conditions and approvals, to sell the assets of its defense
electronics unit to Condor Systems, Inc. The Company intends to report the
operating results and net assets of this unit as a discontinued operation in
the fourth quarter of 1997. Had the agreement to sell this unit been reached
in the third quarter, the sales and operating loss of the continuing
operations of the Company would have been $45.0 million and $20.2 million,
respectively for the three months ended July 31, 1997. For the nine months
ended July 31, 1997, sales and operating loss from continuing operations would
have been $132.0 million and $61.1 million, respectively. Sales from
continuing operations for the three months and nine months ended July 31, 1996
would have been $55.6 million and $132.5 million, respectively and the
operating loss from continuing operations would have been $4.1 and $8.6
million, respectively.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (AS AMENDED ON OCTOBER 14, 1997 TO REVISE RESULTS OF
OPERATIONS--COMPARISON OF NINE MONTHS ENDED JULY 31, 1997 AND 1996--SELLING,
GENERAL AND ADMINISTRATIVE)
RECENT DEVELOPMENTS
The Company has engaged financial advisors to assist the Company in its
exploration of strategic options, including the disposition of Xyplex and any
of its other business units and assets. The Company has not received any
offers of purchase other than as described in Note 9, above. However,
discussions are continuing with other potential acquirers and the Company
cannot predict if additional dispositions will occur or the amount of cash
such dispositions would generate. Under the terms of the Company's credit
agreement, a portion of the net proceeds of such dispositions are required to
be applied to the prepayment of the Company's term loan. In addition,
strategic options being considered may include the acquisition of the Company
by purchase or merger.
RESULTS OF OPERATIONS
Comparison of Three Months Ended July 31, 1997 and 1996
Sales. The Company's third quarter 1997 sales of $48.6 million decreased by
$13.6 million (21.8%) over third quarter sales in the prior fiscal year. Sales
generated by the Company's Communications segment decreased by $9.3 million,
primarily as a result of lower sales of Enterprise Hub related products and
lower sales of network access and internetworking products resulting from the
integration of a new sales force.
The Company's Aerospace segment sales for the third quarter of fiscal 1997
were down $4.3 million (14.1%) from the same period in 1996, because of
reduced sales of defense electronics products, reduced sales from contracts
qualifying, under the Company's current policy, for revenue recognition using
the percentage of completion method, and reduced sales of fire and overheat
detectors resulting from production inefficiencies associated with the move of
the Concord, California operation to Simi Valley, California. These reductions
were partially offset by increased sales of OEM commercial valves.
Gross Margin. The Company's gross margin for the third quarter of 1997 as a
percentage of sales was 22.9%, compared with 40.8% for the third quarter of
1996. The third quarter 1997 gross margin consists of Communications segment
gross margin of $5.2 million (23.2% of sales), and Aerospace segment gross
margin of $5.9 million (22.6% of sales). Communications segment gross margin
as a percentage of sales decreased from 45.8% in the third quarter of 1996 due
to inventory write-offs and reserves for estimated future contract costs in
excess of anticipated revenues recorded in the third quarter of 1997.
Aerospace segment gross margin as a percentage of sales decreased from 35.5%
in the third quarter of 1996 to 22.6% in the third quarter of 1997 primarily
reflecting cost growth in certain defense electronics programs, lower margins
from fluid and pneumatic controls resulting from reduced sales levels,
production inefficiencies in the fire and overheat detector product line
associated with the move of the Concord, California operation to Simi Valley,
California and inventory and loss job reserves established during the third
quarter of 1997.
Engineering and Development. Engineering and development expenses for the
third quarter of 1997 decreased from the third quarter of 1996. The third
quarter 1997 engineering and development expenses consisted of Communications
segment expenses of $3.4 million (15.2% of sales) and Aerospace segment
expenses of $0.2 million (0.9% of sales). The third quarter 1997
Communications segment decrease in engineering and development expenses
reflected reduced headcount at Xyplex Networks and a reduction in spending on
Enterprise Hub related products. To maintain its competitive market position
in the Communications segment, the Company expects to continue to invest a
significant amount of its resources in the development of new Communications
products and product enhancements. However, the Company anticipates that
engineering and development expenditures by its Communications segment in 1997
will, as a percentage of sales, be less than 1996 levels. Aerospace segment
engineering and development expenses for the third quarter decreased by
$0.2 million from 1996 to 1997.
