<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 1999
Commission file number 1-892
THE B.F.GOODRICH COMPANY
(Exact Name of Registrant as Specified in its Charter)
NEW YORK 34-0252680
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, N.C. 28217
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704-423-7000
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 September 30, 1999, there were 110,149,461 shares of common stock
outstanding. There is only one class of common stock.
<PAGE> 2
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 Nine Months Ended
September 30, September 30,
----------------------------- ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Sales $ 1,332.1 $ 1,346.6 $ 4,207.3 $ 4,064.5
Operating Costs and Expenses:
Cost of sales 953.3 961.9 3,004.0 2,933.3
Selling and administrative expenses 200.3 204.0 634.1 631.3
Merger-related and consolidation costs 204.7 -- 241.0 --
------------ ------------ ------------ -------------
1,358.3 1,165.9 3,879.1 3,564.6
------------ ------------ ------------ -------------
Operating income (26.2) 180.7 328.2 499.9
Interest expense (34.5) (33.6) (102.7) (99.9)
Interest income 1.1 0.9 3.4 5.1
Other income (expense) - net (3.6) (4.6) (6.1) 46.1
------------ ------------ ------------ -------------
Income from continuing operations before
income taxes and Trust distributions (63.2) 143.4 222.8 451.2
Income tax expense (3.1) (53.7) (105.7) (168.0)
Distributions on Trust preferred
securities (4.6) (4.6) (13.8) (11.5)
------------ ------------ ------------ -------------
Income from continuing operations (70.9) 85.1 103.3 271.7
Income (loss) from discontinued operations -- -- -- (1.6)
------------ ------------ ------------ -------------
Income before extraordinary items (70.9) 85.1 103.3 270.1
Extraordinary losses on debt
extinguishment - net of taxes -- -- -- (4.3)
------------ ------------ ------------ -------------
Net Income $ (70.9) $ 85.1 $ 103.3 $ 265.8
============ ============ ============ =============
Earnings per share:
Basic
Continuing operations $ (0.64) $ 0.77 $ 0.94 $ 2.46
Discontinued operations -- -- -- (0.01)
Extraordinary Item -- -- -- (0.04)
------------ ------------ ------------ -------------
Net income $ (0.64) $ 0.77 $ 0.94 $ 2.41
============ ============ ============ =============
Diluted
Continuing operations $ (0.64) $ 0.76 $ 0.93 $ 2.41
Discontinued operations -- -- -- (0.01)
Extraordinary Item -- -- -- (0.04)
------------ ------------ ------------ -------------
Net income $ (0.64) $ 0.76 $ 0.93 $ 2.36
============ ============ ============ =============
Dividends declared per common share $ 0.275 $ 0.275 $ 0.825 $ 0.825
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
THE B.F.GOODRICH COMPANY ACTUAL LASTYR
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Dollars in millions)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 65.2 $ 53.5
Accounts and notes receivable, less allowances
for doubtful receivables (September 30, 1999:
$26.0; December 31, 1998: $25.7) 864.1 777.2
Inventories 982.8 967.7
Deferred income taxes 176.2 162.6
Prepaid expenses and other assets 56.5 54.8
------------- ------------
Total Current Assets 2,144.8 2,015.8
------------- ------------
Property, Plant and Equipment 1,569.5 1,562.5
Deferred Income Taxes 13.6 39.7
Prepaid Pension 139.5 193.3
Goodwill 1,031.4 985.6
Identifiable Intangible Assets 108.8 112.4
Other Assets 437.0 343.4
------------- ------------
$ 5,444.6 $ 5,252.7
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term bank debt $ 277.3 $ 144.4
Accounts payable 450.7 456.0
Accrued expenses 679.0 617.0
Income taxes payable 69.6 45.2
Current maturities of long-term debt
and capital lease obligations 7.7 7.6
------------- ------------
Total Current Liabilities 1,484.3 1,270.2
------------- ------------
Long-term Debt and Capital Lease Obligations 1,527.3 1,572.7
Pension Obligations 77.5 76.6
Postretirement Benefits Other Than Pensions 352.0 358.5
Deferred Income Taxes 153.4 139.9
Other Non-current Liabilities 314.9 328.5
Mandatorily Redeemable Preferred Securities of Trust 270.7 268.9
Shareholders' Equity
Common stock - $5 par value
Authorized 200,000,000 shares; issued 111,972,258
shares at September 30, 1999, and 111,524,852 shares
at December 31, 1998 (excluding 14,000,000 shares
held by a wholly owned subsidiary) 559.9 557.7
Additional capital 896.7 884.8
Income retained in the business (91.9) (121.7)
Accumulated other comprehensive income (33.9) (15.1)
Unearned portion of restricted stock awards (1.3) (2.7)
Common stock held in treasury, at cost (1,822,797 shares at
September 30, 1999, and 1,846,894 shares at December 31, 1998) (65.0) (65.6)
------------- ------------
Total Shareholders' Equity 1,264.5 1,237.4
------------- ------------
$ 5,444.6 $ 5,252.7
============= ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
THE B.F.GOODRICH COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in millions)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 103.3 $ 265.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary loss on debt extinguishment -- 6.5
Depreciation and amortization 172.6 156.2
Deferred income taxes 11.5 21.7
Net gains on sales of businesses (11.8) (58.3)
Asset impairment 6.6 --
Change in assets and liabilities, net of effects
of acquisitions and dispositions of
businesses:
Receivables (87.3) (76.3)
Inventories (7.7) (58.1)
Other current assets (1.8) 1.4
Accounts payable (17.9) 8.8
Accrued expenses 57.0 56.4
Income taxes payable 26.2 67.6
Other non-current assets and liabilities (44.9) (16.6)
-------- --------
Net cash provided by operating activities 205.8 375.1
INVESTING ACTIVITIES
Purchases of property (166.7) (171.6)
Proceeds from sale of property 5.2 4.1
Proceeds from sale of businesses 19.3 100.0
Payments made in connection with acquisitions,
net of cash acquired (69.3) (473.6)
-------- --------
Net cash used by investing activities (211.5) (541.1)
FINANCING ACTIVITIES
Net increase (decrease) in short-term debt 134.0 (113.0)
Proceeds from issuance of long-term debt 202.2 725.2
Repayment of long-term debt and capital lease obligations (251.6) (31.3)
Decrease in revolving credit facility, net -- (432.0)
Termination of receivable sales program -- (40.0)
Proceeds from issuance of convertible preferred securities, net 144.5
Proceeds from issuance of capital stock 5.3 26.0
Purchases of treasury stock 3.3 (46.6)
Dividends (61.6) (55.2)
Distributions on Trust preferred securities (13.8) (11.8)
-------- --------
Net cash provided by financing activities 17.8 165.8
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (0.4) (0.3)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11.7 (0.5)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 53.5 61.7
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 65.2 $ 61.2
======== ========
Supplemental Cash Flow Information:
Income taxes paid $ 63.4 $ 42.3
======== ========
Interest paid, net of amounts capitalized $ 57.0 $ 77.5
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A: BASIS OF INTERIM FINANCIAL STATEMENT PREPARATION - The accompanying
unaudited condensed consolidated financial statements of The B.F.Goodrich
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 nine months ended September
30, 1999, are not necessarily indicative of the results that may be achieved for
the year ending December 31, 1999. For further information, refer to the
consolidated financial statements and footnotes included in the Company's and
Coltec Industries Inc's ("Coltec") Annual Reports on Form 10-K for the year
ended December 31, 1998.
NOTE B: MERGER - On July 12, 1999, the Company completed its merger with Coltec.
The merger has been accounted for as a pooling-of-interests. Accordingly, all
prior period consolidated financial statements have been restated to include the
results of operations, financial position and cash flows of Coltec as though
Coltec had always been a part of BFGoodrich . As such, results for the three and
nine month periods ended September 30, 1999 and 1998 represent the combined
results of BFGoodrich and Coltec for these periods.
As a result of the merger, Coltec became a wholly-owned subsidiary of the
Company. In accordance with the terms of the merger, each share of Coltec common
stock was converted into the right to receive 0.56 shares of BFGoodrich common
stock, totaling 35.5 million shares of BFGoodrich common stock.
In addition, the Company issued options to purchase 3.0 million shares of
BFGoodrich common stock in exchange for options to purchase Coltec common stock
outstanding immediately prior to the merger. These options vest and become
exercisable in accordance with the terms and conditions of the original Coltec
options. Also, the holders of the 5 1/4% Convertible Preferred Securities issued
by Coltec Capital Trust, received the right to convert each such convertible
preferred security into 0.955248 of a share of BFGoodrich common stock, subject
to certain adjustments.
The following table presents sales, income from continuing operations and net
income for the previously separate companies and the combined amounts presented
within the income statement for the periods presented. The conforming accounting
adjustments conform Coltec's accounting policies to BFGoodrich's accounting
policies, the more significant of which include: (1) Coltec's landing gear
business was changed from percentage of completion contract accounting to
accrual accounting; (2) non-recurring engineering costs that were capitalized
are now expensed unless they are contractually recoverable from the customer;
and (3) Coltec's SFAS 106 transition obligation that was previously deferred and
was being amortized to income over twenty years has now been recognized
immediately upon initial adoption of SFAS 106.
