FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997
Commission file number 1-892
THE B.F.GOODRICH COMPANY
NEW YORK 34-0252680
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4020 KINROSS LAKES PARKWAY, RICHFIELD, OHIO 44286-9368
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216-659-7600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-------- --------
As of June 30, 1997, there were 54,050,729 shares of common stock outstanding.
There is only one class of common stock.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
THE B.F.GOODRICH COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales $ 578.1 $ 506.1 $ 1,127.5 $ 1,004.1
Operating Costs and Expenses:
Cost of sales 387.2 338.7 762.2 671.7
Selling and administrative expenses 132.0 110.7 257.1 220.1
Restructuring costs - - - 4.0
-------------- -------------- -------------- --------------
519.2 449.4 1,019.3 895.8
-------------- -------------- -------------- --------------
Operating income 58.9 56.7 108.2 108.3
Interest expense (8.2) (9.5) (17.2) (20.2)
Interest income 1.4 0.3 2.4 0.9
Gain on issuance of subsidiary stock 13.7 - 13.7 -
Other income (expense) - net 21.4 (5.1) 17.1 (9.4)
-------------- -------------- -------------- --------------
Income from continuing operations before
income taxes and Trust distributions 87.2 42.4 124.2 79.6
Income tax expense (32.2) (14.7) (45.7) (28.1)
Distributions on Trust preferred securities (2.6) (2.7) (5.2) (5.3)
-------------- -------------- -------------- --------------
Income from continuing operations 52.4 25.0 73.3 46.2
Income from discontinued operations (Note B):
Income from discontinued operations (net of tax) 3.4 12.9 8.0 11.6
Gain on sale of discontinued operations,
including provision of $7.9 for operating losses
during the phase-out period (less applicable
income taxes of $22.8) - - 59.5 -
-------------- -------------- -------------- --------------
Net Income $ 55.8 $ 37.9 $ 140.8 $ 57.8
============== ============== ============== ==============
Earnings per share:
Continuing operations $ 0.96 $ 0.46 $ 1.35 $ 0.86
Discontinued operations 0.06 0.24 1.24 0.22
-------------- -------------- -------------- --------------
Net income $ 1.02 $ 0.70 $ 2.59 $ 1.08
============== ============== ============== ==============
Weighted average number of common and common
equivalent shares outstanding - in millions 54.5 54.0 54.5 53.6
Dividends paid per common share $ 0.275 $ 0.275 $ 0.55 $ 0.55
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
THE B.F.GOODRICH COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Dollars in millions)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------- --------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 174.9 $ 48.7
Accounts and notes receivable, less allowances
for doubtful receivables (June 30, 1997,
$11.6; December 31, 1996, $13.1) 367.5 398.0
Inventories 350.0 367.1
Deferred income taxes 68.0 68.0
Prepaid expenses and other assets 26.5 30.5
--------------- ---------------
Total Current Assets 986.9 912.3
--------------- ---------------
Property
Land, buildings and machinery and equipment 1,551.0 1,663.7
Allowances for depreciation and amortization (676.4) (717.7)
--------------- ---------------
Total Property 874.6 946.0
--------------- ---------------
Deferred Income Taxes - 3.3
Goodwill 504.3 544.3
Identifiable Intangible Assets 43.5 47.6
Other Assets 208.1 209.6
--------------- ---------------
$ 2,617.4 $ 2,663.1
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term bank debt $ 34.8 $ 130.8
Accounts payable 227.2 243.1
Accrued expenses 233.2 237.2
Income taxes payable 12.1 11.1
Current maturities of long-term debt
and capital lease obligations 6.8 36.0
--------------- ---------------
Total Current Liabilities 514.1 658.2
--------------- ---------------
Long-term Debt and Capital Lease Obligations 391.8 400.0
Postretirement Benefits Other Than Pensions 341.4 348.5
Other Non-current Liabilities 81.5 83.6
Mandatorily Redeemable Preferred Securities of Trust 122.9 122.6
Shareholders' Equity
Common stock - $5 par value
Authorized 100,000,000 shares; issued 55,248,759
shares at June 30, 1997, and 54,899,308
shares at December 31, 1996 276.2 274.5
Additional capital 367.3 357.3
Income retained in the business 564.8 453.7
Cumulative unrealized translation adjustments (2.4) 5.9
Unearned portion of restricted stock awards (5.4) (9.0)
Common stock held in treasury, at cost (1,198,030
shares at June 30, 1997, and 1,135,985 shares
at December 31, 1996) (34.8) (32.2)
--------------- ---------------
Total Shareholders' Equity 1,165.7 1,050.2
--------------- ---------------
$ 2,617.4 $ 2,663.1
=============== ===============
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
THE B.F.GOODRICH COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in millions)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 140.8 $ 57.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 60.0 57.5
Deferred income taxes 17.6 15.8
Gains on sale of businesses (116.7) (6.4)
Change in assets and liabilities, net of effects
of acquisitions and dispositions of businesses:
Receivables (16.1) 1.8
Inventories (29.6) (23.6)
Other current assets 1.2 0.4
Accounts payable 7.3 (27.6)
Accrued expenses 0.4 0.1
Income taxes payable 3.0 4.7
Other non-current assets and liabilities (4.0) (17.1)
---------------- ----------------
Net cash provided by operating activities 63.9 63.4
INVESTING ACTIVITIES
Purchases of property (62.9) (78.0)
Proceeds from sale of property 3.6 0.9
Proceeds from sale of businesses 303.2 14.8
Payments made in connection with acquisitions,
net of cash acquired (23.4) (105.3)
---------------- ----------------
Net cash provided (used) by investing activities 220.5 (167.6)
FINANCING ACTIVITIES
Net (decrease) increase in short-term debt (95.0) 224.2
Proceeds from issuance of long-term debt - 20.0
Repayment of long-term debt and capital lease obligations (34.0) (137.0)
Proceeds from issuance of capital stock 6.9 7.7
Purchases of treasury stock (0.3) (0.1)
Dividends (29.6) (29.0)
Distributions on quarterly income preferred securities (5.2) (2.6)
---------------- ----------------
Net cash (used) provided by financing activities (157.2) 83.2
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1.0) (0.6)
---------------- ----------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 126.2 (21.6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 48.7 60.3
---------------- ---------------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 174.9 $ 38.7
================ ===============
Supplemental Cash Flow Information:
Income taxes paid $ 49.1 $ 11.3
================ ===============
Interest paid, net of amounts capitalized $ 16.2 $ 20.0
================ ===============
Contribution of common stock to pension trust $ - $ 30.0
================ ===============
</TABLE>
See notes to condensed consolidated financial statements.
- 4 -
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A: BASIS OF INTERIM FINANCIAL STATEMENT PREPARATION - The accompanying
unaudited condensed consolidated financial statements of The BFGoodrich Company
("BFGoodrich" or the "Company") have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended June 30,
1997, are not necessarily indicative of the results that may be achieved for the
year ending December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. The Company recognizes
gains (and losses) on the issuance of stock by a subsidiary in accordance with
the SEC's Staff Accounting Bulletin 84. Certain prior year amounts have been
reclassified to conform to the current year presentation.
Note B: DISCONTINUED OPERATIONS - On July 16, 1997, the Company entered into a
definitive agreement to sell its chlor-alkali and olefins ("CAO") business
(comprising primarily inventory, fixed assets and certain other assets,
amounting to approximately $60.0 million at June 30, 1997) to The Westlake Group
for cash proceeds of $92.75 million. The Company will also receive cash from the
settlement of accounts receivable net of accounts payable (amounting to
approximately $10.0 million at June 30, 1997). The sale is expected to be
completed during the third quarter and will result in a gain. The disposition of
the CAO business represents the disposal of a segment of a business under APB
Opinion No. 30 ("APB 30"). Accordingly, the consolidated statement of income has
been restated to reflect the CAO business (previously reported as Other
Operations) as a discontinued operation.
On February 3, 1997, the Company completed the sale of Tremco Incorporated to
RPM, Inc. for $230.7 million, resulting in an after-tax gain of $59.5 million,
or $1.09 per share. The sale of Tremco Incorporated completed the disposition
of the Company's Sealants, Coatings and Adhesives ("SC&A") Group which also
represented a disposal of a segment of a business under APB 30.
A summary of the results of discontinued operations for the periods presented
follows (dollars in millions).