11
<PAGE>
Selling, General and Administrative. Selling, general and administrative
expenses (SG&A) for the third quarter of 1997 decreased by $2.7 million from
the third quarter of 1996, from $24.0 million in 1996 to $21.3 million in
1997. Communications segment SG&A expenses for the third quarter decreased by
$1.4 million from 1996 to 1997 due primarily to a reduction in headcount at
Xyplex Networks and the restructuring and move of its Santa Clara, California
operations to its Littleton, Massachusetts facility. Partially offsetting
these reductions were increased amortization expense related to goodwill and
other intangibles and costs associated with the Company's new system
integration business. Communications segment SG&A expenses for the third
quarter of 1997 were $14.1 million (62.9% of sales), which included
amortization expense of $4.0 million related to goodwill and intangible
assets, compared with SG&A expenses of $15.5 million (48.9% of sales), which
included amortization expense of $2.6 million related to goodwill and
intangible assets, for the third quarter of 1996. Aerospace segment SG&A
expenses were $4.7 million (18.0% of sales) for the third quarter of 1997
compared to $5.5 million (18.2% of sales) for the same period in 1996,
reflecting primarily reduced management incentive costs and headcount.
In connection with the April 1996 acquisition of Xyplex, Inc., the Company
acquired goodwill and other intangible assets of $62.8 million and $39.2
million, respectively. These assets were being amortized, on a straight-line
basis, over periods of 20 years in the case of goodwill and five to 15 years
in the case of other intangible assets. During the third quarter of 1997, the
Company reduced the amortization periods for the goodwill and certain other
intangible assets from 20 and 15 years, respectively, to seven years. This
adjustment resulted in an $8.1 million goodwill and other intangible asset
impairment charge which represents the increased amortization from the date of
acquisition to the beginning of the third quarter of 1997. Included in the
1997 third quarter operating results is additional amortization expense of
$1.8 million which has been included in the amortization expense recorded in
the Communications segment SG&A for the third quarter of 1997.
Interest Expense. Interest expense increased to $5.5 million for the third
quarter of 1997 from $3.4 million for the same period of 1996 primarily as a
result of higher interest rates.
Other Expense. Other expense, in the third quarter of 1997, decreased by
$0.5 million over the same period of 1996 reflecting a gain on the sale of an
investment partially offset by the writedown of certain noncurrent assets to
their net realizable value and adjustments to loss reserves for environmental
and other issues.
Income Taxes. In compliance with FASB 109, the Company has established a
full valuation allowance against its potential carry forward benefits. The
Company will continue to offset income tax benefits with this valuation
allowance until such time as its pretax profits would allow for the
elimination of this allowance.
Comparison of Nine Months Ended July 31, 1997 and 1996
Sales. The Company's sales for the nine months ended July 31, 1997 of $143.4
million decreased by $10.8 million (7.0%) over sales in the same period of the
prior fiscal year. Sales generated by the Company's Communications segment
increased by $6.6 million, primarily as a result of the acquisition of Xyplex,
Inc. partially offset by decreased sales of Enterprise Hub related products
reflecting the negative effect associated with the restructuring and move of
its Santa Clara, California operations to its Littleton, Massachusetts
facility and the Company's increased emphasis on sales of network access
products for the enterprise edge market.
The Company's Aerospace segment sales for the first nine months of fiscal
1997 were down $17.4 million (18.7%) from the same period in 1996, due to
reduced sales of defense electronics products, reduced sales from contracts
qualifying, under the Company's current policy, for revenue recognition using
the percentage of completion method and reduced sales of certain industrial
products. Also negatively impacting the 1997 nine months sales were reductions
resulting from production inefficiencies associated with the move of the fire
and overheat detector operations from Concord, California to Simi Valley,
California.