5
<PAGE> 6
<TABLE>
<CAPTION>
(Dollars in millions)
-----------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1998
---- ----
<S> <C> <C>
Sales
BFGoodrich $ 986.2 $ 2,934.9
Coltec 360.4 1,129.6
---------- ----------
Combined $ 1,346.6 $ 4,064.5
========== ==========
Income from continuing operations:
BFGoodrich $ 59.7 $ 169.8
Coltec 27.4 92.2
Conforming accounting adjustment (2.0) 9.7
---------- ----------
Combined $ 85.1 $ 271.7
========== ==========
Net Income:
BFGoodrich $ 59.7 $ 168.2
Coltec 27.4 87.9
Conforming accounting adjustment (2.0) 9.7
---------- ----------
Combined $ 85.1 $ 265.8
========== ==========
</TABLE>
The conforming accounting adjustments have also resulted in the following
changes applicable to the Coltec balance sheet accounts: a decrease in
inventories, income taxes payable and income retained in the business and an
increase in postretirement benefits other than pensions and accrued expenses.
NOTE C: MERGER RELATED AND CONSOLIDATION COSTS - The Company has incurred $241.0
million of merger related and consolidation costs in 1999, $192.5 million of
which were related to the Coltec merger. Merger related and consolidation
reserves at June 30, 1999 and September 30, 1999, as well as activity during the
third quarter, consisted of:
<TABLE>
<CAPTION>
(Dollars in millions)
--------------------------------------------------------
Balance Reserve Balance
June 30, 1999 Provision Reduction September 30, 1999
------------- --------- --------- ------------------
<S> <C> <C> <C> <C>
Personnel related costs $ 7.5 $ 112.2 $ (65.6) $ 54.1
Transaction costs -- 78.9 (76.9) 2.0
Consolidation -- 13.6 (1.0) 12.6
-------- -------- -------- -------
$ 7.5 $ 204.7 $ (143.5) $ 68.7
======== ======== ======== =======
</TABLE>
During the third quarter of 1999, the Company recorded merger related and
consolidation costs of $204.7 million, of which $8.6 million represents non-cash
asset impairment charges. These costs related primarily to personnel related
costs, transaction costs and consolidation costs. The reduction in
6
<PAGE> 7
reserves of $143.5 million related to cash payments during the quarter.
Personnel related costs include severance, change in control and relocation
costs. Personnel related costs associated with the Coltec merger were $96.4
million, consisting of $61.8 million incurred under change in control provisions
in employment agreements, $29.9 million in employee severance costs and $4.7
million of relocation costs. Personnel related costs also include employee
severance costs of $5.9 million for reductions in Performance Materials
(approximately 85 positions), $2.1 million for reductions in Engineered
Industrial Products (approximately 125 positions) and $7.8 million for
reductions in Aerospace (approximately 400 positions).
Transaction costs were associated with the Coltec merger and include investment
banking fees, accounting fees, legal fees, litigation settlement costs,
registration and listing fees and other transaction costs.
Consolidation costs include facility consolidation costs and asset impairment
charges. Consolidation costs associated with the Coltec merger were $7.1
million, consisting primarily of a $6.6 million non-cash impairment charge for
the former BFGoodrich and Aerospace headquarters buildings in Ohio.
Consolidation costs also included a $2.0 million non-cash charge related to the
write-off of the Company's investment in a research and development joint
venture and $1.5 million, $1.7 million and $1.3 million related to realignment
activities at Performance Materials, Engineered Industrial Products and
Aerospace, respectively.
During the first six months of 1999, the Company recorded $36.3 million of
merger related and consolidation costs, $10.1 million of which related to
certain executive severance payments and employee relocation costs related to
the Coltec merger and $26.2 million related to employee termination payments
resulting from realignment of the Performance Materials Segment headquarters
(approximately 140 positions) and the Company's Advanced Technology Group
(approximately 15 positions) as well as from reductions at certain Performance
Materials operating locations (approximately 40 positions).
NOTE D: ACQUISITIONS - In September 1999, the Company's Aerospace segment
acquired a manufacturer of spacecraft attitude determination and control systems
and sensor and imaging instruments. The preliminary purchase price of $33
million includes approximately $32 million of goodwill, which is being amortized
using the straight-line method over 20 years. The purchase price allocation has
been based on preliminary estimates.
In May 1999, the Company's Aerospace segment purchased the remaining 50 percent
interest in a joint venture it did not previously own. The joint venture,
located in Singapore, overhauls and repairs thrust reversers, nacelles and
nacelle components. The preliminary purchase price of $11.5 million includes
approximately $6 million of goodwill. Results for the year have been included on
a consolidated basis with corresponding adjustments being made to equity income
and minority interests, both of which are included in other income.
Goodwill is being amortized using the straight-line method over 20 years.
In March 1999 the Company's Performance Materials segment acquired a textile
coatings business. The preliminary purchase price of $19.6 million includes
approximately $11 million of goodwill. The purchase price allocation has been
based on preliminary estimates. Goodwill is being amortized using
7
<PAGE> 8
the straight-line method over 20 years.
Also, in March 1999, the Company's Aerospace segment acquired a developer of
micro-electromechanical systems, which integrate electrical and mechanical
components to form "smart" sensing and control devices. The preliminary purchase
price of $12 million includes approximately $9 million of goodwill. The purchase
agreement provides for additional consideration to be paid over the next six
years based on a percentage of net sales. The additional consideration for the
first five years, however, is guaranteed not to be less than $3.5 million. As
the $3.5 million of additional consideration is not contingent on future events,
it has been included in the $12 million purchase price noted above. All
additional contingent amounts payable under the purchase agreement will be
recorded as additional purchase price when earned and amortized over the
remaining life of the goodwill. Goodwill is being amortized using the
straight-line method over 15 years.
NOTE E: INVENTORIES - Inventories included in the accompanying condensed
consolidated balance sheet consist of:
<TABLE>
<CAPTION>
(Dollars in millions)
----------------------------
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
FIFO or average cost
(which approximates current costs):
Finished products $ 314.4 $ 289.8
In process 533.2 587.3
Raw materials and supplies 291.8 229.0
---------- ----------
1,139.4 1,106.1
Less:
Reserve to reduce certain
inventories to LIFO (72.0) (73.4)
Progress payments and advances (84.6) (65.0)
---------- ----------
Total $ 982.8 $ 967.7
========== ==========
</TABLE>
In-process inventories include significant deferred costs related to production,
pre-production and excess-over-average costs for long-term contracts. The
Company has pre-production inventory of $85.6 million related to design and
development costs on the 717-200 program through September 30, 1999. In
addition, the Company has excess-over-average inventory of $49.4 million related
to costs associated with the production of the flight test inventory and the
first production units on this program. The aircraft was certified by the FAA on
September 1, 1999, and Boeing is actively marketing the plane. Recovery of these
costs will depend on the ultimate number of aircraft delivered.
NOTE F: BUSINESS SEGMENT INFORMATION - The Company's operations are classified
into three reportable business segments: BFGoodrich Aerospace ("Aerospace"),
BFGoodrich Engineered Industrial Products ("Engineered Industrial Products") and
BFGoodrich Performance Materials ("Performance Materials"). The Company's three
reportable business segments are managed separately based on fundamental
differences in their operations.
8
<PAGE> 9
Segment operating income is total segment revenue reduced by operating expenses
identifiable with that business segment. Corporate includes general corporate
administrative costs and Advanced Technology Group research expenses. Merger
related and consolidation costs are discussed in Note C of these unaudited
condensed consolidated financial statements.
The Company evaluates performance primarily based on operating income. The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies. There are no intersegment
sales.
