<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1994
================================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER 1-3998
LITTON INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-1775499
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
360 NORTH CRESCENT DRIVE
BEVERLY HILLS, CALIFORNIA 90210-4867
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 859-5000
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
On November 30, 1994 there were 45,968,339 shares of Common Stock
outstanding.
Page 1 of 10
Exhibit Index appears on Page 8
================================================================================
<PAGE> 2
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX
REPORT ON FORM 10-Q
FOR QUARTER ENDED OCTOBER 31, 1994
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
Three months ended October 31, 1994 and 1993............................ 3
Consolidated Balance Sheets
October 31, 1994 and July 31, 1994...................................... 4
Consolidated Statements of Cash Flows
Three months ended October 31, 1994 and 1993............................ 5
Notes to Consolidated Financial Statements................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................................... 8
Signature............................................................................. 10
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Sales and Service Revenues............................................ $788,778 $841,049
-------- --------
Costs and Expenses
Cost of sales....................................................... 631,323 676,890
Selling, general and administrative................................. 78,861 85,810
Depreciation and amortization....................................... 23,392 25,060
Interest -- net..................................................... 1,289 9,644
-------- --------
Total....................................................... 734,865 797,404
-------- --------
Earnings from Continuing Operations before Taxes on Income............ 53,913 43,645
Taxes on Income....................................................... (21,835) (17,718)
-------- --------
Earnings from Continuing Operations................................... 32,078 25,927
Discontinued Operations............................................... -- 9,090
-------- --------
Net Earnings................................................ $ 32,078 $ 35,017
======== ========
Primary Earnings per Share
Continuing Operations............................................... $ 0.68 $ 0.55
Discontinued Operations............................................. -- 0.20
-------- --------
Total Primary............................................... $ 0.68 $ 0.75
======== ========
Fully Diluted Earnings per Share
Continuing Operations............................................... $ 0.68 $ 0.55
Discontinued Operations............................................. -- 0.20
-------- --------
Total Fully Diluted......................................... $ 0.68 $ 0.75
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
1994 1994
----------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and marketable securities.................................... $ 128,177 $ 117,104
Accounts receivable............................................... 383,238 320,985
Inventories less progress billings................................ 426,758 481,073
Deferred tax assets............................................... 353,094 330,495
Prepaid expenses.................................................. 15,550 14,416
----------- ----------
Total Current Assets...................................... 1,306,817 1,264,073
----------- ----------
Property, Plant and Equipment -- at cost............................ 1,492,666 1,484,538
Less accumulated depreciation..................................... (903,534) (886,922)
----------- ----------
Net Property, Plant and Equipment................................... 589,132 597,616
----------- ----------
Goodwill and Other Intangibles, Net................................. 138,717 138,395
----------- ----------
Long-term Investments and Other Assets.............................. 260,582 254,212
----------- ----------
Total Assets.............................................. $ 2,295,248 $2,254,296
=========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable.................................................. $ 562,674 $ 555,895
Payrolls and related expenses..................................... 234,241 225,124
Taxes on income................................................... 140,694 120,511
Notes payable and current portion of long-term obligations........ 33,744 97,734
Customer deposits and contract liabilities........................ 235,173 227,877
----------- ----------
Total Current Liabilities................................. 1,206,526 1,227,141
----------- ----------
Long-term Obligations............................................... 107,938 105,621
----------- ----------
Postretirement Benefit Obligations other than Pensions.............. 200,630 198,795
----------- ----------
Other Long-term Liabilities......................................... 81,530 63,833
----------- ----------
Deferred Tax Liabilities............................................ 53,111 48,492
----------- ----------
Shareholders' Investment
Capital stock
Voting preferred stock -- Series B............................. 2,053 2,053
Common stock................................................... 45,966 45,914
Additional paid-in capital........................................ 274,419 273,280
Retained earnings................................................. 349,548 317,681
Cumulative currency translation adjustment........................ (26,473) (28,514)
----------- ----------
Total Shareholders' Investment............................ 645,513 610,414
----------- ----------
Total Liabilities and Shareholders' Investment............ $ 2,295,248 $2,254,296
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Cash and cash equivalents at beginning of period...................... $ 44,526 $237,440
-------- --------
Cash Was Provided by (Used for) Continuing Operations
Operating Activities