12
<PAGE>
Gross Margin. The Company's gross margin for the first nine months of 1997
as a percentage of sales was 31.9%, compared with 42.1% for the first nine
months of 1996. The 1997 gross margin consists of Communications segment gross
margin of $23.7 million (35.0% of sales), and Aerospace segment gross margin
of $22.1 million (29.1% of sales). Communications segment gross margin as a
percentage of sales decreased from 46.3% in the same period of 1996 primarily
because of inventory write-downs in connection with both the restructuring and
move of operations from Santa Clara to Littleton and lower than anticipated
sales levels. Aerospace segment gross margin as a percentage of sales
decreased from 39.4% in the first nine months of 1996 to 29.1% in the first
nine months of 1997 primarily reflecting production inefficiencies associated
with the move of the Concord, California operations to Simi Valley,
California, lower sales volume of fluid control devices, inventory write-offs
and decreased margins on defense electronic products.
Engineering and Development. Engineering and development expenses for the
first nine months of 1997 decreased by $1.6 million from the first nine months
of 1996. The 1997 engineering and development expenses consist of
Communications segment expenses of $11.4 million (16.8% of sales) and
Aerospace segment expenses of $0.9 million (1.2% of sales). Communications
segment engineering and development expenses decreased by $0.5 million from
1996 to 1997 primarily due to decreased spending for Enterprise Hub related
products partially offset by the inclusion of Xyplex engineering and
development expenses since its acquisition on April 10, 1996. To maintain its
competitive market position in the Communications segment, the Company expects
to continue to invest a significant amount of its resources in the development
of new Communications products and product enhancements. However, the Company
anticipates that engineering and development expenditures by its
Communications segment in 1997 will, as a percentage of sales, be less than
1996 levels. Aerospace segment engineering and development expenses decreased
by $1.1 million from 1996 to 1997.
Selling, General and Administrative. Selling, general and administrative
expenses (SG&A) for the first nine months of 1997 increased by $12.5 million
from the first nine months of 1996, from 33.1% of sales in 1996 to 44.3% of
sales in 1997. Communications segment SG&A expenses increased by $13.9 million
from the first nine months of 1996 to the first nine months of 1997 due
primarily to the inclusion of Xyplex SG&A expenses since its acquisition on
April 10, 1996 and increased amortization expense related to goodwill and
other intangibles. Communications segment SG&A expenses for the first nine
months of 1997 were $40.9 million (60.4% of sales), which included
amortization expense of $9.3 million related to goodwill and intangible
assets, compared with SG&A expenses of $27.0 million (44.1% of sales), which
included amortization expense of $4.2 million related to goodwill and
intangible assets, for the first nine months of 1996. Aerospace segment SG&A
expenses were $14.5 million (19.2% of sales) for the first nine months of 1997
compared to $17.0 million (18.3% of sales) for the same period in 1996.
In April 1995, the Company acquired all of the stock of Hughes LAN Systems,
Inc. The subsidiary was renamed Whittaker Communications, Inc. ("WCI").
Goodwill and intangible assets were recorded at the date of acquisition to
recognize the fact that the acquisition of the Enterprise Hub product line and
systems integration business was a key early step in the build-up and market
positioning of the Company's communications business and the second phase of
its transition from sole dependence on its aerospace and defense business.
During 1996, revenue from these product lines declined and operating losses
increased due to delays of key product enhancements, increased competition and
key employee attrition. During the first quarter of 1997, in an effort to
restructure the communications segment and reverse the continuing decline in
revenue and the continuing increase in operating losses from the Enterprise
Hub products and system integration business, the Company decided to close the
Santa Clara operation of WCI and integrate that operation into the operation
of Xyplex, Inc., which the Company acquired from Raytheon Company in April,
1996. Nevertheless, revenues continued to decline to de minimus levels and
operating losses continued to be incurred. In consideration of this continued
deterioration the Company determined that the goodwill and other intangibles
previously recorded had no remaining value and therefore recognized a goodwill
and other intangible asset impairment charge of $22.1 million in April 1997.