<TABLE>
<CAPTION>
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales
Aerospace $ 855.2 $ 862.4 $ 2,747.3 $ 2,565.8
Engineered Industrial Products 170.6 179.4 542.7 600.6
Performance Materials 306.3 304.8 917.3 898.1
---------- ---------- ---------- ----------
Total Sales $ 1,332.1 $ 1,346.6 $ 4,207.3 $ 4,064.5
========== ========== ========== ==========
Operating Income
Aerospace $ 130.9 $ 128.5 $ 418.3 $ 351.0
Engineered Industrial Products 28.1 35.2 99.3 96.8
Performance Materials 39.4 37.4 115.6 114.2
---------- ---------- ---------- ----------
$ 198.4 $ 201.1 $ 633.2 $ 562.0
Corporate General and
Administrative Expenses (19.9) (20.4) (64.0) (62.1)
Merger Related and
Consolidation Costs (204.7) -- (241.0) --
---------- ---------- ---------- ----------
Total Operating Income $ (26.2) $ 180.7 $ 328.2 $ 499.9
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Assets
Aerospace $ 2,976.8 $ 2,844.9
Engineered Industrial Products 412.3 404.0
Performance Materials 1,411.0 1,369.5
Corporate 644.5 634.3
--------- ---------
Total Assets $ 5,444.6 $ 5,252.7
========= =========
</TABLE>
9
<PAGE> 10
NOTE G: EARNINGS PER SHARE - The computation of basic and diluted earnings per
share for income from continuing operations is as follows:
<TABLE>
<CAPTION>
(In millions, except per share amounts) Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Income from continuing operations
for basic earnings per share - income
available to common shareholders $ (70.9) $ 85.1 $ 103.3 $ 271.7
========= ========= ========= =========
Denominator:
Denominator for basic earnings per
share - weighted-average shares 110.1 110.8 109.9 110.3
--------- --------- --------- ---------
Effect of dilutive securities:
Stock options, warrants and restricted shares -- 0.7 0.9 1.3
Convertible Notes -- -- -- 0.7
Convertible Preferred Securities -- 2.9 -- 1.8
--------- --------- --------- ---------
Dilutive potential common shares -- 3.6 0.9 3.8
--------- --------- --------- ---------
Denominator for diluted earnings per
share - adjusted weighted-average shares
and assumed conversions 110.1 114.4 110.8 114.1
========= ========= ========= =========
Per share income from continuing operations:
Basic $ (.64) $ .77 $ .94 $ 2.46
========= ========= ========= =========
Diluted $ (.64) $ .76 $ .93 $ 2.41
========= ========= ========= =========
</TABLE>
NOTE H: COMPREHENSIVE INCOME
Total comprehensive income consists of the following:
<TABLE>
<CAPTION>
(Dollars in millions) Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ---------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income (Loss) $ (70.9) $ 85.1 $ 103.3 $ 265.8
Other Comprehensive Income
Unrealized translation adjustments
during period 0.6 7.1 (18.8) (2.0)
------- ------- -------- --------
Total Comprehensive Income (Loss) $ (70.3) $ 92.2 $ 84.5 $ 263.8
======= ======= ======== ========
</TABLE>
10
<PAGE> 11
Accumulated other comprehensive income consists of the following (dollars in
millions):
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Cumulative unrealized translation adjustments $ (29.7) $ (10.9)
Minimum pension liability adjustment (4.2) (4.2)
-------- -------
$ (33.9) $ (15.1)
======== =======
</TABLE>
NOTE I: CONTINGENCIES
GENERAL
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, asbestos and
environmental matters, which 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. From time to time, the
Company is also involved in legal proceedings as a plaintiff involving contract,
patent protection, environmental and other matters. Gain contingencies, if any,
are recognized when they are realized.
ENVIRONMENTAL
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 ("PRP") by
the U.S. Environmental Protection Agency ("EPA"), or similar state agencies, in
connection with several sites.
The Company initiates corrective and/or preventive environmental projects of its
own to ensure safe and lawful activities at its current operations. It also
conducts a compliance and management systems audit program. The Company believes
that compliance with current governmental regulations will not have a material
adverse effect on its capital expenditures, earnings or competitive position.
The Company's environmental engineers and consultants review and monitor
environmental issues at past and existing operating sites, as well as off-site
disposal sites at which the Company has been identified as a PRP. This process
includes investigation and remedial selection and implementation, as well as
negotiations with other PRPs and governmental agencies.
At September 30, 1999, the Company has recorded in Accrued Expenses and in Other
Non-current Liabilities a total of $114.1 million to cover future environmental
expenditures.
The Company believes that its reserves are adequate based on currently available
information. Management believes that it is reasonably possible that additional
costs may be incurred beyond the amounts accrued as a result of new information.
However, the amounts, if any, cannot be estimated and
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<PAGE> 12
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.
ASBESTOS
As of September 30, 1999 two subsidiaries of the Company were among a number of
defendants (typically 15 to 40) in approximately 92,600 actions (including
approximately 7,300 actions in advanced stages of processing) filed in various
states by plaintiffs alleging injury or death as a result of exposure to
asbestos fibers. During the first nine months of 1999, these two subsidiaries of
the Company received approximately 25,900 new actions compared to approximately
28,700 new actions received during the first nine months of 1998. Through
September 30, 1999, approximately 276,200 of the approximately 368,800 total
actions brought have been settled or otherwise disposed.
Payments were made by the Company with respect to asbestos liability and related
costs aggregating $58.0 million and $34.4 million for the first nine months of
1999 and 1998, respectively, substantially all of which were covered by
insurance. Settlements are generally made on a group basis with payments made to
individual claimants over periods of one to four years. Related to payments not
covered by insurance, the Company recorded charges to operations amounting to
$6.0 million during the first nine months of 1999 and 1998.
In accordance with the Company's internal procedures for the processing of
asbestos product liability actions and due to the proximity to trial or
settlement, certain outstanding actions have progressed to a stage where the
Company can reasonably estimate the cost to dispose of these actions. As of
September 30, 1999, the Company estimates that the aggregate remaining cost of
the disposition of the settled actions for which payments remain to be made and
actions in advanced stages of processing, including associated legal costs, is
approximately $132.8 million and the Company expects that this cost will be
substantially covered by insurance.
With respect to the 85,300 outstanding actions as of September 30, 1999, which
are in preliminary procedural stages, as well as any actions that may be filed
in the future, the Company lacks sufficient information upon which judgments can
be made as to the validity or ultimate disposition of such actions, thereby
making it difficult to estimate with reasonable certainty what, if any,
potential liability or costs may be incurred by the Company. However, the
Company believes that its subsidiaries are in a favorable position compared to
many other defendants because, among other things, the asbestos fibers in its
asbestos-containing products were encapsulated. Subsidiaries of the Company
continue to distribute encapsulated asbestos-bearing product in the United
States with annual sales of less than $1.5 million. All sales are accompanied by
appropriate warnings. The end users of such product are sophisticated users who
utilize the product for critical applications where no known substitutes exist
or have been approved.
Insurance coverage of a small non-operating subsidiary formerly distributing
asbestos-bearing products is nearly depleted. Considering the foregoing, as well
as the experience of the Company's subsidiaries and other defendants in asbestos
litigation, the likely sharing of judgments among multiple responsible
defendants, and given the substantial amount of insurance coverage that the
Company expects to be available from its solvent carriers to cover the majority
of its exposure, the Company believes that pending and reasonably anticipated
future actions are not likely to have a materially adverse effect on the
Company's consolidated results of operations or financial condition, but could
be material to the
12
<PAGE> 13
Company's results of operations in a given period. Although the insurance
coverage which the Company has is substantial, it should be noted that insurance
coverage for asbestos claims is not available to cover exposures initially
occurring on and after July 1, 1984. The Company's subsidiaries continue to be
named as defendants in new cases, some of which allege initial exposure after
July 1, 1984.
The Company has recorded an accrual for its liabilities for asbestos-related
matters that are deemed probable and can be reasonably estimated (settled
actions and actions in advanced stages of processing), and has separately
recorded an asset equal to the amount of such liabilities that is expected to be
recovered by insurance. In addition, the Company has recorded a receivable for
that portion of payments previously made for asbestos product liability actions
and related litigation costs that is recoverable from its insurance carriers.
Liabilities for asbestos-related matters and the receivable from insurance
carriers included in the Consolidated Balance Sheets are as follows:
(Dollars in millions)
September 30, December 31,
1999 1998
------ ------
Accounts and notes receivable $129.9 $95.4
Other assets 29.7 32.6
Accrued expenses 111.5 89.7
Other liabilities 21.3 22.8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS
OF OPERATIONS
MERGER
On July 12, 1999, the Company completed its merger with Coltec. The merger has
been accounted for as a pooling-of-interests. Accordingly, all prior period
consolidated financial statements have been restated to include the results of
operations, financial position and cash flows of Coltec as though Coltec had
always been a part of BFGoodrich . As such, results for the three and nine month
periods ended September 30, 1999 and 1998 represent the combined results of
BFGoodrich and Coltec.
13
<PAGE> 14
The following table presents sales, income from continuing operations and net
income for the previously separate companies and the combined amounts presented
within the income statement for the periods presented.
(Dollars in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1998
---- ----
Sales
BFGoodrich $ 986.2 $ 2,934.9
Coltec 360.4 1,129.6
---------- ----------
Combined $ 1,346.6 $ 4,064.5
========== ==========
Income from continuing operations:
BFGoodrich $ 59.7 $ 169.8
Coltec 27.4 92.2
Conforming accounting adjustment (2.0) 9.7
---------- ----------
Combined $ 85.1 $ 271.7
========== ==========
Net Income:
BFGoodrich $ 59.7 $ 168.2
Coltec 27.4 87.9
Conforming accounting adjustment (2.0) 9.7
---------- ----------
Combined $ 85.1 $ 265.8
========== ==========
MERGER-RELATED AND CONSOLIDATION COSTS
During the third quarter, the Company recorded merger-related and consolidation
costs of $204.7 million, of which $8.6 million represents non-cash asset
impairment charges. These costs related primarily to personnel related costs,
transaction costs and consolidation costs (see Note C of the accompanying
unaudited condensed combined financial statements for further details).