- 5 -
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales:
CAO $ 37.8 $ 44.1 $ 78.3 $ 77.3
SC&A - 95.8 - 169.1
----------------------------------------------------------------
$ 37.8 $ 139.9 $ 78.3 $ 246.4
================================================================
Pretax income from operations:
CAO $ 5.3 $ 8.3 $ 12.4 $ 13.1
SC&A - 7.2 - 0.7
----------------------------------------------------------------
5.3 15.5 12.4 13.8
Pretax gain on sale of business - 6.4 - 6.4
Income tax expense (1.9) (9.0) (4.4) (8.6)
----------------------------------------------------------------
Income from discontinued operations $ 3.4 $ 12.9 $ 8.0 $ 11.6
================================================================
</TABLE>
Note C: INVENTORY - Inventories included in the accompanying condensed
consolidated balance sheet consist of:
<TABLE>
<CAPTION>
(Dollars in millions)
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
FIFO or average cost
(which approximates
current costs):
Finished products $ 130.5 $ 157.7
In process 139.4 122.0
Raw materials & supplies 138.1 152.1
----- -----
408.0 431.8
Reserve to reduce certain
inventories to LIFO basis (58.0) (64.7)
----- ------
Total $ 350.0 $ 367.1
===== =====
</TABLE>
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<PAGE>
Note D: ACQUISITIONS AND DIVESTITURES - During the latter part of the second
quarter of 1997, the Company completed the sale of its Engine Electrical Systems
Division, which was part of the Sensors and Integrated Systems Group in the
Aerospace segment. The Company received cash proceeds of $72.5 million, which
resulted in a pretax gain of $26.4 million ($16.4 million after tax).
During the latter part of the first quarter of 1997, the Company's Aerospace
segment acquired a manufacturer of data acquisition systems for satellites and
other aerospace applications. The final purchase price of $23.4 million includes
approximately $14 million of goodwill. The purchase price allocations have been
based on preliminary estimates. Goodwill is being amortized using the
straight-line method over 20 years. The results of operations since the
acquisition date have been included in the consolidated financial statements,
and are not material.
Note E: CAPITAL STOCK - During the first six months of 1997, 349,451 shares of
authorized but previously unissued shares of common stock were issued under an
employee compensation plan. Also under this plan, 48,345 shares of treasury
stock were purchased and 13,700 unearned shares were forfeited and returned to
treasury stock.
Note F: PUBLIC OFFERING OF SUBSIDIARY STOCK - In May 1997, the Company's
subsidiary, DTM Corporation ("DTM"), issued 2,852,191 shares of its authorized
but previously unissued common stock in an initial public offering ("IPO"). The
shares were issued at $8.00 per share ($7.44 per share net of the underwriting
discount) resulting in cash proceeds of $21.2 million to DTM, net of the
underwriting discount. DTM develops, designs, manufactures, markets and
supports, on an international basis, rapid prototyping and rapid tooling
systems, powdered material and related services. The Company owned approximately
92 percent of DTM's outstanding common stock immediately prior to the IPO. As a
result of the IPO, the Company's interest declined to approximately 50 percent
(the Company did not sell any of its interest in the IPO). The Company
recognized a pretax gain of $13.7 million ($8.0 million after tax, including
provision for deferred income taxes) in accordance with the SEC's Staff
Accounting Bulletin 84.
Note G: INCOME TAXES - The effective tax rate for the second quarter and first
six months of 1997 was higher than the federal statutory rate principally due to
state and local income taxes. The lower effective rate for the comparable
periods of 1996 was principally due to lower foreign income taxes.
Note H: CONTINGENCIES - There are pending or threatened against BFGoodrich or
its subsidiaries various claims, lawsuits and administrative proceedings, all
arising from the ordinary course of business with respect to commercial, product
liability and environmental matters, which
- 7 -
<PAGE>
seek remedies or damages. BFGoodrich believes that any liability that may
finally be determined with respect to commercial and product liability claims,
should not have a material effect on the Company's consolidated financial
position or results of operations. The Company is also involved from time to
time in legal proceedings as a plaintiff involving contract, patent protection,
environmental and other matters. Gain contingencies, if any, are recognized when
they are realized.
The Company and its subsidiaries are generators of both hazardous wastes and
non-hazardous wastes, the treatment, storage, transportation and disposal of
which are subject to various laws and governmental regulations. Although past
operations were in substantial compliance with the then-applicable regulations,
the Company has been designated as a potentially responsible party by the U.S.
Environmental Protection Agency in connection with 32 sites, most of which
related to previously discontinued businesses. The Company believes it may have
continuing liability with respect to not more than 15 sites.
A significant portion of accrued environmental liabilities is in connection with
five sites which relate to businesses previously discontinued. Two of the most
significant variables in determining the Company's ultimate liability are the
remediation method finally adopted for the site and the Company's share of the
total site remediation cost. With respect to the five previously discontinued
sites, the Company's maximum percentage share of the ultimate remediation costs
is fixed. Of the five sites, two sites are in the operation and maintenance
phase for which costs are reasonably fixed; a third site is in the construction
phase, which is expected to be completed soon, which the Company will "buy out"
of for a percentage of the total cost without any further liability exposure; a
fourth site is currently being constructed for which reasonable estimates of the
ultimate completion cost can be made; however, the final cost at completion can
vary significantly as a result of changes made during the construction phase and
changed regulatory agency requirements, all of which are difficult to predict.
With respect to the fifth site, uncertainty exists as to the total cost of
remediation and the amount of past EPA costs to be reimbursed.
Management believes that it is reasonably possible that additional environmental
costs may be incurred beyond the amounts accrued as a result of new information.
However, the amounts, if any, cannot be estimated and management believes that
they would not be material to the Company's financial condition, but could be
material to the Company's results of operations in a given period.
Note I: RECENTLY ISSUED ACCOUNTING STANDARD - In February 1997, the Financial
Accounting Standards Board issued Statement No. 128, Earnings per Share, which
is required to be adopted on December 31, 1997. At that time, the Company will
be required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact of Statement 128 on the calculation of primary and fully
diluted earnings per share for the three and six month periods ended June 30,
1997 and June 30, 1996 is not material.
- 8 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS
----------------------------------
COMPARISON OF THE SECOND QUARTER AND FIRST HALF OF 1997
TO THE SECOND QUARTER AND FIRST HALF OF 1996
--------------------------------------------
TOTAL COMPANY
-------------
During the second quarter of 1997, the Company's chlor-alkali and olefins
("CAO") business has been reported as a discontinued operation. The following
discussion and analysis excludes the results of the CAO business (previously
reported as Other Operations), unless otherwise stated.
Sales in the second quarter of 1997 increased to $578.1 million, or 14 percent
over the same period last year. Excluding acquisitions and divestitures, sales
increased 11 percent, largely reflecting higher volumes in both the Aerospace
and Specialty Chemicals segments.
Sales for the first half of 1997 increased to $1,127.5 million from $1,004.1
million for the corresponding period of 1996, reflecting a 12 percent increase.
Excluding acquisitions and divestitures, sales increased 8 percent, for the same
reasons as the second quarter.
Cost of sales as a percent of sales in the second quarter of 1997 compared to
the same period of 1996 remained virtually unchanged. Total cost of sales
increased to $387.2 million in the second quarter of 1997 from $338.7 million in
the second quarter of 1996, reflecting acquisitions and internal volume growth.
Cost of sales as a percent of sales for the first half of 1997 increased by 0.7
percentage points. This increase reflects higher original-equipment strategic
sales incentives in the Aerospace segment, coupled with higher start-up costs
and increased operating expenses in the Specialty Chemicals segment related to
several capital projects in Europe and the United States.
Selling and administrative expenses were 22.8 percent of sales for the second
quarter of 1997 compared to the 21.9 percent for the corresponding period of
1996. Selling and administrative expenses were $132.0 million for the second
quarter of 1997 compared to $110.7 million in the same period of 1996. These
increases reflect acquisitions, and higher support costs associated with capital
expansions.
For the first half of 1997, selling and administrative expenses were 22.8
percent compared with 21.9 percent for the same period of 1996. Selling and
administrative expenses were $257.1 million for the first half of 1997 compared
with $220.1 million for the corresponding period last year. The increase
occurred for the same reasons as the second quarter.
During the second quarter of 1997, the Company recognized a $13.7 million pretax
gain ($8.0
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<PAGE>
million after tax) in connection with the issuance of a subsidiary's common
stock in an initial public offering (see note F to the condensed consolidated
financial statements for further details). The Company does not expect public or
private offerings of subsidiaries' previously unissued stock to occur in the
foreseeable future.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share for the three and six month
periods ended June 30, 1997 and June 30, 1996 is not material.
OUTLOOK
-------
During 1997, the Company has sold Tremco Incorporated and Engine Electrical
Systems Division, and the sale of CAO is pending. To date in 1997, the Company
has made only one relatively modest acquisition. The Company has expressed
interest in acquiring several significant businesses, but has not been
successful in its efforts to date. While the Company continues to explore
significant acquisition opportunities at prices it believes to be appropriate,
it is not likely that one will be completed in time to offset in 1997 the loss
in operating income that would have been expected to be generated by the
divested businesses. If the Company does not make one or more significant
acquisitions in the near future, the Company may consider the possibility of
entering into a share repurchase program.