13
<PAGE>
In connection with the April 1996 acquisition of Xyplex, Inc., the Company
acquired goodwill and other intangible assets of $62.8 million and $39.2
million, respectively. These assets were being amortized, on a straight-line
basis, over periods of 20 years in the case of goodwill and five to 15 years
in the case of other intangible assets. During the third quarter of 1997, the
Company reduced the amortization periods for the goodwill and certain other
intangible assets from 20 and 15 years, respectively, to seven years. This
adjustment resulted in an $8.1 million goodwill and other intangible asset
impairment charge which represents the increased amortization from the date of
acquisition to the beginning of the third quarter of 1997. Included in the
1997 nine-month operating results is additional amortization expense of $1.8
million which has been included in the amortization expense recorded in the
Communications segment SG&A for the nine months of 1997.
Restructuring Costs. During the first nine months of 1997, the
Communications segment recognized costs and related liabilities of $5.3
million in connection with the integration of its Santa Clara, California
operation into its Littleton, Massachusetts facility. The liabilities include
$2.2 million for severance payments, $2.1 million for facility closedown costs
and $1.0 million for the write-off of other assets and other costs. During the
first nine months of 1997, charges made against the restructuring reserve
included severance payments of $2.2 million, fixed asset writedowns of $1.5
million, site close costs of $0.6 million and other costs of $1.0 million.
Interest Expense. Interest expense increased to $13.8 million for the first
nine months of 1997 from $7.1 million for the same period of 1996 primarily as
a result of incremental debt related to the acquisition of Xyplex and higher
interest rates.
Other Expense. Other expense for the first nine months of 1997 increased by
$0.3 million over the same period of 1996 reflecting the writedown of assets
to net realizable value, loss reserves for environmental and other issues
partially offset by a gain on the sale of an investment.
Income Taxes. In compliance with FASB 109, the Company has established a
full valuation allowance against its potential carry forward benefits. The
Company will continue to offset income tax benefits with this valuation
allowance until such time as its pretax profits would allow for the
elimination of this allowance.
Operating Results. In addition to the impairment charges and restructuring
costs described above, the Company recognized other write-offs and one-time
charges in connection with its overall streamlining and integration efforts.
The Communications segment incurred costs of $6.3 million for the writedown of
inventories which became excess or obsolete in connection with the
restructuring plan. The Aerospace segment incurred costs of $2.0 million for
the closing and move of its Concord, California facility to Simi Valley,
California.
ACQUISITION
On April 10, 1996, the Company acquired all of the capital stock of Xyplex,
Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon Company ("Raytheon").
Xyplex is a producer of high-speed internetworking equipment, terminal servers
and shared media products for business local area networks. Xyplex also
provides remote access products that interconnect with phone companies' wide
area networks. The purchase price was $67.5 million in cash, subject to
certain adjustments, and $50.0 million in the form of 1,974,333 newly issued
shares of the Company's common stock. Other direct costs associated with the
acquisition were approximately $1.4 million. The cash paid to Raytheon was
obtained from an amendment to the Company's existing credit facility entered
into on April 10, 1996.
The Xyplex acquisition was accounted for as a purchase and the balance sheet
of Xyplex was combined with the Company's balance sheet as of April 30, 1996.
The transaction resulted in the acquisition of intangible assets valued at
$39.2 million which were being amortized on a straight-line basis over periods
ranging from five to 15 years, goodwill of $62.8 million which was being
amortized on a straight-line basis over 20 years. Acquired in-process research
and development valued at $11.7 million was expensed at the acquisition date.
The Company also assumed accrued liabilities of $16.6 million at the
acquisition date. Prior to closing, Xyplex
14
<PAGE>
forgave the intercompany receivable due from Raytheon. During the third
quarter of 1997, the Company reduced the amortization periods for the goodwill
and certain other intangible assets from 20 and 15 years, respectively, to
seven years. This adjustment resulted in an $8.1 million goodwill and other
intangible asset impairment charge which represents the increased amortization
from the date of acquisition to the beginning of the third quarter of 1997.