The Company has identified additional merger related and consolidation costs of
approximately $60 million that will be recorded during the fourth quarter and
throughout next year. The timing of these costs is dependent on the finalization
and approval of management's plans. These costs consist primarily of costs
associated with the consolidation of its landing gear facilities, the
reorganization of operating facilities and for the relocation of personnel.
The Company expects to achieve costs savings of up to $60 million per year by
2002 related to the merger with Coltec.
14
<PAGE> 15
TOTAL COMPANY
1999 AND 2000 OUTLOOK
The Company has revised its earnings per share outlook to be between $3.20 and
$3.30 in 1999, compared to $2.91 in 1998, excluding special items. The revised
earnings outlook reflects continued pricing pressure and higher raw material
costs in Performance Materials, and continued softness across most markets
served by the Engineered Industrial Products segment. Other factors included
initial dilution from the Coltec merger and delays in closing the transaction,
which postponed the realization of cost synergies.
Looking ahead to 2000, the Company expects the same market issues that have
affected results in the second half of 1999 to continue. These pressures,
together with a further decline in commercial aircraft production, will most
likely result in relatively flat financial performance in 2000 compared to 1999.
This outlook includes $25 million in annual headquarter cost savings beginning
in 2000 and significant operational savings through consolidation of businesses
and facilities.
THIRD QUARTER OF 1999 COMPARED WITH
THIRD QUARTER OF 1998
Sales during the quarter ended September 30, 1999, decreased by $14.5 million,
or 1.1 percent from sales during the same period last year. Sales decreased by
0.8 percent for Aerospace, and by 4.9 percent for Engineered Industrial Products
and increased by 0.5 percent for Performance Materials as compared to the 1998
third quarter. The reasons for these fluctuations as compared to last year are
discussed by segment below.
Cost of sales as a percent of sales increased slightly from 71.4 percent in 1998
to 71.6 percent in 1999. Despite the reduction in sales between periods noted
above, management has been able to lower its controllable costs through
operating improvement initiatives.
Selling and administrative costs as a percent of sales decreased slightly from
15.1 percent in 1998 to 15.0 percent in 1999. This is due primarily to the
Company's efforts to control costs, especially given the decrease in sales noted
above.
Merger related and consolidation costs of $204.7 million were recorded during
the third quarter of 1999. These costs relate primarily to costs associated with
the Coltec merger (see further discussion under merger related and consolidation
costs section above and in Note C of the accompanying unaudited condensed
consolidated financial statements).
Excluding merger related and consolidation costs, operating income decreased
$2.2 million, or 1.2 percent, from $180.7 million in 1998 to $178.5 million in
1999. Operating income increased by $2.4 million in the Aerospace Segment and by
$2.0 million in the Performance Materials Segment and decreased by $7.1 million
in the Engineered Industrial Products Segment. Operating income by segment is
discussed in greater detail below.
Interest expense-net increased $0.7 million from $32.7 million in 1998 to $33.4
million in 1999.
Other expense-net decreased $1.0 million from $4.6 million in the third quarter
of 1998 to $3.6 million in the third quarter of 1999.
The Company's effective tax rate excluding special items, decreased from 37.4
percent to 37.0 percent, quarter to quarter.
15
<PAGE> 16
FIRST NINE MONTHS OF 1999 COMPARED WITH
FIRST NINE MONTHS OF 1998
Sales during the first nine months of 1999 increased by $142.8 million, or 3.5
percent, over sales during the same period last year. Sales increased by 7.1
percent for Aerospace and by 2.1 percent for Performance Materials and decreased
by 9.6 percent for Engineered Industrial Products as compared to 1998. The
reasons for these fluctuations are discussed by segment below.
Cost of sales as a percent of sales decreased from 72.2 percent in 1998 to 71.4
percent in 1999. The decrease is a result of the Company's efforts to improve
productivity and to lower manufacturing and material costs.
Selling and administrative costs as a percent of sales decreased from 15.5
percent in 1998 to 15.1 percent in 1999. Most of the decrease has come from the
Performance Materials and Engineered Industrial Products Segments where level to
declining sales volumes have led to increased focus on controlling costs.
Merger related and consolidation costs of $241.0 million were recorded during
the first nine months of 1999. See further discussion under the merger related
and consolidation costs section above and Note C to the accompanying unaudited
condensed consolidated financial statements.
Excluding merger related and consolidation costs, operating income increased
$69.3 million, or 13.9 percent, from $499.9 million in 1998 to $569.2 million in
1999. Operating income increased by $67.3 million in the Aerospace Segment, $1.4
million in the Performance Materials Segment and by $2.5 million in the
Engineered Industrial Products Segment. Operating income by segment is discussed
in greater detail below.
Interest expense-net increased $4.5 million, or 4.7 percent, from $94.8 million
in 1998 to $99.3 million in 1999.
Other (income) expense-net increased $52.2 million from $46.1 million of income
in the first nine months of 1998 to $6.1 million of expense in the first nine
months of 1999. Excluding the gain on the sale of Holley Performance Products in
1998 of $58.3 million, other expense - net was $12.2 million through the first
nine months of 1998. The resulting decrease between periods is primarily due to
a $3.2 million gain in 1999 on the sale of the Company's remaining interest in
its DTM subsidiary.
The Company's effective tax rate, excluding special items, decreased from 37.2
percent to 36.5 percent, period to period. The reduced effective tax rate
between periods is primarily due to expected additional benefits from the
Company's foreign, state and local tax planning during 1999.
The Company recognized a $1.6 million after-tax charge during the first quarter
of 1998 related to a business previously divested and reported as a discontinued
operation. The Company also recorded an extraordinary charge in 1998 of $4.3
million, net of taxes, in connection with the early repayment of debt.
16
<PAGE> 17
BUSINESS SEGMENT PERFORMANCE
SEGMENT ANALYSIS
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in Millions) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES:
Aerospace $ 855.2 $ 862.4 $ 2,747.3 $ 2,565.8
Engineered Industrial Products 170.6 179.4 542.7 600.6
Performance Materials 306.3 304.8 917.3 898.1
- --------------------------------------------------------------------------------------------------------------------------
Total $ 1,332.1 $ 1,346.6 $ 4,207.3 $ 4,064.5
==========================================================================================================================
OPERATING INCOME:
Aerospace $ 130.9 $ 128.5 $ 418.3 $ 351.0
Engineered Industrial Products 28.1 35.2 99.3 96.8
Performance Materials 39.4 37.4 115.6 114.2
- --------------------------------------------------------------------------------------------------------------------------
Total Reportable Segments 198.4 201.1 633.2 562.0
Merger Related and Consolidation Costs (204.7) -- (241.0) --
Corporate (19.9) (20.4) (64.0) (62.1)
- ---------------------------------------------------------------------------------------------------------------------------
Total $ (26.2) $ 180.7 $ 328.2 $ 499.9
===========================================================================================================================
</TABLE>
The Company's operations are classified into three reportable business segments:
BFGoodrich Aerospace ("Aerospace"), BFGoodrich Engineered Industrial Products
("Engineered Industrial Products") and BFGoodrich Performance Materials
("Performance Materials"). Aerospace consists of four business groups:
Aerostructures; Landing Systems; Sensors and Integrated Systems; and
Maintenance, Repair and Overhaul ("MRO"). They serve commercial, military,
regional, business and general aviation markets.
Engineered Industrial Products is a single business group. This group
manufactures industrial seals; gaskets; packing products; self-lubricating
bearings; diesel, gas and dual fuel engines; air compressors; spray nozzles and
vacuum pumps.
Performance Materials consists of three business groups: Textile and Coatings
Solutions; Polymer Additives and Specialty Plastics; and Consumer Specialties.
These groups provide materials for a wide range of end use market applications
including textiles, coatings, food & beverage, personal care, pharmaceuticals,
graphic arts, industrial piping, plumbing and transportation.
17
<PAGE> 18
Corporate includes general corporate administrative costs and Advanced
Technology Group research expenses. Beginning in 2000, such research expenses
will be reported within segment operating income. Segment operating income is
total segment revenue reduced by operating expenses directly identifiable with
that business segment. Merger related and consolidation costs are presented
separately and are discussed above (see further discussion under merger related
and consolidation costs section and Note C to the accompanying unaudited
condensed consolidated financial statements).
An expanded analysis of sales and operating income by business segment follows.