Net earnings........................................................ 32,078 25,927
Adjustments to reconcile net earnings to net cash provided by
operating activities
Depreciation and amortization.................................... 23,392 25,060
(Increase) decrease in accounts receivable....................... (26,236) 122,625
Decrease in inventory............................................ 54,695 9,624
(Increase) decrease in deferred tax assets....................... (5,319) 8,106
Increase in prepaid expenses..................................... (1,014) (1,102)
Decrease in accounts payable..................................... (47,822) (4,485)
Increase (decrease) in payrolls and related expenses............. 8,098 (6,814)
Increase (decrease) in taxes on income........................... 20,069 (39,283)
Increase in customer deposits and contract liabilities........... 27,296 78,122
Other operating activities....................................... 4,946 (19,341)
-------- --------
Cash provided by operating activities................................. 90,183 198,439
-------- --------
Investing Activities
Purchase of capital assets.......................................... (14,370) (12,181)
Decrease (increase) in other current marketable securities.......... 8,735 (18,673)
Other investing activities.......................................... 362 7,596
-------- --------
Cash used for investing activities.................................... (5,273) (23,258)
-------- --------
Financing Activities
(Decrease) increase in short-term obligations, net.................. (64,288) 3,398
Other financing activities.......................................... (814) 1,239
-------- --------
Cash (used for) provided by financing activities...................... (65,102) 4,637
-------- --------
Net cash provided by continuing operations............................ 19,808 179,818
-------- --------
Net cash used for discontinued operations............................. -- (16,927)
-------- --------
Resulting in increase in cash and cash equivalents.................... 19,808 162,891
-------- --------
Cash and cash equivalents at end of period............................ $ 64,334 $400,331
======== ========
Supplemental disclosure of cash flow information
Interest paid....................................................... $ 1,778 $ 1,544
Net income taxes (received) paid.................................... $ (850) $ 67,614
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED OCTOBER 31, 1994
1. The amounts included in this report are unaudited; however, in the opinion of
management, all adjustments necessary for a fair statement of results for the
stated periods have been included. These adjustments are of a normal
recurring nature. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. Certain
reclassifications of prior period information were made for comparative
purposes. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report to Shareholders for the
fiscal year ended July 31, 1994. The results of operations for the three
months ended October 31, 1994 are not necessarily indicative of operating
results for the entire year.
2. The components of inventory balances are summarized below:
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
1994 1994
----------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and work in process............................ $ 877,014 $ 925,415
Finished goods............................................... 39,516 40,768
--------- ---------
916,530 966,183
Less progress billings....................................... (489,772) (485,110)
--------- ---------
Net inventories.................................... $ 426,758 $ 481,073
========= =========
</TABLE>
3. Interest (expense) income is shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
-------------------------
1994 1993
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Interest expense............................................. $ (3,600) $ (14,677)
Interest income.............................................. 2,311 5,033
--------- ---------
Net interest expense............................... $ (1,289) $ (9,644)
========= =========
</TABLE>
6
<PAGE> 7
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Net earnings for the first quarter ended October 31, 1994 were $32.1
million, a 24% increase over earnings from continuing operations of $25.9
million for the same period of fiscal year 1994. Respective primary earnings per
share were $.68 and $.55. These improvements were primarily attributable to a
significant reduction in interest costs as a result of the early extinguishment
of certain subordinated debt in July 1994. Sales and operating profit for the
current quarter were $788.8 million and $68.4 million compared with $841.0
million and $69.6 million, respectively, for the same period a year ago. Results
of discontinued operations reported for the first quarter of fiscal year 1994
related to the operations of Western Atlas Inc. which was distributed in March
1994 to shareholders of Litton Common stock.
Sales and operating profit for the Advanced Electronics segment were $362.9
million and $28.3 million for the current quarter compared with $396.1 million
and $28.7 million, respectively, for the first quarter of fiscal year 1994.
Although sales declined, earlier downsizing efforts enabled this segment to
achieve a higher operating margin. The near-term outlook for these businesses
includes continued focus on operating efficiencies and opportunities for
strategic acquisitions including the previously announced transaction involving
the Teledyne Electronic Systems division of Teledyne, Inc. The Company
anticipates finalizing this transaction during the second quarter of this fiscal
year. The Marine Engineering and Production segment reported comparable results,
with sales and operating profit of $372.5 million and $35.6 million.
Corresponding amounts for the prior year's first quarter were $391.4 million and
$36.7 million, respectively. Backlog for this segment at October 31, 1994 was
$3.33 billion, not including the options for two Aegis destroyers whose
construction the Company anticipates will be funded in the U.S. Navy's fiscal
year 1995 budget.