Included in the 1997 third quarter and nine-months operating results is
additional amortization expense of $1.8 million which has been included in the
amortization expense recorded in the Communications segment SG&A for the third
quarter and nine months of 1997. Based on the Company's current projections,
the undiscounted future cash flows from the Xyplex operation appear sufficient
to recover the carrying value of the intangible assets and goodwill. The
Company intends to continue to evaluate the performance and cash flow
projections of Xyplex as well as its technological positioning in the
enterprise edge market. There can be no assurances that such evaluations will
not result in additional write- offs. Such evaluations are based on the
continued operation of Xyplex. The Company is considering, among other
strategic options, the disposition of Xyplex. It is likely that such a sale
would result in the recognition of a loss.
Sales of Xyplex products and services contributed substantial revenues to
the Company beginning in the third quarter of 1996, as well as resulting in
increased operating expenses. A significant portion of the increase in
operating expenses for the nine months ended July 31, 1997 over the
corresponding 1996 period was due to the acquisition of Xyplex and the
integration of the Whittaker Communications, Inc. ("WCI") and Xyplex
operations.
FINANCIAL CONDITION AND LIQUIDITY
On April 10, 1996, in conjunction with the purchase of Xyplex, the Company
amended and increased its bank credit facility and borrowed an additional
$76.5 million under such facility. At that time the credit agreement consisted
of an $85.0 million revolving credit facility with a five-year term and an
$85.0 million term loan repayable in quarterly installments over five years.
The cash payment to Raytheon Company for the purchase of Xyplex on April 10,
1996 was $67.3 million.
At July 31, 1997, the Company's debt totaled $147.3 million, which consisted
of $74.5 million of loans under the revolving credit facility, $57.2 million
under the term loan, $15.0 million of convertible subordinated debt, and $0.6
million of other debt. In addition, there were $8.3 million of letters of
credit outstanding under the revolving credit facility. The Company was not in
compliance with any of the four financial ratio covenants in its bank credit
agreement at July 31, 1997. The Company has obtained a waiver of the defaults
up to, but not including December 31, 1997. The most recent waiver agreement
dated as of July 31, 1997 requires the Company to make, in addition to
previously scheduled quarterly principal payments, additional principal
payments on the term loan by September 30, 1997 in an aggregate amount of not
less than $20 million, and to pay a fee on November 3, 1997 equal to the
greater of 1.5% of the total credit agreement commitment on October 31, 1997
or $750,000. In addition, the waiver permits the Company to retain 50 percent
of the net cash proceeds from certain asset sales which prior to such waiver
would have been applied in their entirety to repay the term loan. There can be
no assurance that in future periods, the Company will be in compliance with
any of the financial ratio covenants contained in its credit agreement, or
that, after expiration of the waiver on December 31, 1997, additional waivers
of the financial covenants will be obtained and, if obtained, that any such
waivers would contain terms which would be as favorable to the Company as, or
would materially differ from, waivers granted in the past. Consequently, bank
debt in the amount of $119.3 million, which otherwise would have been
classified as noncurrent, has been classified as current. Furthermore,
acceleration of the debt under the credit agreement by the bank lending group
upon the Company's failure, after December 31, 1997, to comply with any of the
financial ratio covenants would be an event of default under the $15 million
7% convertible subordinated note issued by the Company to Hughes Electronics
Corporation as partial consideration for its purchase of WCI in 1995. Because
of this possible cross-default, the entire $15 million principal balance of
the 7% convertible subordinated note has also been classified as current debt.
At July 31, 1997, the Company had unused and available credit of $0.2 million
under its revolving credit facility.
15
<PAGE>
The Company believes that its existing cash and available credit under its
revolving credit facility will be adequate to pay the waiver fee on November
3, 1997, and to meet future operating cash needs through the end of the
current fiscal year. Thereafter, the Company may need additional financing to
meet its operating cash needs. However, there can be no assurance that the
Company will be able to obtain such additional financing.