AEROSPACE
<TABLE>
<CAPTION>
(Dollars in millions)
Three Months Ended September 30, Nine Months Ended September 30,
----------------------------------- --------------------------------------
1999 1998 % Change 1999 1998 % Change
----- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
SALES
Aerostructures $248.5 $276.3 (10.1) $ 881.9 $ 861.3 2.4
Landing Systems 251.8 239.4 5.2 782.4 695.9 12.4
Sensors and Integrated Systems 230.5 229.8 0.3 696.6 676.5 3.0
MRO 124.4 116.9 6.4 386.4 332.1 16.4
------ ------ -------- --------
Total Sales $855.2 $862.4 (0.8) $2,747.3 $2,565.8 7.1
====== ====== ======== ========
OPERATING INCOME
Aerostructures $39.1 $ 44.5 (12.1) $ 136.5 $ 127.3 7.2
Landing Systems 40.2 33.7 19.3 121.4 80.7 50.4
Sensors and Integrated Systems 44.8 42.9 4.4 130.4 123.2 5.8
MRO 6.8 7.4 (8.1) 30.0 19.8 51.5
------ ------ -------- --------
Total Operating Income $130.9 $128.5 1.9 $ 418.3 $ 351.0 19.2
====== ====== ======== ========
OPERATING INCOME AS A PERCENT OF SALES
Aerostructures 15.7 16.1 15.5 14.8
Landing Systems 16.0 14.1 15.5 11.6
Sensors and Integrated Systems 19.4 18.7 18.7 18.2
MRO 5.5 6.3 7.8 6.0
Total Aerospace 15.3 14.9 15.2 13.7
</TABLE>
18
<PAGE> 19
THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998
Sales of BFGoodrich Aerospace decreased $7.2 million, or 0.8 percent, from
$862.4 million in the third quarter of 1998 to $855.2 million in the third
quarter of 1999. The decrease was attributable to lower after-market sales at
Aerostructures ($28 million), partially offset by acquisitions ($9 million) and
higher after-market demand for wheels and brakes ($10 million) and landing gear
maintenance services ($3 million).
Aerospace operating income increased $2.4 million, or 1.9 percent, from $128.5
million in the third quarter of 1998 to $130.9 million in the third quarter of
1999. The increase was attributable to increased demand for sensors and
after-market sales of wheels and brakes, partially offset by reduced
after-market demand for nacelles.
AEROSTRUCTURES GROUP: Sales for the third quarter of 1999 decreased $27.8
million, or 10.1 percent, from $276.3 million in the third quarter of 1998 to
$248.5 million in the third quarter of 1999. Lower aftermarket sales, along with
the MD-90 program no longer being in production, resulted in most of the
decrease.
Operating income decreased $5.4 million, or 12.1 percent, from $44.5 million in
the third quarter of 1998 to $39.1 million in the third quarter of 1999. The
decrease is attributable to the decline in volumes noted above as well as costs
associated with the site consolidation efforts announced during the fourth
quarter of last year.
LANDING SYSTEMS GROUP: Sales for the third quarter of 1999 increased $12.4
million, or 5.2 percent, from $239.4 million in the third quarter of 1998 to
$251.8 million during the third quarter of 1999. The increase resulted from
strong after-market demand for wheels and brakes ($9.6 million) and acquisitions
($4.7 million), partially offset by reduced demand for landing gear components
($1 million). The increased demand for wheels and brakes came from the
commercial (A321 and A330/340), regional (Dash8-400 and ERJ145LR) and military
(C-5 and F16HD) markets. Landing gear sales decreased due to reduced OEM demand
during the quarter
Operating income increased $6.5 million, or 19.3%, from $33.7 million during the
third quarter of 1998 to $40.2 million during the third quarter of 1999. The
increase resulted primarily from increased sales of after-market wheels and
brakes.
SENSORS & INTEGRATED SYSTEMS GROUP: Sales for the third quarter of 1999
increased $0.7 million, or 0.3 percent, from $229.8 million in the third quarter
of 1998 to $230.5 million in the third quarter 1999. The increase is
attributable to higher component sales to the industrial gas turbine market and
additional work performed in support of new satellite programs, largely offset
by lower sales of fuel management systems.
Operating income increased $1.9 million, or 4.4 percent, from $42.9 million
during the third quarter of 1998 to $44.8 million during the third quarter of
1999. Operating margins continued to benefit from operating improvement
initiatives and an improvement in product mix, partially offset by increased
research and development expenditures on the helicopter health and usage
monitoring system (HUMS).
19
<PAGE> 20
MRO GROUP: Sales for the third quarter of 1999 increased $7.5 million, or 6.4
percent, from $116.9 million in the third quarter of 1998 to $124.4 million in
the third quarter of 1999. The increase is attributable to increased demand for
landing gear maintenance services ($3.5 million) and the acquisition of the
remaining 50 percent interest of a joint venture business in the Asia pacific
region and the subsequent consolidation of the joint venture's results ($4.6
million). Demand for the group's airframe maintenance services was flat as
compared to the prior year period and was slightly down for its component
maintenance services.
Operating income decreased $0.6 million, or 8.1 percent, from $7.4 million in
the third quarter of 1998 to $6.8 million in the third quarter of 1999. The
decrease was caused by several non-recurring expense items involving sales
credits and material cost adjustments. Excluding these items, operating income
was $1.1 million greater in the third quarter of 1999 than in 1998 due primarily
to the increased sales noted above.
FIRST NINE MONTHS OF 1999 COMPARED WITH FIRST NINE MONTHS OF 1998
Sales by BFGoodrich Aerospace increased by $181.5 million, or 7.1 percent, from
$2,565.8 million during the first nine months of 1998 to $2,747.3 million during
the first nine months of 1999. The increase is primarily attributable to the
PW4000 settlement noted within the Company's second quarter Form 10-Q,
acquisitions, increased sales of landing gear components and strong after-market
demand for wheels and brakes.
Aerospace operating income increased $67.3 million, or 19.2 percent, from $351.0
million during the first nine months of 1998 to $418.3 million during the first
nine months of 1998. The factors noted above resulting in the increase in sales
also apply to the increase in operating income.
AEROSTRUCTURES GROUP: Sales for the first nine months of 1999 increased $20.6
million, or 2.4 percent, from $861.3 million in the first nine months of 1998 to
$881.9 million in the first nine months of 1999. Higher after-market sales and
the PW4000 settlement contributed to most of the increase more than offsetting
lower OEM sales.
Operating income increased $9.2 million, or 7.2 percent, from $127.3 million
during the first nine months of 1998 to $136.5 million during the first nine
months of 1999. The increase is primarily attributable to higher after-market
sales that generally carry a higher margin than OEM sales and the settlement of
the PW4000 claim partially offset by higher manufacturing costs associated with
the close of the Group's Tolo facility and the start-up of the Group's
Arkadelphia facility.
LANDING SYSTEMS GROUP: Sales for the first nine months of 1999 increased $86.5
million, or 12.4 percent, from $695.9 million in the first nine months of 1998
to $782.4 million in the first nine months of 1999. The increase is attributable
to higher commercial OEM sales of landing gear ($34 million), acquisitions
($20.0 million) and higher after-market demand for wheels and brakes and
aircraft seats ($25 million).
Operating income increased $40.7 million, or 50.4 percent, from $80.7 million in
the first nine months of 1998 to $121.4 million in the first nine months of
1999. An overall favorable sales mix, increased
20
<PAGE> 21
volume, acquisitions and operating improvement initiatives all contributed to
the improved results.
SENSORS & INTEGRATED SYSTEMS GROUP: Sales for the first nine months of 1999
increased $20.1 million, or 3 percent, from $676.5 million in the first nine
months of 1998 to $696.6 million in the first nine months of 1999. The increase
resulted from higher volumes of sensors and gas turbine engine components,
partially offset by lower volumes of fuel management products.
Operating income increased $7.2 million, or 5.8 percent, from $123.2 million
during the first nine months of 1998 to $130.4 million during the first nine
months of 1999. This increase reflects the impact of higher sales volumes and a
favorable sales mix of higher margin after-market spares, partially offset by
increased spending on HUMS.
MRO GROUP: Sales for the first nine months of 1999 increased $54.3 million, or
16.4 percent, from $332.1 million in the first nine months of 1998 to $386.4
million in the first nine months of 1999. The increase reflects higher demand
for airframe, component and landing gear overhaul maintenance services in
addition to the acquisition of the remaining interest of a joint venture
business in the Asia Pacific region.
Operating income increased by $10.2 million, or 51.5 percent, from $19.8 million
during the first nine months of 1998 to $30.0 million during the first nine
months of 1999. The increase is principally due to the higher demand experienced
in all of the MRO markets served by the Company ($5 million), as well as the
impact of the acquisition noted above ($5 million).
ENGINEERED INDUSTRIAL PRODUCTS
<TABLE>
<CAPTION>
(Dollars in millions)
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------- -------------------------------------
1999 1998 $ Change 1999 1998 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
SALES $170.6 $179.4 (4.9) $542.7 $600.6 (9.6)
OPERATING INCOME 28.1 35.2 (20.2) 99.3 96.8 2.6
OPERATING INCOME AS A PERCENT OF SALES
16.5 19.6 18.3 16.1
</TABLE>
THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998
Sales decreased by $8.8 million, or 4.9 percent, from $179.4 million in the
third quarter of 1998 to $170.6 million in the third quarter of 1999. The
decrease was attributable to reduced volumes in most businesses, especially in
the sealing technology, sprayer and compressor product lines. The decreased
volumes resulted from weak business conditions in most of the markets served by
the Segment.