- 10 -
<PAGE>
SEGMENT ANALYSIS
----------------
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
(Dollars in Millions) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales:
Aerospace $349.7 $303.0 $ 676.4 $ 610.0
Specialty Chemicals 228.4 203.1 451.1 394.1
------ ------ -------- --------
Total $578.1 $506.1 $1,127.5 $1,004.1
- ---------------------------------------------------------------------------------------------------------------
Operating Income:
Aerospace $ 42.9 $ 39.9 $ 75.9 $ 79.1
Specialty Chemicals 31.1 28.5 62.2 53.5
------ ------ -------- --------
Total Reportable Segments 74.0 68.4 138.1 132.6
Corporate (15.1) (11.7) (29.9) (24.3)
------ ------ -------- --------
Total $ 58.9 $ 56.7 $ 108.2 $ 108.3
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The Company's operations are classified into two reportable business segments:
BFGoodrich Aerospace ("Aerospace") and BFGoodrich Specialty Chemicals
("Specialty Chemicals"). Aerospace consists of three business groups: Landing
Systems; Sensors and Integrated Systems; and Maintenance, Repair and Overhaul
("MRO"). They serve commercial, military, regional, business and general
aviation markets. Specialty Chemicals consists of two business groups: Specialty
Additives and Specialty Plastics. They serve various markets, such as personal
care, industrial piping, plumbing, pharmaceuticals, printing, textiles and
automotive.
Corporate includes general corporate administrative costs and Advanced
Technology Group research expenses. Segment operating income is total segment
revenue reduced by operating expenses directly identifiable with that business
segment. Intersegment eliminations are included in Corporate and are not
significant in any period.
An expanded analysis of sales and operating income by business segment follows.
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<PAGE>
Aerospace
- ---------
<TABLE>
<CAPTION>
Sales by Group (in millions)
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Landing Systems $ 120.8 $ 95.8 $ 236.6 $ 196.0
Sensors and Integrated Systems 140.1 120.1 266.1 238.0
MRO 88.8 87.1 173.7 176.0
- -----------------------------------------------------------------------------------------------------
TOTAL $ 349.7 $ 303.0 $ 676.4 $ 610.0
- -----------------------------------------------------------------------------------------------------
</TABLE>
Second Quarter 1997 Versus Second Quarter 1996
- ----------------------------------------------
The Aerospace segment achieved sales of $349.7 million in the second quarter of
1997, an increase of 15 percent over the second quarter of 1996. Excluding
divestitures and an acquisition, sales increased 14 percent.
The Landing Systems Group sales increased 26 percent over the 1996 second
quarter. This growth largely reflects higher demand from original-equipment
manufacturers for landing gear and evacuation products, primarily for the
B747-400 and B767 programs. Demand also improved for wheels and brakes products
for regional, business and military aircraft, as well as for the B777, B737 and
A330/340 commercial programs.
Excluding divestitures and an acquisition, sales in the Sensors and Integrated
Systems Group increased 12 percent over the 1996 second quarter. This increase
reflects stronger demand for aftermarket spares sales, particularly for aircraft
sensors and ice protection products. In addition, higher commercial
original-equipment demand for sensors products, principally on the B747 and B777
programs, contributed to the quarterly sales growth.
Sales in the MRO Group increased modestly over the prior year second quarter,
due to continued strong sales growth at the group's airframe business. The
airframe business achieved a 10 percent sales increase over the second quarter
of 1996, largely reflecting the full impact of new contracts with two airlines.
This growth, however, was substantially offset by lower sales from the component
services businesses due to reduced demand from a major customer with whom a new
maintenance contract is currently being negotiated, in addition to lost business
resulting from the bankruptcy of two major customers.
First Half of 1997 Versus First Half of 1996
- --------------------------------------------
Total Aerospace segment sales for the first half of 1997 increased by 11 percent
compared
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<PAGE>
with the first half of 1996. Excluding divestitures and an acquisition, sales
increased 9 percent.
Sales in the Landing Systems Group increased 21 percent over the first half of
1996. This improvement occurred for the same reasons affecting the second
quarter.
The Sensors and Integrated Systems Group achieved a 12 percent sales increase
during the first half of 1997. Excluding divestitures and an acquisition, sales
increased 7 percent, also for the same reasons affecting the second quarter
sales results.
The MRO Group's sales declined modestly compared to the first half of 1996. In
addition to the factors affecting the second quarter sales, the 1996 sales
include approximately $7 million of product sales by the component services
businesses which are not normally made by the service businesses and which are
not expected to recur.
<TABLE>
<CAPTION>
Operating Income by Group (in millions)
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Landing Systems $ 18.1 $ 15.6 $ 31.4 $ 30.4
Sensors and Integrated Systems 19.4 17.2 34.9 30.1
MRO 5.4 7.1 9.6 18.6
- ---------------------------------------------------------------------------------------------------
TOTAL $ 42.9 $ 39.9 $ 75.9 $ 79.1
- ---------------------------------------------------------------------------------------------------
</TABLE>
Second Quarter 1997 Versus Second Quarter 1996
- ----------------------------------------------
Overall, the Aerospace segment's operating income increased 8 percent compared
with the second quarter of 1996. Excluding divestitures and an acquisition,
operating income increased 7 percent.
The Landing Systems Group achieved a 16 percent increase in operating income
over the second quarter of 1997, largely as a result of higher sales levels.
This income growth was achieved despite significantly higher original-equipment
strategic sales incentives by the group's wheel and brake businesses, and a
nearly three week long strike at the group's landing gear business.
The Sensors and Integrated Systems Group operating income increased 13 percent
compared with the second quarter of 1996, due to higher sales volumes,
particularly for higher margin
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<PAGE>
aftermarket spares sales. Operating income in the 1997 second quarter was
constrained by higher engineering costs associated with development programs,
mainly in connection with the aircraft health and usage monitoring system.
Excluding divestitures and an acquisition, the group's operating income
increased 12 percent.
Operating income in the MRO Group declined to $5.4 million in the second quarter
of 1997 from $7.1 million in the same period last year, primarily due to the
lower component services sales levels previously mentioned. In addition, the
group's airframe business continues to experience (although at a diminishing
level) labor inefficiencies from training new technicians. During the second
half of 1996, the airframe business experienced substantially higher than normal
turnover levels due to increased employment at Boeing's neighboring facility.
Although turnover of skilled technicians has returned to historical levels
during 1997, replacement technicians are still undergoing training, thus
negatively impacting productivity.
First Half of 1997 Versus First Half of 1996
- --------------------------------------------
Total Aerospace operating income declined by 4 percent compared with the first
half of 1996. Excluding divestitures and an acquisition, operating income
decreased 6 percent.
The Landing Systems and Sensors and Integrated Systems Groups achieved higher
operating income for the first half of 1997 compared with the first half of 1996
for the same reasons that affected the second quarter income results. Excluding
divestitures and an acquisition, the Sensors and Integrated Systems Group's
operating income increased 11 percent.
Operating income in the MRO Group declined significantly during the first half
of 1997 compared with the same period of 1996, also due to the same reasons
affecting the second quarter income results.
Specialty Chemicals
- -------------------
<TABLE>
<CAPTION>
Sales by Group (in millions)
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Specialty Plastics $ 77.0 $ 71.0 $ 153.8 $ 142.6
Specialty Additives 151.4 132.1 297.3 251.5
- ---------------------------------------------------------------------------------------------------
TOTAL $ 228.4 $ 203.1 $ 451.1 $ 394.1
- ---------------------------------------------------------------------------------------------------
</TABLE>
- 14 -
<PAGE>
Second Quarter 1997 Versus Second Quarter 1996
- ----------------------------------------------
The Specialty Chemicals segment achieved sales of $228.4 million in the second
quarter of 1997, an increase of 12 percent over the second quarter of 1996.
Excluding the five acquisitions made in the second quarter of 1996, sales
increased 8 percent.
The Specialty Plastics Group achieved a 9 percent increase in sales over the
second quarter of last year. Excluding an acquisition, sales increased 7
percent, reflecting higher volumes across all business lines. This growth,
however, was dampened by the negative foreign currency translation effect of the
stronger U.S. dollar, primarily relative to the Belgian franc.
Sales in the Specialty Additives Group increased 8 percent, excluding
acquisitions. The group experienced higher volumes across all business lines,
with demand being particularly solid in the personal-care, paper, coatings and
adhesives markets. The group also benefited from higher selling prices. To a
lesser extent, the group was adversely affected by unfavorable foreign currency
translation effects.
First Half of 1997 Versus First Half of 1996
- --------------------------------------------
Year-to-date sales for the Specialty Chemicals segment increased 14 percent.