Debt as a percent of total capitalization (stockholders' equity plus debt)
was 69.8% at July 31, 1997, compared with 55.3% at October 31, 1996. The
current ratio at July 31, 1997 was 0.57, compared with 0.69 at October 31,
1996, while working capital was ($84.1) million at July 31, 1997, compared
with ($65.7) million at October 31, 1996. Excluding the debt reclassifications
discussed above, the current ratio would have been 1.79 and working capital
would have been $50.2 million at July 31, 1997 and at October 31, 1996 the
current ratio and working capital would have been 2.36 and $85.3 million.
Cash flow used by operations for the first nine months of 1997 was $0.3
million, compared to $1.4 million for the same period in 1996. The $1.1
million decrease in cash flow used by operations from 1996 to 1997 was due
primarily to the other intangibles impairment charge, decreases in accounts
receivable, decreases in income taxes recoverable and decreases in inventories
and other current assets substantially offset by the increase in net loss and
the write-off of acquired in-process research and development in 1996.
Capital expenditures during the first nine months of 1997 were $3.5 million,
compared to $3.4 million for the same period of 1996. At July 31, 1997, there
were approximately $1.2 million of approved capital expenditures outstanding
for the replacement and upgrade 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 and advances under the credit
agreement. Capital expenditure amounts are a component of one of the financial
ratio covenants contained in the Company's credit agreement.
The Company is evaluating the most advantageous means to realize the value
of a 996-acre parcel of land which was formerly used by a discontinued
technology unit. The land is located in the city of Santa Clarita, California,
approximately 35 miles from downtown Los Angeles. In September 1995, the City
of Santa Clarita granted entitlements necessary to develop this property as a
mixed-use residential, commercial, and light industrial development. The
initial term of the entitlements was ten years. In February 1996, the City
approved a development agreement which, among other things, extended the ten-
year term of the entitlements to over 20 years. Cash expenditures related to
the environmental remediation of this property were $1.4 million during the
first nine months of 1997.
The Company believes that current real estate market conditions are less
likely to result in realization of the highest value of the property from a
cash sale of the property in its current condition than from either an
agreement with a developer to participate in the remediation of the property
and the development of the property's infrastructure for sale of parcels to
merchant builders or from the Company's remediation and infrastructure
development of the property itself. There can be no assurance, however, that
such a development agreement will be reached or that the Company will have the
financial and development capabilities to develop the property itself. The
Company believes that the undiscounted cash flows from the development of this
property will be sufficient to recover its carrying value as well as the costs
to complete remediation activities.
On February 26, 1997, the Company concluded the sale and leaseback of its
Simi Valley facilities. The net proceeds of $17.4 million from the sale were
used to prepay term debt under the Company's credit agreement. The lease term
covers the fifteen year period ending February 28, 2012 and calls for rent
escalations of 6% every three years beginning with the fourth year.
Statements made herein that are not based on historical fact are "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. The risk factors that could cause actual results to differ
from the forward looking statements include delay in developing new programs
and products, inability to qualify for new programs or to develop new
products, loss of existing business and inability to attract new business and
customers, reduced spending by commercial and defense customers and
development of competing products.
16
<PAGE>
EXHIBITS TO PART I
I(a)Calculation of Earnings (Loss) Per Share.
17
<PAGE>
EXHIBIT I(A)
WHITTAKER CORPORATION
CALCULATION OF EARNINGS (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
JULY 31,
-----------------
1997 1996
-------- -------
<S> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS)
Net loss...................................................... $(79,624) $(8,946)
Adjustments................................................... -- --
-------- -------
Net loss used in primary earnings per share calculations...... $(79,624) $(8,946)
======== =======
AVERAGE COMMON AND COMMON EQUIVALENT SHARES
Weighted average number of common shares outstanding.......... 11,136 9,704
Common equivalent shares:
Series D Participating Convertible Preferred Stock.......... -- --
Stock options included under treasury stock method.......... -- --
-------- -------
TOTAL......................................................... 11,136 9,704
======== =======
Primary Loss Per Share........................................ $ (7.15) $ (0.92)
======== =======
</TABLE>
NOTE
Loss per share has been computed based on the weighted average number of
shares outstanding during the periods. Common equivalent shares have been
excluded from the calculations as antidilutive. Common stock equivalents
include Series D Participating Convertible Preferred Stock on an if converted
basis, and dilutive employee stock options calculated using the treasury stock
method.