As noted previously, net interest costs were significantly lower in the
current quarter as a result of the early extinguishment of certain subordinated
debt in July 1994. The in-substance defeasance was effected by the purchase of
U.S. Government obligations to provide sufficient cash flows to satisfy
scheduled interest payments and the eventual redemption of the debt on July 1,
1995.
Cash and marketable securities increased to $128.2 million at October 31,
1994 from $117.1 million at the end of the previous fiscal year, after a net use
of cash of approximately $64 million to paydown short-term obligations during
the quarter. Strong cash flows from operations were the primary reason for the
increase. The Company also has available credit commitments of up to $400
million for its general use.
During the current quarter, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 112, Employers' Accounting for Postemployment
Benefits, and SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities. The adoption of these standards did not have an impact on the
Company's consolidated financial statements. In October 1994, the Financial
Accounting Standards Board issued SFAS No. 119, Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments, which requires
disclosures concerning amounts, nature, and terms of such financial instruments.
The Company will include the required disclosures, to the extent applicable, in
its fiscal year-end 1995 reporting.
7
<PAGE> 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11: Statement of Computation of Earnings per Share included herein
on page 9.
Exhibit 27: Financial Data Schedule included herein.
(b) Reports on Form 8-K: There were no reports on Form 8-K filed for the quarter
ended October 31, 1994.
8
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT 11
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
PRIMARY EARNINGS PER SHARE AND FULLY DILUTED EARNINGS PER SHARE
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
OCTOBER 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings available for common shares and common stock equivalent
shares deemed to have a dilutive effect:
Earnings from continuing operations.............................. $ 32,078 $ 25,927
Provision for cash dividends on preferred stock (Series B)........ (205) (205)
---------- ----------
Net earnings from continuing operations............................. 31,873 25,722
Discontinued operations............................................. -- 9,090
---------- ----------
Net earnings available for common shares and common stock equivalent
shares deemed to have a dilutive effect............................ $ 31,873 $ 34,812
========== ==========
Primary earnings per share:
Continuing operations............................................. $ 0.68 $ 0.55
Discontinued operations........................................... -- 0.20
---------- ----------
Total Primary............................................. $ 0.68 $ 0.75
========== ==========
FULLY DILUTED EARNINGS PER SHARE
Net earnings available for common shares and common stock equivalent
shares deemed to have a dilutive effect............................ $ 31,873 $ 34,812
========== ==========
Fully diluted earnings per share:
Continuing operations............................................. $ 0.68 $ 0.55
Discontinued operations........................................... -- 0.20
---------- ----------
Total Fully Diluted....................................... $ 0.68 $ 0.75
========== ==========
Shares used in primary earnings per share computation
Weighted average common shares outstanding (net of treasury
shares).......................................................... 45,946,946 45,554,289
Common stock equivalents.......................................... 1,174,237 1,059,551
---------- ----------
Total common shares and common stock equivalent shares deemed to
have a dilutive effect........................................... 47,121,183 46,613,840
========== ==========
Shares used in fully diluted earnings per share computation
Total common shares and common stock equivalent shares deemed to
have a dilutive effect........................................... 47,121,183 46,613,840
Additional potentially dilutive securities (equivalent in common
stock):
Stock options.................................................. -- 27,195
---------- ----------
Total..................................................... 47,121,183 46,641,035
========== ==========
</TABLE>
9
<PAGE> 10
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.
LITTON INDUSTRIES, INC.
(Registrant)
By /s/ CAROL A. WIESNER
------------------------------------
Carol A. Wiesner
Vice President and Controller
(Chief Accounting Officer)
December 15, 1994
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT OCTOBER 31, 1994 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 1994 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> OCT-31-1994
<CASH> 64,334
<SECURITIES> 63,843
<RECEIVABLES> 383,238
<ALLOWANCES> 0
<INVENTORY> 426,758
<CURRENT-ASSETS> 1,306,817
<PP&E> 1,492,666
<DEPRECIATION> 903,534
<TOTAL-ASSETS> 2,295,248
<CURRENT-LIABILITIES> 1,206,526
<BONDS> 107,938
<COMMON> 45,966
0
2,053
<OTHER-SE> 597,494
<TOTAL-LIABILITY-AND-EQUITY> 2,295,248
<SALES> 788,778
<TOTAL-REVENUES> 788,778
<CGS> 631,323
<TOTAL-COSTS> 710,184
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,289
<INCOME-PRETAX> 53,913
<INCOME-TAX> 21,835
<INCOME-CONTINUING> 32,078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,078
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.68
</TABLE>