Excluding acquisitions, sales increased 7 percent.
Both the Specialty Plastics and Specialty Additives Groups achieved higher sales
compared with the comparable period of 1996, for the same reasons affecting the
second quarter results. Excluding acquisitions, sales increased 6 percent in the
Specialty Plastics Group and 7 percent in the Specialty Additives Group.
<TABLE>
<CAPTION>
Operating Income by Group (in millions)
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Specialty Plastics $ 8.5 $ 11.2 $ 18.3 $ 22.4
Specialty Additives 22.6 17.3 43.9 31.1
- ---------------------------------------------------------------------------------------------------
TOTAL $ 31.1 $ 28.5 $ 62.2 $ 53.5
- ---------------------------------------------------------------------------------------------------
</TABLE>
- 15 -
<PAGE>
Second Quarter 1997 Versus Second Quarter 1996
- ----------------------------------------------
Operating income for the Specialty Chemicals segment increased 9 percent.
Excluding acquisitions, operating income increased 6 percent.
The Specialty Plastics Group operating income decreased 25 percent from the
prior year quarter, excluding an acquisition, despite higher sales in 1997. The
group's operating margins were down principally due to higher PVC raw material
costs, and start-up costs and higher operating expenses associated with capacity
expansions in Europe and the U.S. Operating income was also adversely affected
by unfavorable foreign exchange rates.
The Specialty Additives Group operating income increased 31 percent, excluding
acquisitions. This achievement largely reflects the benefit of higher volumes,
complemented by higher selling prices and lower raw material costs.
First Half of 1997 Versus First Half of 1996
- --------------------------------------------
Operating income for the first half of 1997 increased 16 percent for the
Specialty Chemicals segment. Excluding acquisitions, operating income increased
10 percent.
Excluding acquisitions, operating income decreased 19 percent in the Specialty
Plastics Group but increased 33 percent in the Specialty Additives Group, for
the same reasons affecting the second quarter results. In addition, the first
half of 1996 included a $1.1 million and $2.9 million pretax charge for the
Specialty Plastics and Specialty Additives Groups, respectively, relating to a
voluntary early retirement program.
CORPORATE
---------
Second quarter 1997 Corporate expenses increased to $15.1 million, compared to
$11.7 million in the same period last year. This increase is largely
attributable to higher costs associated with the Company's long-term incentive
plan and other employee benefit costs.
Corporate expenses for the first half of 1997 were $29.9 million compared with
$24.3 million for the same period of 1996. The increase is due to the same
reasons for the second quarter increase.
INTEREST EXPENSE/INCOME
-----------------------
Interest expense in the second quarter of 1997 decreased 14 percent to $8.2
million, compared to the same period in 1996. Interest expense for the first
half of 1997 decreased 15
- 16 -
<PAGE>
percent to $17.2 million, compared to the first half of 1996. These decreases
were due to lower short-term debt levels, principally resulting from the use of
the proceeds from business divestitures (see note D to the condensed
consolidated financial statements).
Higher interest income in the 1997 periods compared with 1996 reflects higher
cash levels in 1997 generated from the proceeds of business divestitures.
INCOME TAXES
------------
For the second quarter of 1997, an income tax provision of $32.2 million was
recorded on pretax income from continuing operations of $87.2 million, an
effective tax rate of 36.9 percent. For the same period last year, an income tax
provision of $14.7 million was recorded on pretax income from continuing
operations of $42.4 million, an effective tax rate of 34.7 percent. For the
first half of 1997, an income tax provision of $45.7 million was recorded on
pretax income from continuing operations of $124.2 million, an effective tax
rate of 36.8 percent. For the same period last year, an income tax provision of
$28.1 million was recorded, reflecting an effective rate of 35.3 percent. For
the 1997 periods, the effective tax rate was higher than the federal statutory
rate principally due to state and local income taxes. The effective rate was
lower for the 1996 periods principally due to lower foreign income taxes.
DISCONTINUED OPERATIONS
-----------------------
On July 16, 1997, the Company entered into a definitive agreement to sell its
CAO business (comprising primarily inventory, fixed assets and certain other
assets, amounting to approximately $60.0 million at June 30, 1997) to The
Westlake Group for cash proceeds of $92.75 million. The Company will also
receive cash from the settlement of accounts receivable net of accounts payable
(amounting to approximately $10.0 million at June 30, 1997). The sale is
expected to be completed during the third quarter and will result in a gain. The
disposition of the CAO business represents the disposal of a segment of a
business under APB Opinion No. 30 ("APB 30"). Accordingly, the consolidated
statement of income has been restated to reflect the CAO business (previously
reported as Other Operations) as a discontinued operation.
On February 3, 1997, the Company completed the sale of Tremco Incorporated to
RPM, Inc. for $230.7 million, resulting in an after-tax gain of $59.5 million,
or $1.09 per share. The sale of Tremco Incorporated completed the disposition of
the Company's Sealants, Coatings and Adhesives ("SC&A") Group which also
represented a disposal of a segment of a business under APB 30.
- 17 -
<PAGE>
A summary of the results of discontinued operations is presented in note B to
the accompanying condensed consolidated financial statements.
CAPITAL RESOURCES AND LIQUIDITY
-------------------------------
Current assets less current liabilities increased by $218.7 million from
December 31, 1996 to June 30, 1997. This result reflects the proceeds from the
sale of Tremco Incorporated and the Engine Electrical Systems Division, and
lower working capital usage by the Company's businesses during the first half of
the year. The Company's current ratio increased from 1.4X at December 31, 1996
to 1.9X at June 30, 1997. The quick ratio also increased from .68X at December
31, 1996 to 1.1X at June 30, 1997. The Company expects to have adequate cash
flow from operations and has the credit facilities (described in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996) to satisfy its
operating requirements and capital spending programs and to finance growth
opportunities as they arise.
The Company's debt-to-capitalization ratio was 25.2 percent at June 30, 1997,
compared with 32.6 percent at December 31, 1996. For purposes of this ratio, the
Trust preferred securities are treated as capital.
Cash Flows
Cash flow from operating activities in the first half of 1997 was virtually the
same as the corresponding period last year. The Company continues to realize the
benefits of its initiatives to reduce the investment in operating working
capital. Average operating working capital (defined as accounts receivable plus
pre-LIFO inventory less accounts payable) as a percent of annualized sales was
22.9 percent for the first half of 1997, compared with 25.3 percent for the same
period last year (percentages exclude the SC&A Group). During the first half of
1997, the Company generated over $300 million in cash proceeds from the
previously mentioned business dispositions. The Company expects to generate
positive cash flow from operating activities in 1997 after satisfying capital
expenditures and payment of dividends, but excluding the effects of
acquisitions and divestitures.
- 18 -
<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant held its Annual Meeting of Shareholders on April 21, 1997. As
described in the 1997 Proxy Statement, the following actions were taken:
- The fourteen nominees for directors were elected.
- The appointment of Ernst & Young LLP as independent auditors for the year
1997 was ratified.
The votes were as follows:
For Director:
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Voted For Vote Withheld
<S> <C> <C>
Jeannette Grasselli Brown 48,823,456 575,769
David L. Burner 48,766,740 632,485
George A. Davidson, Jr. 48,843,862 555,363
Richard K. Davidson 48,832,690 566,535
James J. Glasser 48,807,465 591,760
Thomas H. O'Leary 48,811,395 587,830
Douglas E. Olesen 48,814,665 584,560
John D. Ong 48,630,469 768,756
Richard de J. Osborne 48,843,546 555,679
Joseph A. Pichler 48,825,928 573,297
Alfred M. Rankin, Jr. 48,828,019 571,206
Ian M. Ross 48,804,090 595,135
D. Lee Tobler 48,783,391 615,834
A. Thomas Young 48,834,527 564,698
</TABLE>
For ratification of independent auditors:
48,808,611 shares voted for; 288,654 shares voted against; and 301,960 shares
vote withheld.
- 19 -
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10(A) - Stock Option Plan, as amended through June 2, 1997.
Exhibit 10(H) - Rights Agreement, dated as of June 2, 1997, between
The B.F.Goodrich Company and The Bank of New York which includes the
form of Certificate of Amendment setting forth the terms of the
Junior Participating Preferred Stock, Series F, par value $1 per
share, as Exhibit A, the form of Right Certificate as Exhibit B and
the Summary of Rights to Purchase Preferred Shares as Exhibit C
which was filed as Exhibit 1 to Form 8-A filed June 19, 1997 is
incorporated herein by reference.
Exhibit 10(I) - Employee Protection Plan.
Exhibit 11 - Statement re Computation of Per Share Earnings is filed
as part of this report.
Exhibit 27 - Financial data schedule.