Unaudited
18
<PAGE>
WHITTAKER CORPORATION
CALCULATION OF EARNINGS (LOSS) PER SHARE--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR NINE MONTHS
ENDED JULY 31,
-----------------
1997 1996
-------- -------
<S> <C> <C>
FULLY DILUTED EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS)
Net loss used in primary earnings per share calculation
(above).................................................... $(79,624) $(8,946)
Adjustments................................................. -- --
-------- -------
Net loss used in fully diluted earnings per share
calculations............................................... $(79,624) $(8,946)
======== =======
AVERAGE SHARES USED TO CALCULATE FULLY DILUTED
EARNINGS (LOSS) PER SHARE
Average common and common equivalent shares (above)......... 11,136 9,704
Add:
Additional stock options included under treasury stock
method................................................... -- --
Additional shares assuming conversion of subordinated
convertible debt......................................... -- --
-------- -------
TOTAL....................................................... 11,136 9,704
======== =======
Fully Diluted Loss Per Share................................ $ (7.15) $ (0.92)
======== =======
</TABLE>
NOTES
Loss per share has been computed based on the weighted average number of
common shares outstanding during the periods. Common equivalent shares and the
assumed conversion of subordinated convertible debt have been excluded from
the calculations as antidilutive. Common stock equivalents include Series D
Participating Convertible Preferred Stock on an if converted basis, and
dilutive employee stock options calculated using the treasury stock method.
Fully diluted earnings per share do not include the additional potential
dilutive effect of employee stock options as inclusion of such amounts would
be antidilutive.
Unaudited
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Environmental Matters
As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of
1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law
enacted to address public health and environmental concerns arising with
respect to the past treatment and disposal of hazardous substances. The
Company is also a potentially responsible party in a number of other actions
brought under state laws patterned after CERCLA. In nearly all of these
matters, the Company contributed a small amount (generally less than 1%) of
the total treated or disposed of waste. In addition to the CERCLA and similar
actions described above, the Company also, from time to time, conducts or
participates in remedial investigations and cleanup activities at facilities
currently or formerly occupied by its operating units.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. *
<TABLE>
<C> <S>
10.1 Seventh Amendment and Waiver, dated as of June 29, 1997, among
Registrant, NationsBank of Texas, N.A., as Agent, and the
financial institutions named therein as Lenders. (Exhibit 10.1 to
Form 10-Q for the quarter ended July 31, 1997.)
10.2 Eighth Amendment and Waiver, dated as of July 31, 1997, among
Registrant, NationsBank of Texas, N.A., as Agent, and the
financial institutions named therein as Lenders. (Exhibit 10.2 to
Form 10-Q for the quarter ended July 31, 1997.)
10.3 Asset purchase agreement, dated as of September 4, 1997, by and
among Whittaker Corporation, Whittaker Communications Limited,
Whittaker Services Corporation and Condor Systems, Inc. (Exhibit
10.3 to Form 10-Q for the quarter ended July 31, 1997.)
11. Statements re computation of per share earnings for the three
months ended July 31, 1997 (Exhibit I(a) of Part I to this Form
10-Q/A).
27. Financial Data Schedule. (Exhibit 27 to Form 10-Q for the quarter
ended July 31, 1997.)
</TABLE>
- --------
* Exhibits followed by a parenthetical reference are incorporated by
reference to the documents described therein.
(b) Reports on Form 8-K.
During the quarter ended July 31, 1997, the Company did not file any reports
on Form 8-K.
20
<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
By: /s/ John K. Ott
-------------------------------
Date: October 14, 1997 John K. Otto
Vice President, Chief Financial
Officer and Treasurer
21