Operating income decreased $7.1 million, or 20.2 percent, from $35.2 million in
the third quarter of 1998 to $28.1 million in the third quarter of 1999. The
decrease in operating income between periods was primarily attributable to the
decline in volume discussed above.
21
<PAGE> 22
FIRST NINE MONTHS OF 1999 COMPARED WITH FIRST NINE MONTHS OF 1998
Sales decreased $57.9 million, or 9.6 percent, from $600.6 million in the first
nine months of 1998 to $542.7 million in the first nine months of 1999. The
decrease in sales was attributable to a 1998 disposition ($37 million) and
reduced volumes in most of the Segment's businesses ($24 million), partially
offset by favorable prices and mix ($4 million). The reduced volumes were
attributable to weakness experienced in most markets served by the Segment,
especially in the sealing technology, spray nozzle, diesel engine and compressor
markets.
Operating income increased by $2.5 million, or 2.6 percent, from $96.8 million
in the first nine months of 1998 to $99.3 million in the first nine months of
1999. Excluding the impact of dispositions ($6 million) and non-recurring
charges ($15 million) during the first nine months of 1998, operating income
decreased by $16.5 million. The non-recurring charges in 1998 related to Y2K
costs and a warranty issue related to previously sold diesel engines. The
decrease in operating income between periods was due to the market weakness
noted above.
22
<PAGE> 23
PERFORMANCE MATERIALS
(Dollars in millions)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1999 1998 % Change 1999 1998 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
SALES
Textile and Coatings Solutions $ 154.4 $ 158.5 (2.6) $ 467.7 $ 459.0 1.9
Polymer Additives and
Specialty Plastics 107.1 103.7 3.3 318.7 322.7 1.2
Consumer Specialties 44.8 42.6 5.2 130.9 116.4 12.5
-------- -------- -------- --------
Total Sales $ 306.3 $ 304.8 0.5 $ 917.3 $ 898.1 2.1
======== ======== ======== ========
OPERATING INCOME
Textile and Coatings Solutions $ 12.9 $ 16.3 (20.9) $ 34.8 $ 52.8 (34.1)
Polymer Additives and
Specialty Plastics 20.3 14.1 44.0 57.1 41.5 37.6
Consumer Specialties 6.2 7.0 (11.4) 23.7 19.9 19.1
-------- -------- -------- --------
Total Operating Income $ 39.4 $ 37.4 5.3 $ 115.6 $ 114.2 1.2
======== ======== ======== ========
OPERATING INCOME AS A PERCENT OF SALES
Textile and Coating Solutions 8.4 10.3 7.4 11.5
Polymer Additives and
Specialty Plastics 19.0 13.6 17.9 12.9
Consumer Specialties 13.8 16.4 18.1 17.1
Total Performance Materials 12.9 12.3 12.6 12.7
</TABLE>
THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998
Sales for the Performance Materials Segment increased $1.5 million, or 0.5
percent, from $304.8 million during the third quarter last year to $306.3
million during the third quarter this year. The increase was attributable to
increased volumes (3 percent, or $8 million) and acquisitions ($5 million),
offset by unfavorable pricing in each of the Groups ($11 million).
Operating income increased $2.0 million, or 5.3 percent, from $37.4 million in
1998 to $39.4 million in the third quarter of 1999. The increase reflects higher
volumes ($4 million), lower variable costs primarily related to raw material
prices ($3 million) and manufacturing efficiencies/overhead cost controls ( $6
million), offset by an unfavorable pricing environment in most of the markets
served (3 percent, or $11 million).
23
<PAGE> 24
TEXTILE AND COATINGS SOLUTIONS GROUP: Sales decreased $4.1 million, or 2.6
percent, from $158.5 million in the third quarter of 1998 to $154.4 million in
the third quarter of 1999. The decrease was driven by continued weak pricing ($5
million) and volume declines ($3 million), partially offset by an acquisition
($5 million). Most of the Group's businesses continue to experience lower
volumes and prices then in the prior year primarily resulting from an overall
industry slump which has led to increased competition and pricing pressures.
Operating income decreased by $3.4 million, or 20.9 percent, from $16.3 million
in the third quarter of 1998 to $12.9 million in the third quarter of 1999.
Lower raw material costs and savings from operating improvement initiatives
partially offset the negative impact of the price and volume declines noted
above.
POLYMER ADDITIVES AND SPECIALTY PLASTICS GROUP: Sales increased by $3.4 million,
or 3.3 percent, from $103.7 million during the third quarter of 1998 to $107.1
million during the third quarter of 1999. Favorable volumes in North America,
Asia and the Middle East ($7 million), more than offset price reductions ($4
million) seen primarily in the rubber chemicals markets. Volume continues to be
strong for the Group's TempRite high heat resistant plastics, as a robust
construction market drove strength in the plumbing, fire sprinkler, and
industrial piping markets.
Operating income increased $6.2 million, or 44.0 percent, from $14.1 million
during the third quarter of 1998 to $20.3 million during the third quarter of
1999. The increase was primarily attributable to savings from various operating
improvement initiatives coupled with higher demand for and a favorable sales mix
of higher margin TempRite high heat resistant products, partially offset by
lower sales prices in many of the Group's other products.
THE CONSUMER SPECIALTIES GROUP: Sales increased $2.2 million, or 5.2 percent,
from $42.6 million in the third quarter of 1998 to $44.8 million in the third
quarter of 1999. The increase was attributable to higher volumes and mix ($3
million), partially offset by lower prices in certain of the Group's products
($1 million). New applications drove volume increases in the personal care and
pharmaceutical markets served by the Group.
Operating income decreased $0.8 million, or 11.4 percent, from $7.0 million in
the third quarter of 1998 to $6.2 million in the third quarter of 1999. Despite
the sales increase noted above, operating income decreased between periods as a
result of incremental plant maintenance costs incurred during the third quarter
of 1999 as part of the Group's Y2K compliance plan.
FIRST NINE MONTHS OF 1999 COMPARED WITH FIRST NINE MONTHS OF 1998
Sales increased $19.2 million, or 2.1 percent, from $898.1 million in the first
nine months of 1998 to $917.3 million in the first nine months of 1999.
Acquisitions (primarily Freedom Chemical, which was acquired in March of 1998)
accounted for $74 million of the sales increase, offset by $55 million of
unfavorable volume, price, and mix. Volumes for many of the Segment's products
have been down due to a deterioration of end markets served by the Segment and
increased competition that has resulted. Inexpensive imports and certain areas
of foreign economic weakness have put additional pressure on pricing, causing
year-to-date prices to be down more than 3 percent versus the first nine months
of 1998.
24
<PAGE> 25
Operating income increased by $1.4 million, or 1.2 percent, from $114.2 million
in the first nine months of 1998 to $115.6 million in the first nine months of
1999. The increase was attributable to reduced raw material costs, increased
manufacturing productivity and overhead cost controls, which more than offset
the income erosion from the price and volume declines mentioned above.
TEXTILE AND COATINGS SOLUTIONS GROUP: Sales increased by $8.7 million, or 1.9
percent, from $459.0 million in the first nine months of 1998 to $467.7 million
in the first nine months of 1999. The increase in sales is solely related to the
Freedom acquisition and the inclusion of nine months results in 1999 and only
six months in 1998. The impact of the acquisition was sufficient to offset the
volume and price declines experienced by the Group's other businesses.
Operating income decreased by $18.0 million, or 34.1 percent, from $52.8 million
in the first nine months of 1998 to $34.8 million in the first nine months of
1999. The impact of the acquisition was not sufficient enough to offset the
unfavorable volume and price declines noted above, particularly in regards to
the textile markets served by the Group.
POLYMER ADDITIVES AND SPECIALTY PLASTICS GROUP: Sales decreased by $4.0 million,
or 1.2 percent, from $322.7 million in the first nine months of 1998 to $318.7
million in the first nine months of 1999. The decrease was caused primarily by
price reductions ($13 million), offset by favorable volumes and improved mix ($9
million). The price reductions impacted most of the Group's products, while the
volume increase was driven primarily by the Group's TempRite high-heat resistant
plastics products.
Operating income increased $15.6 million, or 37.6 percent, from $41.5 million in
the first nine months of 1998 to $57.1 million in the first nine months of 1999.
The increase was primarily driven by demand for the Group's TempRite high-heat
resistant products and the higher margins associated with such products,
effective overhead cost controls and lower raw material costs, partially offset
by decreased volumes and prices in the Group's other products.
CONSUMER SPECIALTIES GROUP: Sales increased $14.5 million, or 12.5 percent, from
$116.4 million in the first nine months of 1998 to $130.9 million in the first
nine months of 1999. The increase in sales between periods was driven by the
Freedom acquisition ($20 million), partially offset by volume and price declines
in most of the remaining businesses ($6 million).