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K with respect to the
adoption on June 2, 1997 by the Company's Board of Directors of
a Shareholders Rights Plan effective on August 2, 1997, to
replace the existing plan that expires August 2, 1997.
- 20 -
<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 thereunto duly authorized.
August 6, 1997 The B.F.Goodrich Company
/S/D. LEE TOBLER
-----------------------------
D. Lee Tobler
Executive Vice President and
Chief Financial Officer
/S/STEVEN G. ROLLS
-----------------------------
Steven G. Rolls
Vice President & Controller
(Chief Accounting Officer)
- 21 -
Exhibit 10(A)
THE B.F.GOODRICH COMPANY
STOCK OPTION PLAN
1. PURPOSE. The purpose of the Plan is to promote the interests of the
shareholders by providing stock-based incentives to selected employees to align
their interests with shareholders and to motivate them to put forth maximum
efforts toward the continued growth, profitability and success of the Company.
In furtherance of this objective, stock options, stock appreciation rights,
performance shares, restricted shares, common stock, and/or other incentive
awards may be granted in accordance with the provisions of this Plan.
2. ADMINISTRATION. The Plan is to be administered by the Compensation
Committee or any successor committee (the "Committee") of the Board of Directors
of the Company. The Committee shall consist of at least three members who shall
not be eligible to participate in the Plan. The Committee shall have full power
and authority to construe, interpret and administer the Plan. All decisions,
actions or interpretations of the Committee shall be final, conclusive and
binding on all parties.
The Committee may delegate to the Chief Executive Officer and
to other senior officers of the Company the authority to make awards under the
Plan with respect to not more than ten percent of the shares authorized under
the Plan, pursuant to such conditions and limitations as the Committee may
establish, except that only the Committee may make awards to Participants who
are subject to Section 16 of the Securities Exchange Act of 1934.
3. SHARES AVAILABLE FOR THE PLAN. An aggregate of 3,200,000 shares of
common stock of the Company shall be available for delivery pursuant to the
provisions of the Plan. Such shares may be either authorized but unissued shares
or treasury shares. Any shares awarded under the Plan which are not issued or
otherwise are returned to the Company, whether because awards have been
forfeited, lapsed, expired, been canceled, withheld to satisfy withholding tax
obligations or otherwise, shall again be available for other awards under the
Plan. However, upon surrender of a stock option or exercise of any related stock
appreciation right, the number of shares subject to the surrendered option shall
be charged against the maximum number of shares issuable under the Plan and
shall not be available for future awards.
4. LIMITATION ON AWARDS. No individual employee may receive awards
under this Plan with respect to more than 200,000 shares in any calendar year.
5. TERM. No awards may be made under this Plan after April 15, 2001.
6. ELIGIBILITY. Awards under the Plan may be made to any salaried,
full-time employee of the Company or any subsidiary corporation of which more
than 50% of the voting stock is owned by the Company. Directors who are not
full-time employees are not eligible to participate.
1
<PAGE>
7. STOCK OPTIONS. The Committee may in its discretion from time to time
grant to eligible employees options to purchase, at a price not less than 100%
of the fair market value on the date of grant (the "option price"), common stock
of the Company, subject to the conditions set forth in this Plan. The Committee
may not reduce the option price of any stock option grant after it is made,
except in connection with a Corporate Reorganization, nor may the Committee
agree to exchange a new lower priced option for an outstanding higher priced
option
The Committee, at the time of granting to any employee an
option to purchase shares or any related stock appreciation right or limited
stock appreciation right under the Plan, shall fix the terms and conditions upon
which such option or appreciation right may be exercised, and may designate
options incentive stock options pursuant to Section 422 of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code") or any other statutory
stock option that may be permitted under the Internal Revenue Code from time to
time, provided, however that (i) the date on which such options and related
appreciation rights shall expire, if not exercised, may not be later than ten
years after the date of grant of the option, (ii) in the case of options
designated as incentive stock options (as defined in Section 422 of the Internal
Revenue Code), the aggregate fair market value of stock optioned to an employee
(determined at time of grant) under this plan or any other plan of this Company
and its subsidiaries with respect to which incentive stock options are
exercisable for the first time by such employee during any calendar year shall
be limited to $100,000 (unless such Section 422 limit is revised, then in
conformance with such revision) and (iii) in case of any other statutory stock
option permitted under the Internal Revenue Code, then in accordance with such
provisions as in effect from time to time.
Within the foregoing limitations, the Committee shall have the
authority in its discretion to specify all other terms and conditions, including
but not limited to provisions for the exercise of options in installments, the
time limits during which options may be exercised, and in lieu of payment in
cash, the exercise in whole or in part of options by tendering common stock of
the Company owned by the employee, valued at the fair market value on the date
of exercise or other acceptable forms of consideration equal in value to the
option price. The Committee may, in its discretion, issue rules or conditions
with respect to utilization of common stock for all or part of the option price,
including limitations on the pyramiding of shares.
8. STOCK APPRECIATION RIGHTS. The Committee may, in its discretion,
grant stock appreciation rights and limited stock appreciation rights (as
hereinafter described) in connection with any stock option, either at the time
of grant of such stock option or any time thereafter during the term of such
stock option. Except for the terms of this Plan with respect to limited stock
appreciation rights, each stock appreciation right shall be subject to
2
<PAGE>
the same terms and conditions as the related stock option and shall be
exercisable at such times and to such extent as the Committee shall determine,
but only so long as the related option is exercisable. The number of stock
appreciation rights or limited stock appreciation rights shall be reduced not
only by the number of appreciation rights exercised but also by the number of
shares purchased upon the exercise of a related option. A related stock option
shall cease to be exercisable to the extent the stock appreciation rights or
limited stock appreciation rights are exercised. Upon surrender to the Company
of the unexercised related stock option, or any portion thereof, a stock
appreciation right shall entitle the optionee to receive from the Company in
exchange therefor (a) a payment in stock as determined below, or (b) to the
extent determined by the Committee, the cash equivalent of the fair market value
of such payment in stock on the exercise date had the employee been awarded a
payment in stock instead of cash, or any combination of stock and cash. The
number of shares which shall be issued pursuant to the exercise of stock
appreciation rights shall be determined by dividing (1) the total number of
stock appreciation rights being exercised multiplied by the amount by which the
fair market value of a share of common stock of the Company on the exercise date
exceeds the option price of the related option, by (2) the fair market value of
a share of common stock of the Company on the exercise date. No fractional
shares shall be issued.
The grant of limited stock appreciation rights will permit a
grantee to exercise such limited stock appreciation rights for cash during a
sixty-day period commencing on the date on which any of the events described in
the definition of Change of Control occurs, each of which events shall
hereinafter be known as a "Change in Control Event." Notwithstanding the
foregoing, however, if the Change in Control Event occurs within six months
after the date on which limited stock appreciation rights were granted, then the
sixty-day period during which such limited stock appreciation rights may be
exercised for cash shall commence six months after the date on which the limited
stock appreciation rights were granted. The amount of cash received upon the
exercise of any limited stock appreciation rights under either of the preceding
two sentences shall equal the excess, if any, of the fair market value of a
share of the Company's common stock on the date of exercise of the limited stock
appreciation rights, over the option price of the stock option to which the
limited stock appreciation rights relate.
9. PERFORMANCE SHARE AWARDS. The Committee may make awards in common
stock subject to conditions established by the Committee which may include
attainment of specific performance objectives ("Performance Share Awards").
Performance Share Awards may include the awarding of additional shares upon
attainment of the specified performance objectives.
10. PERFORMANCE OBJECTIVES. Performance objectives that may be used
under the Plan include Net Income, Pretax Income, Consolidated Operating Income,
Segment Operating Income, Return on Equity, Operating Income Return on Net
Capital Employed, Return on Assets, Cash Flow, Working Capital and Earnings per
Share of Common Stock
3
<PAGE>
of the Company (the "Performance Objectives"). The Performance Objectives shall
be calculated without regard to any change in accounting standards adopted
pursuant to the Financial Accounting Standards Board after the goal for a
Performance Objective is adopted which will affect the performance measure by 10
percent or more.
11. RESTRICTED SHARES. The Committee may make awards in common stock
subject to conditions, if any, established by the Committee which may include
continued service with the Company or its subsidiaries. Any award of Restricted
Shares which is conditioned upon continued employment shall be conditioned upon
continued employment for a minimum period of two years and ten months following
the award, except in the case of death, disability or retirement. The maximum
number of Restricted Shares that may be awarded under the plan shall be 800,000
shares.
12. OTHER AWARDS. The Committee may make awards authorized under this
Plan in Units, the value of which is based, in whole or in part, on the value of
the Company's common stock, in lieu of making such awards in common stock. The
Committee may provide for the deferral of cash-based awards under such terms and
conditions as in its discretion it deems appropriate.
12A. DEFERRED AWARDS. The Committee may permit recipients of awards to
elect to defer receipt of such awards under such terms and conditions that the
Committee may prescribe. The Committee may authorize the Company to establish
various trusts or make other arrangements with respect to any deferred awards.
13. FAIR MARKET VALUE. For all purposes of this Plan the fair market
value of a share of stock shall be the mean of the high and low prices of the
Company's common stock on the relevant date as reported on the New York Stock
Exchange -- Composite Transactions listing (or similar report), or, if no sale
was made on such date, then on the next preceding day on which such a sale was
made.
14. TERMINATION OF EMPLOYMENT. Upon the termination of employment of
any employee for any reason, his or her options and any related appreciation
rights shall terminate at that time with respect to all shares which were not
then purchasable by him or her, provided, however, that if the termination of
employment is by reason of death, disability or retirement the Committee may in
its sole discretion provide that such options and related appreciation rights
shall not terminate upon death, disability or retirement and may become
immediately exercisable or continue to become exercisable in accordance with the
terms of the original grant.
15. ASSIGNABILITY. Options and any related appreciation rights and
other awards granted under this Plan shall not be transferable other than by
will or the laws of descent and distribution or by such other means as the
Committee may approve from time to time.
4
<PAGE>
16. CORPORATE REORGANIZATION. The number and kind of shares authorized
for delivery under the Plan and the price at which shares may be purchased may
be adjusted appropriately in the event of any stock split, stock dividend,
combination of shares, merger, consolidation, reorganization, or other change in
the structure of the Company or the nature of the shares of the Company. The
determination of what adjustments, if any, are appropriate shall be made in the
discretion of the Board of Directors or the Committee.
In the event of a dissolution or liquidation of the Company or
a merger, consolidation, sale of all or substantially all of its assets, or
other corporate reorganization in which the Company is not the surviving
corporation or any merger in which the Company is the surviving corporation but
the holders of its common stock receive securities of another corporation, any
outstanding options hereunder shall terminate, provided that each optionee
shall, in such event, have the right immediately prior to such dissolution,
liquidation, merger, consolidation, sale of assets or reorganization in which
the Company is not the surviving corporation or any merger in which the Company
is the surviving corporation but the holders of its common stock receive
securities of another corporation, to exercise any unexpired option and/or stock
appreciation right in whole or in part without regard to the exercise date
contained in such option. Nothing herein contained shall prevent the assumption
and continuation of any outstanding option or the substitution of a new option
by the surviving corporation.
17. COMMITTEE'S DETERMINATION. The Committee's determinations under the
Plan including without limitation, determinations of the employees to receive
awards or grants, the form, amount and timing of such awards or grants, the
terms and provisions of such awards or grants and the agreements evidencing
same, and the establishment of Performance Objectives need not be uniform and
may be made by it selectively among employees who receive, or are eligible to
receive awards or grants under the Plan whether or not such employees are
similarly situated.
18. LEAVE OF ABSENCE OR OTHER CHANGE IN EMPLOYMENT STATUS. The
Committee shall be entitled to make such rules, regulations and determinations
as it deems appropriate under the Plan in respect of any leave of absence taken
by an employee or any other change in employment status, such as a change from
full time employment to a consulting relationship, of an employee relative to
any grant or award. Without limiting the generality of the foregoing, the
Committee shall be entitled to determine (i) whether or not any such leave of
absence or other change in employment status shall constitute a termination of
employment within the meaning of the Plan and (ii) the impact, if any, of any
such leave of absence or other change in employment status on awards under the
Plan theretofore made to any employee who takes such leave of absence or
otherwise changes his or her employment status.
5
<PAGE>
19. WITHHOLDING TAXES. The Committee shall have the right to require
any Federal, state or local withholding tax requirements to be satisfied by
withholding shares of common stock or other amounts which would otherwise be
payable under the Plan.
20. RETENTION OF SHARES. If shares of common stock are awarded subject
to attainment of Performance Objectives, continued service with the Company or
other conditions, the shares may be registered in the employees' names when
initially awarded, but possession of certificates for the shares shall be
retained by the Secretary of the Company for the benefit of the employees, or
shares may be registered in book entry form only, in both cases subject to the
terms of this Plan and the conditions of the particular awards. In either event,
each employee shall have the right to receive all dividends and other
distributions made with respect to such awards registered in his or her name and
shall have the right to vote or execute proxies with respect to such registered
shares.
21. FORFEITURE OF AWARDS. Any awards or parts thereof made under this
plan which are subject to Performance Objectives or other conditions which are
not satisfied, shall be forfeited, and any shares of common stock issued shall
revert to the Treasury of the Company.
22. CONTINUED EMPLOYMENT. Nothing in the Plan or in any agreement
entered into pursuant to the Plan shall confer upon any employee the right to
continue in the employment of the Company or affect any right which the Company
may have to terminate the employment of such employee.
23. CHANGE IN CONTROL. For purposes of the Plan, a Change in Control
shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company (other than by exercise
of a conversion privilege), (B) any acquisition by the Company or any of its
subsidiaries, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its subsidiaries or (D)
any acquisition by any corporation with respect to which, following such
acquisition, more than 70% of, respectively, the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such acquisition in
6
<PAGE>
substantially the same proportions as their ownership, immediately prior to such
acquisition, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be; or
(ii) During any period of two consecutive years, individuals
who, as of the beginning of such period, constitute the Board (the "Incumbent
Board"), cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
beginning of such period whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or
(iii) approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which all
or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation, do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 70% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger or
consolidation of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) a sale or other
disposition of all or substantially all of the assets of the Company, other than
to a corporation, with respect to which following such sale or other
disposition, more than 70% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation to vote generally in the
election of directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be.
24. EFFECT OF CHANGE IN CONTROL. Options and any related appreciation
rights that are not then exercisable shall become immediately exercisable in the
event of a Change in Control. The Committee may make such provision with respect
to other awards under this Plan as it deems appropriate in its discretion.
7
<PAGE>
25. COMPLIANCE WITH LAWS AND REGULATIONS. Notwithstanding any other
provisions of the Plan, the issuance or delivery of any shares may be postponed
for such period as may be required to comply with any applicable requirements of
any national securities exchange or any requirements under any other law or
regulation applicable to the issuance or delivery of such shares, and the
Company shall not be obligated to issue or deliver any such shares if the
issuance or delivery thereof shall constitute a violation of any provision of
any law or any regulation of any governmental authority, whether foreign or
domestic, or any national securities exchange.
26. AMENDMENT. The Board of Directors of the Company may alter or amend
the Plan, in whole or in part, from time to time, or terminate the Plan at any
time, provided however, that no amendment shall be made without the approval of
the shareholders which has the effect of increasing the number of shares subject
to this Plan (other than in connection with a Corporate Reorganization), but no
such action shall adversely affect any rights or obligations with respect to
awards previously made under the Plan.
8
Exhibit 10(I)
THE B.F.GOODRICH COMPANY
EMPLOYEE PROTECTION PLAN
The B.F.Goodrich Company Employee Protection Plan (the "Plan") is established
this 18th day of July, 1988.
1. PURPOSE. The purpose of this Plan is to attract and retain qualified
employees, and to minimize the disruption among those employees that can occur
as a result of attempts to change control of Goodrich, thereby assuring
continuing stability in the operations of Goodrich and each of the Domestic
Subsidiaries.
2. CERTAIN DEFINITIONS. For purpose of this Plan:
a) "Goodrich" means The B.F.Goodrich Company, a New York
corporation.
b) "Domestic Subsidiary" means each corporation incorporated
within the United States of America which is directly or indirectly
wholly owned by Goodrich at the time of a Change in Control, and which
is specifically identified in Appendix A to this Plan. Appendix A may
be amended from time to time prior to a Change in Control by the Chief
Executive Officer of Goodrich.
c) "Company" means, collectively or individually, Goodrich
and each or any Domestic Subsidiary.
d) "Covered Employee" means an employee who by virtue of
Articles 3 and 5 of this Plan is entitled to participate in the
benefits of this Plan according to the terms and conditions stated
herein.
e) "Plan" means, collectively, this Employee Protection Plan,
Appendix A attached hereto, and any amendments and modifications
thereto.