Operating income increased $3.8 million, or 19.1 percent, from $19.9 million in
the first nine months of 1998 to $23.7 million in the first nine months of 1999.
The increase in operating income was attributable to the Freedom acquisition
noted above, manufacturing efficiencies, overhead cost controls and a one-time
favorable settlement from a patent infringement lawsuit.
YEAR 2000 COMPUTER COSTS
GENERAL - The Year 2000 issue is the result of some computer programs being
written using two digits rather than four to define the applicable year. The
Company's computer equipment and software and devices with embedded technology
that are date-sensitive may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing
25
<PAGE> 26
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. The Company has assessed how it may be impacted by the Year 2000
issue and has formulated and commenced implementation of a comprehensive plan to
address all known aspects of the issue.
THE PLAN - The Company's plan encompasses its information systems, production
and facilities equipment that utilize date/time oriented software or computer
chips, products, vendors and customers and is being carried out in four phases:
1) assessment and development of a plan; 2) remediation; 3) testing; and 4)
implementation. The Company's plan includes purchasing new information systems
where circumstances warrant.
The Company has made significant progress against its plan and has completed the
following percentages of its total planned remediation efforts in the areas
noted:
Information systems 97%
Production and facilities equipment 98%
Products 97%
The Company is also reviewing the efforts of its vendors and customers to become
Year 2000 compliant. Letters and questionnaires have been sent to all critical
entities with which the Company does business to assess their Year 2000
readiness. The Company anticipates that its activities will be ongoing for all
of 1999 and will include follow-up telephone interviews and on-site meetings as
considered necessary in the circumstances. Although its review is continuing,
the Company is not currently aware of any vendor or customer circumstances that
may have a material adverse impact on the Company. The Company will be looking
for alternative suppliers where circumstances warrant. The Company can provide
no assurance that Year 2000 compliance plans will be successfully completed by
suppliers and customers in a timely manner.
COST - The Company's estimate of the total cost for Year 2000 compliance is
approximately $114 million, of which approximately $105 million has been
incurred through September 30, 1999. The Company capitalized approximately $67
million and expensed approximately $38 million of the $105 million spent to
date. The Company's cost estimates include the amount specifically related to
remedying Year 2000 issues as well as costs for improved systems which are Year
2000 compliant and would have been acquired in the ordinary course but whose
acquisition has been accelerated to ensure compliance by the Year 2000.
Incremental spending has not been, and is not expected to be, material because
most Year 2000 compliance costs include items that are part of the standard
procurement and maintenance of the Company's information systems and production
and facilities equipment. Other non-Year 2000 efforts have not been materially
delayed or impacted by the Company's Year 2000 initiatives.
26
<PAGE> 27
RISKS - The Company believes that the Year 2000 issue will not pose significant
operational problems for the Company. However, if all Year 2000 issues are not
properly identified, or assessment, remediation, testing and implementation are
not effected in a timely manner with respect to problems that are identified,
there can be no assurance that the Year 2000 issue will not have a material
adverse impact on the Company's results of operations or adversely affect the
Company's relationships with customers, vendors, or others. Additionally, there
can be no assurance that the Year 2000 issues of other entities will not have a
material adverse impact on the Company's systems or results of operations.
CONTINGENCY - The Company has developed contingency plans in the event any of
its critical suppliers or service providers should incur Year 2000 failures in
their systems that would cause a disruption in the Company's ability to conduct
business and for system implementations/upgrades planned for later this year.
Some of the areas addressed in these contingency plans include potentially
increasing the staffing of shifts at year-end, carrying higher-levels of
inventory for critical materials, components and finished goods and using
alternate suppliers for critical raw materials. The Company's view of a
"reasonably likely worse case scenario" would entail the temporary shutdown of a
production unit at one or more of the Company's major manufacturing sites.
Although the Company does not anticipate such a scenario will occur, if it were
to occur, the Company believes it would be able to correct the problem in a
timely fashion, alternatively source the production or satisfy the customer
demand from existing inventory. Possible consequences of these actions may
include increased manufacturing and general and administrative expenses and/or
lost revenue. If the Company's contingency plans are not adequate or its
suppliers or customers fail to remedy their own Year 2000 matters, the Company's
results of operations and financial condition may be materially adversely
affected.
CAPITAL RESOURCES AND LIQUIDITY
Current assets less current liabilities decreased $85.1 million from December
31, 1998 to September 30, 1999. The decrease resulted primarily from an increase
in short-term debt and accrued expenses related to merger and consolidation
costs incurred during 1999. 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, 1998 and in the Company's
Quarterly Report on Form 10-Q for the three months ended March 31, 1999) 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 54.0 percent at September 30,
1999, compared with 53.3 percent at December 31, 1998. For purposes of this
ratio, the trust preferred securities are treated as capital.
During the first quarter of 1999, the Company made several changes to its
committed domestic and European credit facilities. The Company extended the
maturity of its existing $300 million five-year revolver to February 18, 2004.
The Company also entered into a new $300 million short-term revolver with
certain banks that expires March 14, 2000. In addition, the Company increased
the size of its committed European multi-currency facility, which expires August
19, 2003, from $75 million to $125 million.
27
<PAGE> 28
On May 5, 1999, the company issued $200 million in Notes due 2009 with a coupon
interest rate of 6.60 percent. Net proceeds will be used to repay short-term
indebtedness and for general corporate purposes. The Company also entered into
an interest rate swap agreement that effectively converts the interest rate on
the Notes to a floating rate based on LIBOR.
CASH FLOWS
Cash flow from operating activities in the first nine months of 1999 was $169.3
million less than the same period last year, primarily as a result of the merger
related and consolidation costs incurred during 1999. EBITDA, excluding merger
related and consolidation costs, as well as gains on the sale of assets,
increased $83.1 million from $643.9 million in the first nine months of 1998 to
$727.0 million in the first nine months of 1999.
TRANSITION TO THE EURO
Although the Euro was successfully introduced on January 1, 1999, the legacy
currencies of those countries participating will continue to be used as legal
tender through January 1, 2002. Thereafter, the legacy currencies will be
canceled and Euro bills and coins will be used in the eleven participating
countries.
Transition to the Euro creates a number of issues for the Company. Business
issues that must be addressed include product pricing policies and ensuring the
continuity of business and financial contracts. Finance and accounting issues
include the conversion of bank accounts and other treasury and cash management
activities.
The Company continues to address these transition issues and does not expect the
transition to the Euro to have a material effect on the results of operations or
financial condition of the Company. Actions taken to date include the ability to
quote its prices; invoice when requested by the customer; and issue pay checks
to its employees on a dual currency basis. The Company has not yet set
conversion dates for its accounting systems, statutory reporting and tax books,
but will do so later this year or early in year 2000. The financial institutions
in which the Company has relationships have transitioned to the Euro
successfully and are issuing statements in dual currencies.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities, which, as
amended by FASB Statement No. 137, is required to be adopted in years beginning
after June 15, 2000. The Statement permits early adoptions as of the beginning
of any fiscal quarter after its issuance. The Statement will require the Company
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of the derivative will either be offset against the change in fair value
of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings.
28
<PAGE> 29
The Company has not yet determined what the effect of Statement No. 133 will be
on its earnings and financial position and has not yet determined the timing or
method of adoption. However, the Statement could increase volatility in earnings
and comprehensive income.
In September 1999, the EITF reached a consensus on Issue 99-5, Accounting for
Pre-Production Costs Related to Long-Term Supply Arrangements. The consensus
requires design and development costs for products to be sold under long-term
supply arrangements incurred subsequent to December 31, 1999, to be expensed as
incurred unless contractually recoverable. The Company does not believe the
consensus will have a significant effect on its results or financial position.
FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
This document includes statements that reflect projections or expectations of
our future financial condition, results of operations or business that are
subject to risk and uncertainty. We believe such statements to be "forward
looking" statements within the meaning of the Private Securities Litigation
Reform Act of 1995. BFGoodrich's actual results may differ materially from those
included in the forward-looking statements. Forward-looking statements are
typically identified by words or phrases such as "believe", "expect",
"anticipate", "intend", "estimate", "are likely to be" and similar expressions.
Factors that could cause actual results of our Aerospace segment to differ
materially from those discussed in the forward-looking statements include, but
are not limited to, the following:
o The worldwide civil aviation market could be adversely affected if
customers cancel or delay current orders or original-equipment
manufacturers reduce the rate they build or expect to build products for
such customers. Such cancellations, delays or reductions may occur if there
is a substantial change in the health of the airline industry or in the
general economy, or if a customer were to experience financial or
operational difficulties. There have been weak new aircraft orders and
actual cancellation of orders from Asian carriers due to the Asian
financial crisis. There are financial difficulties in Russia and Latin
America as well. If these developments should continue or accelerate, it
could have an adverse effect upon the Company.
o If the decline in future new aircraft build rates is greater than
anticipated, there could be a material adverse impact on the Company. Even
if orders remain strong, original-equipment manufacturers could reduce the
rate at which they build aircraft due to inability to obtain adequate parts
from suppliers and/or because of productivity problems relating to a recent
rapid build-up of the labor force to increase the build rate of new
aircraft. Boeing announced a temporary cessation of production in the fall
of 1997 for these reasons.
o A change in levels of defense spending could curtail or enhance prospects
in the Company's military business.
o If the trend towards increased outsourcing or reduced number of suppliers
in the airline industry changes, it could affect the Company's business.