3. ELIGIBILITY. Employees eligible to participate in the benefits of this
Plan are:
a) All regular, full-time salaried employees of Goodrich, and
b) Those regular, full-time salaried employees of each
Domestic Subsidiary who are employed in categories similar to Covered
Employees of Goodrich;
provided, however, that anything to the contrary in the Plan
notwithstanding, this Plan shall not be applicable to the following
employees or categories of employees:
i) Employees whose compensation is determined on an
hourly basis and non-office employees (other than those
employed at the Company's Brecksville Research and Development
Center and Avon Lake Technical Center) who hold positions that
<PAGE>
are generally characterized as 'hourly' positions, regardless
of whether the position of any specific employee is
characterized as hourly or salaried.
ii) Employees whose conditions of employment are
subject to a collective bargaining agreement between Goodrich
or any Domestic Subsidiary and any labor union or other
collective bargaining unit.
iii) Employees of Goodrich or a Domestic Subsidiary
whose category of employment is described as "normal hourly
salaried" (other than those in that category who are employed
at the Company's Brecksville Research and Development Center
and Avon Lake Technical Center, who shall be considered to be
salaried employees), or who are employed in similar
categories.
iv) Employees who have entered into a Management
Continuity Agreement with Goodrich or a similar agreement with
any Domestic Subsidiary.
4. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in Control" of
the Company shall mean:
a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (A) the then outstanding shares of common
stock of Goodrich (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of
Goodrich entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change of Control: (A)
any acquisition directly from Goodrich (other than by exercise of a
conversion privilege), (B) any acquisition by Goodrich or any of its
subsidiaries, (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Goodrich or any of its
subsidiaries or (D) any acquisition by any corporation with respect to
which, following such acquisition, more than 70% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such
acquisition in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may
be; or
b) During any period of two consecutive years, individuals
who, as of the beginning of such period, constitute the Board of
Directors of Goodrich (the "Incumbent Board") cease for any reason to
constitute at least a majority of said Board; provided, however, that
any individual becoming a director subsequent to the beginning of such
period whose election, or nomination for election by the shareholders
of Goodrich, was approved by a vote of at least
2
<PAGE>
a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or
c) Approval by the shareholders of Goodrich of a
reorganization, merger or consolidation, in each case, with respect to
which all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such reorganization, merger or consolidation, do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 70% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may
be; or
d) Approval by the shareholders of Goodrich of (A) a complete
liquidation or dissolution of Goodrich or (B) a sale or other
disposition of all or substantially all of the assets of Goodrich,
other than to a corporation, with respect to which following such sale
or other disposition, more than 70% of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be.
5. INVOLUNTARY TERMINATION. A Covered Employee shall be entitled to the benefits
provided hereunder if such Covered Employee incurs an "Involuntary Termination"
of employment within two years after a Change in Control. An "Involuntary
Termination" shall be deemed to have taken place upon the occurrence of one or
more of the following events:
a) Termination of the Covered Employee's employment with the
Company without the consent of the Covered Employee, for any reason
other than for cause. The Company shall bear the burden of proving that
a termination was for cause by a preponderance of the evidence.
Notwithstanding the foregoing provisions of this Paragraph 5(a), if the
purchaser of any business unit, division, or subsidiary of the Company
which is sold after the date on which a Change in Control occurs offers
employment to any Covered Employee, the termination of such Covered
Employee's employment by the Company prior to or simultaneous with any
such sale shall not be considered an Involuntary Termination, unless
3
<PAGE>
either (1) the base salary offered to the Covered Employee by the
purchaser is lower than the Covered Employee's highest base salary
between the date immediately prior to the Change in Control and the
date of sale, or (2) the employee benefits offered to the Covered
Employee are not at least comparable to the benefits received
immediately prior to the Change in Control. If either or both of the
events described in the foregoing sentence occur, a Covered Employee
will be deemed to have incurred an Involuntary Termination if such
Covered Employee chooses not to accept the offer of employment made by
such purchaser, or accepts the offer of employment, but voluntarily
terminates within sixty days following such event.
b) Termination by a Covered Employee of employment with the
Company within sixty days following (1) a reduction in the base salary
of the Covered Employee from the highest base salary of the Covered
Employee between the date immediately prior to the Change in Control
and the date of such termination, or (2) a ceasing by the Company to
provide employee benefits at a level at least comparable to the
benefits received immediately prior to the Change in Control.
c) Termination by a Covered Employee of employment with the
Company within sixty days after the Covered Employee is requested to
transfer to another location of the Company which is more than 50 miles
farther from the Covered Employee's residence than was the location at
which the Covered Employee was employed immediately prior to the Change
in Control, unless the Covered Employee is offered relocation benefits
at least comparable to those provided by the Company immediately prior
to the Change in Control.
Solely for the purposes of determining whether an
"Involuntary Termination" has occurred, the term "Company" shall
include any purchaser of any business unit, division, subsidiary, or
assets of the Company following a Change in Control, and any and all
successors to any such purchaser.
6. EMPLOYEE PROTECTION BENEFITS. Upon Involuntary Termination, a Covered
Employee shall be entitled to the following "Employee Protection Benefits":
a) For Covered Employees who were employed immediately prior
to the Change in Control in positions having Hay point levels of less
than 800, a dollar amount equal to two weeks' base salary for each full
year of continuous service with the Company, any subsidiary of the
Company, or any successor thereto (including any period of employment
with any purchaser of any business unit, division, or assets of the
Company, or any successor to any such purchaser following the date on
which a Change in Control occurs), but in no event more in total than
twelve months' base salary or less in total than one month's base
salary.
b) For Covered Employees who were employed immediately prior
to the Change in Control in positions having Hay point levels of 800 or
more, a dollar amount equal to twelve months' base salary, without
regard to the Covered Employee's length of continuous service as an
employee of the Company.
4
<PAGE>
c) A dollar amount equal to the Covered Employee's base salary
for any period of unused vacation for the year in which the Change in
Control occurs, and for any period of accrued vacation for the
following year, both determined as of the date immediately prior to the
date of Involuntary Termination, and determined under the Company's
vacation policy in effect immediately prior to the Change in Control. A
Covered Employee shall also be entitled to receive a dollar amount
equal to such Covered Employee's base salary for any period of deferred
(or banked) vacation which such Covered Employee may have accrued under
the relevant vacation policies of the Company in effect prior to the
Change in Control.
d) For Covered Employees who were participants in the bonus
program for the year in which the Change in Control occurs, a dollar
amount equal to the greater of (i) the amount most recently paid to the
Covered Employee under such program for a full calendar year, (ii) the
Covered Employee's "target incentive amount" under such program for the
calendar year in which Involuntary Termination occurs, or (iii) the
Covered Employee's "target incentive amount" under such program for the
calendar year in which the Change in Control occurs, prorated to
reflect the portion of the calendar year in which Involuntary
Termination occurs during which a Covered Employee was employed by the
Company. Comparable payments shall be made for Covered Employees of the
Company who are covered by a bonus program using criteria different
from those set out above.
The Employee Protection Benefits, less any taxes that are
required by law to be withheld, shall be paid to the Covered Employee
in a lump sum within fifteen days after Involuntary Termination.
Covered Employees of Domestic Subsidiaries of the Company
which at the time of the Change in Control have not been assigned Hay
Point ratings shall be entitled to the Employee Protection Benefit
described in subparagraph 6(b) if they hold positions which are
determined by Goodrich to be at least equivalent, based upon the
factors used by the Hay rating system, to those held by Covered
Employees whose positions are rated at 800 or more Hay points, and if
their positions are listed on Exhibit B attached hereto. All other
Covered Employees of Domestic Subsidiaries of the Company which at the
time of the Change in Control have not assigned Hay Point ratings to
the positions held by their employees shall be entitled to the Employee
Protection Benefit described in subparagraph 6(a).
A Covered Employee's base salary for purposes of any
calculation under this Paragraph 6 shall be such Covered Employee's
highest base salary between the date immediately prior to the Change in
Control and the date of Involuntary Termination.
In addition to the Employee Protection Benefits, upon
Involuntary Termination, each Covered Employee shall be entitled to
continuation of whatever medical, dental, vision, and life insurance
coverages (individually, the "Specific Benefit Coverages") the Covered
Employee was receiving immediately prior to the Change in Control. Such
coverages shall be continued for the period following Involuntary
Termination which equals in length the period of base salary used to
calculate the Employee Protection Benefit described in Paragraphs 6(a)
and 6(b), whichever is applicable. The Covered Employee shall be
5
<PAGE>
responsible for paying such premiums for the Specific Benefit Coverages
as were being paid by the Covered Employee immediately prior to the
Change in Control. In no event, however, shall any Specific Benefit
Coverage be continued once the Covered Employee commences new
employment, if the Covered Employee is eligible to receive such
Specific Benefit Coverage, whether or not at a comparable level, from
the Covered Employee's new employer. The period following Involuntary
Termination during which a Covered Employee is entitled to a Specific
Benefit Coverage under this Plan is not intended to extend the period
during which the Covered Employee is permitted under federal law to
purchase medical, dental, or vision coverage from the Company.
7. PAYMENT LIMITATION. Notwithstanding the benefits described above, if the
aggregate present value of the "parachute payments" to the Covered Employee,
determined under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), exceeds 2.99 times the "base amount" (as defined below), the
amounts otherwise payable under this Plan shall be reduced so that the aggregate
present value of the "parachute payments", determined under Section 280G of the
Code, does not exceed 2.99 times the base amount. The preceding sentence shall
apply only to those Covered Employees whose positions and/or levels of
compensation are such that they would be liable for payment of the excise tax
described in Section 4999 of the Code if they received "excess parachute
payments" as determined under the Code.
The term "base amount" shall be determined according to Section 280G of
the Code and any regulations promulgated thereunder and any interpretations
thereof by the Internal Revenue Service. In the absence of such regulations, if
a Covered Employee was not employed by the Company (or an affiliate) during the
entire "base period" (as defined in Section 280G), the base amount shall be the
average of such Covered Employee's annual compensation for the complete calendar
years during the base period during which the Covered Employee was so employed.
If services were not performed for the Company by the Covered Employee prior to
the taxable year in which the Change of Control occurs, unless otherwise
provided by regulations, the base amount shall be equal to the Covered
Employee's estimated annualized taxable compensation for the taxable year in
which the Change in Control occurs.
For purposes of this section, compensation shall include every type and
form of compensation includible in gross income in respect of employment by the
Company, including compensation income recognized as a result of the exercise of
stock options or sale of the stock so acquired and long-term incentive payments,
except to the extent otherwise provided in regulations promulgated under Section
280G of the Code.
8. OTHER ENTITLEMENTS. The provisions of this Plan, and any payment or benefit
provided for hereunder, shall not reduce any amount otherwise payable to or for
a Covered Employee, or in any way diminish any rights of a Covered Employee,
whether existing at any point in time, or which will arise solely as a result of
the passage of time, under any other benefit plan or arrangement with the
Company, specifically including, but not limited to, any pension or retirement
plan or arrangement, except that payments made under this Plan shall be in lieu
of any benefits to which a Covered Employee would otherwise be entitled under
any severance pay policy or plan of the Company, and shall be offset by any
severance benefits that may become due to any Covered
6
<PAGE>
Employee under any contract between the Company and a Covered Employee upon the
termination of any such Covered Employee's employment, or under any severance
pay plan or policy of any purchaser of any business unit, division, subsidiary,
or assets of the Company following a Change in Control for which the Covered
Employee becomes employed following a Change in Control, and any and all
successors to any such purchaser. Payments under this Plan shall not be made to
any Covered Employee who is employed outside the United States of America and
who is legally entitled to receive any severance or other termination benefits
under the laws of the foreign country in which such Covered Employee is then
employed.
9. LEGAL FEES AND EXPENSES. If a Change in Control shall have occurred,
thereafter the Company shall pay and be solely responsible for any and all
attorneys' and related fees and expenses incurred by a Covered Employee to
successfully (in whole or in part, and whether by modification of the Company's
position, agreement, compromise, settlement, or administrative or judicial
determination) enforce such Covered Employee's rights under any provision of
this Plan. In the event that any payment to or on behalf of a Covered Employee
pursuant to this paragraph of the Plan, when added to the amount of any other
payment to, or receipt of any employee benefit by, a Covered Employee is deemed
to constitute an "excess parachute payment" as that term is defined in Section
280G of the Code, and such payment or receipt, as the case may be, is subject to
the excise tax imposed by Section 4999 of the Code, the Company shall pay to the
Covered Employee an additional amount in cash equal to the amount necessary to
cause the amount of the aggregate after-tax cash compensation and employee
benefits otherwise receivable by the Covered Employee under this Plan to be
equal to the aggregate after-tax cash compensation and employee benefits the
Covered Employee would have received as if the payments under this paragraph had
not been considered a "parachute payment" under Section 280G of the Code.
Covered Employees shall not be required to refund any amounts received under the
Plan upon obtaining new employment or otherwise mitigate the amounts received
under this Agreement by seeking or accepting new employment.
10. AMENDMENT AND TERMINATION. The Plan may be amended, terminated, or otherwise
modified at any time prior to a Change in Control by the Board of Directors.
After the occurrence of a Change in Control, the Plan may not be amended,
modified, or terminated.
11. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Plan shall create
any obligation on the part of the Company to continue the employment of a
overed Employee.
12. GOVERNING LAW. This Plan shall be construed and governed under the laws of
the State of Ohio.
13. VALIDITY. The invalidity or unenforceability of any provisions of this Plan
shall not affect the validity or unenforceability of any other provision of this
Agreement, which shall remain in full force and effect.
14. SUCCESSORS OF COVERED EMPLOYEE. This Plan shall inure to the benefit of and
be enforceable by each Covered Employee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If any Covered Employee should die while any amount would still be
payable hereunder if the Covered Employee had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Plan to the devisee, legatee or other designee of the Covered
Employee or, if there be no such designee, to Covered Employee's such estate.
15. SECTION HEADINGS. The section headings contained herein have been inserted
for convenience or reference only, and shall not modify, define, expand, or
limit any of the provisions hereof.
7
<PAGE>
APPENDIX A
BFGoodrich Aerospace Component Overhaul & Repair, Inc.
BFGoodrich Avionics Systems, Inc.
Godfrey Engineering, Inc.
International BFGoodrich Technology Corporation
JcAir, Inc.
Mitech Corporation
Rosemount Aerospace Inc.
Simmonds Precision Products, Inc.
Simmonds Precision Motion Controls, Inc.
TRAMCO, INC.
8
THE B.F.GOODRICH COMPANY
EXHIBIT 11 - STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------------- ----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
PRIMARY EARNINGS PER SHARE:
<S> <C> <C> <C> <C>
Number of Shares:
Average number of common shares outstanding 53,998,568 53,363,119 53,920,155 53,039,427
Effect of dilutive stock options 532,079 609,510 541,015 599,083
--------------- --------------- --------------- ---------------
Total average number of common and common
equivalent shares outstanding 54,530,647 53,972,629 54,461,170 53,638,510
=============== =============== =============== ===============
Income:
Income from continuing operations $ 52.4 $ 25.0 $ 73.3 $ 46.2
Income from discontinued operations 3.4 12.9 67.5 11.6
--------------- --------------- --------------- ---------------
Net income applicable to common stock $ 55.8 $ 37.9 $ 140.8 $ 57.8
=============== =============== =============== ===============
Per share amounts:
Continuing operations $ 0.96 $ 0.46 $ 1.35 $ 0.86
Discontinued operations 0.06 0.24 1.24 0.22
--------------- --------------- --------------- ---------------
Net income $ 1.02 $ 0.70 $ 2.59 $ 1.08
=============== =============== =============== ===============
FULLY DILUTED EARNINGS PER SHARE:
Number of Shares:
Average number of common shares
outstanding from above 53,998,568 53,363,119 53,920,155 53,039,427
Effect of dilutive stock options -
based on the treasury method using
last day's market price, if higher
than average market price 605,389 609,589 630,032 599,338
--------------- --------------- --------------- ---------------
Total average number of common and common
equivalent shares outstanding 54,603,957 53,972,708 54,550,187 53,638,765
=============== =============== =============== ===============
Income:
Income from continuing operations $ 52.4 $ 25.0 $ 73.3 $ 46.2
Income from discontinued operations 3.4 12.9 67.5 11.6
--------------- --------------- --------------- ---------------
Net income applicable to common stock $ 55.8 $ 37.9 $ 140.8 $ 57.8
=============== =============== =============== ===============
Per share amounts:
Continuing operations $ 0.96 $ 0.46 $ 1.34 $ 0.86
Discontinued operations 0.06 0.24 1.24 0.22
--------------- --------------- --------------- ----------------
Net income $ 1.02 $ 0.70 $ 2.58 $ 1.08
=============== =============== =============== ================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of
Income of this Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 174,900
<SECURITIES> 0
<RECEIVABLES> 379,100
<ALLOWANCES> 11,600
<INVENTORY> 350,000
<CURRENT-ASSETS> 986,900
<PP&E> 1,551,000
<DEPRECIATION> 676,400
<TOTAL-ASSETS> 2,617,400
<CURRENT-LIABILITIES> 514,100
<BONDS> 391,800
122,900
0
<COMMON> 276,200
<OTHER-SE> 889,500
<TOTAL-LIABILITY-AND-EQUITY> 2,617,400
<SALES> 1,127,500
<TOTAL-REVENUES> 1,127,500
<CGS> 762,200
<TOTAL-COSTS> 762,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,200
<INCOME-PRETAX> 124,200
<INCOME-TAX> 45,700
<INCOME-CONTINUING> 73,300
<DISCONTINUED> 67,500
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140,800
<EPS-PRIMARY> 2.59
<EPS-DILUTED> 2.58
</TABLE>