29
<PAGE> 30
o If the Boeing 717 program is not as successful as anticipated, it could
adversely affect the Company's business.
o If the Company is unable to continue to acquire and develop new systems and
improvements, it could affect future growth rates.
o In the immediate past there has been a higher-than-normal historical
turnover rate of technicians in the MRO business due to hiring by Boeing
and the airlines, although recently the turnover rate has been returning
closer to historical levels. If this trend were again to reverse, it could
have an adverse effect on the Company.
o If the Company does not experience continued growth in demand for its
higher-margin aftermarket aerospace products or is unable to continue to
achieve improved operating margins in its MRO business, it could have an
adverse effect on operating results. Such events could be exacerbated if
there is a substantial change in the health of the airline industry, or in
the general economy, or if a customer were to experience major financial
difficulties. Various industry estimates of future growth of revenue
passenger miles, new original equipment deliveries and estimates of future
deliveries of regional, business, general aviation and military orders may
prove optimistic, which could have an adverse affect on operations.
Factors that could cause actual results of our Engineered Industrial Products
segment to differ materially from those discussed in the forward-looking
statements include, but are not limited to, the following:
o If maintenance schedules are reduced or delayed in the segment's key
customer base, including the petrochemical industry in the US, then results
could be adversely impacted. A significant decline in the price of oil
would also negatively impact the results of the segment.
o The segment could be adversely impacted if capital spending for products
used in the manufacture of industrial products in the US declines.
o If decreases in Federal funding cause orders for large engines to decline
or be delayed, then the results of segment could be adversely impacted.
o The results could be adversely impacted if orders in the
automotive/heavy-duty truck market decline.
Factors that could cause actual results of our Performance Materials segment to
differ materially from those discussed in the forward-looking statements
include, but are not limited to, the following:
o Expected sales increases in the Far East and Latin America could be
adversely impacted by recent turmoil in financial markets in those regions.
o If volume does not increase or cost reduction benefits do not materialize,
the results of the Performance Materials Segment could be adversely
affected.
30
<PAGE> 31
o If cost benefits from continued integration of recent acquisitions and
realignment activities do not occur as expected, results could be adversely
impacted.
o Revenue growth in various businesses may not materialize as expected.
o The segment may not be able to achieve the $7 million in cost savings in
the second half of 1999 and $15 million in annualized savings in 2000 from
the realignment of the Performance Materials organization.
Factors that could cause actual results of the entire Company to differ
materially from those discussed in the forward-looking statements include, but
are not limited to, the following:
o If outside vendors are unable to make their computer systems Year 2000
compliant in time, or if the magnitude of the Year 2000 issue is greater
than presently anticipated, it could have a material adverse impact on the
Company.
o Future claims against the Company's subsidiaries with respect to asbestos
exposure and insurance and related costs may result in future liabilities
that are significant and may be material.
o If there are unexpected developments with respect to environmental matters
involving the Company, it could have an adverse effect upon the Company.
o The Company anticipates $60 million in annualized savings from the Coltec
merger by 2002. If the Company is unable to achieve these savings, it could
have an adverse impact upon the Company.
o If the Company's state and local tax planning is not as effective as
anticipated, the Company's effective tax rate could increase.
We caution you not to place undue reliance on the forward-looking statements
contained in this document, which speak only as of the date on which such
statements were made. We undertake no obligation to release publicly any
revisions to these forward-looking statements to reflect events or circumstances
after the date on which such statements were made or to reflect the occurrence
of unanticipated events.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and certain of its subsidiaries are defendants in various lawsuits
involving asbestos-containing products. In addition, the Company has been
notified that it is among potentially responsible parties under federal
environmental laws, or similar state laws, relative to the cost of investigating
and in some cases remediating contamination by hazardous materials at several
sits. See Note I to the accompanying unaudited condensed consolidated financial
statements, which is incorporated herein by reference.
31
<PAGE> 32
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description
------- -----------
10(Z) Family Protection Plan of Coltec Industries Inc filed as
Exhibit 4.28 to Coltec Industries Inc's Quarterly Report
on Form 10-Q for the quarter ended September 27, 1998,
is incorporated herein by reference.
10(AA) Form of Split Dollar Insurance Agreement dated May 8,
1997 between Coltec Industries Inc and certain executive
officers, filed as Exhibit 10.2 to Coltec Industries Inc's
Annual Report on Form 10-K for the year ended
December 31, 1997, is incorporated herein by reference.
10(BB) Benefits Equalization Plan of Coltec Industries Inc
effective January 1, 1976 and Amended and Restated as of
January 1, 1989, filed as Exhibit 10.3 to Coltec
Industries Inc's Annual Report on Form 10-K for the year
ended December 31, 1997, is incorporated herein by
reference.
10(CC) Employment Agreement between Coltec Industries Inc and
John W. Guffey, Jr., dated July 15, 1998, filed as
Exhibit 10.28 to Coltec Industries Inc's Quarterly Report
on Form 10-Q for the quarter ended June 28, 1998, is
incorporated herein by reference.
10(DD) 1992 Stock Option and Incentive Plan of Coltec Industries
Inc, filed as Exhibit 10.24 to Coltec Industries Inc's
Annual Report on Form 10-K for the year ended December 31,
1991, is incorporated herein by reference.
10(EE) Amendment No. 1 to Coltec Industries Inc's 1992 Stock
Option and Incentive Plan, filed as Exhibit 10.15 to
Coltec Industries Inc's Annual Report on Form 10-K for
the year ended December 31, 1993, is incorporated herein
by reference.
10(FF) Second Amendment to Coltec Industries Inc's 1992 Stock
Option and Incentive Plan, filed as Exhibit 10.3 to
Coltec Industries Inc's Quarterly Report on Form 10-Q for
the quarter ended September 28, 1997, is incorporated
herein by reference.
10(GG) Amendment No. 3 to Coltec Industries Inc's 1992 Stock
Option and Incentive Plan, filed as Exhibit A to Coltec
Industries Inc's definitive proxy statement filed
March 26, 1997, is incorporated herein by reference.
32
<PAGE> 33
10(HH) 1994 Long-Term Incentive Plan of Coltec Industries Inc,
filed as Exhibit 10.16 to Coltec Industries Inc's Annual
Report on Form 10-K for the year ended December 31, 1993,
is incorporated herein by reference.
10(II) Resolutions of the Board of Directors of Coltec Industries
Inc adopted July 13, 1995 amending Section 6(a) of Coltec
Industries Inc's 1994 Long-Term Incentive Plan, filed
as Exhibit 10.17 to Coltec Industries Inc's Annual Report
on Form 10-K for the year ended December 31, 1995, is
incorporated herein by reference.
10(JJ) Resolution of the Board of Directors of Coltec Industries
Inc adopted on May 30, 1995 establishing a
change-in-control arrangement for non-employee directors,
filed as Exhibit 10.21 to Coltec Industries Inc's Annual
Report on Form 10-K for the year ended December 31, 1995,
is incorporated herein by reference.
27 Financial Data Schedule.
(b) Reports on Form 8-K -
Current Report on Form 8-K/A filed on September 24, 1999 (amending the
Current Report in Form 8-K filed July 12, 1999) containing unaudited
pro forma condensed combined financial information related to the
Company's merger with Coltec Industries Inc.
Current Report on Form 8-K filed on July 12, 1999 regarding the
completion/consummation of the Company's merger with Coltec.
Incorporated by reference in this report are (i) the financial
statements of Coltec Industries Inc included in the Annual Report of
Coltec Industries Inc on Form 10-K for the year ended December 31, 1998
and (ii) the pro forma combined financial information of The
B.F.Goodrich Company and Coltec Industries Inc contained in
Registration Statement No. 333-74067 on Form S-4 of The B.F.Goodrich
Company declared effective March 9, 1999.
Current report on Form 8-K filed on July 9, 1999 related to the
settlement of the Allied Signal Inc. lawsuit opposing the merger
between the Company and Coltec.
33
<PAGE> 34
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.
November 15, 1999 The B.F.Goodrich Company
/S/ LAURENCE A. CHAPMAN
-------------------------------------
Laurence A. Chapman
Senior Vice President and
Chief Financial Officer
/S/ ROBERT D. KONEY, JR.
-------------------------------------
Robert D. Koney, Jr.
Vice President & Controller
(Chief Accounting Officer)
34
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