<PAGE> 1
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 January 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)
<TABLE>
<S> <C>
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)
</TABLE>
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 February 28, 1994 there were 45,724,900 shares of Common Stock outstanding.
Page 1 of 23
Exhibit Index appears on Page 18
<PAGE> 2
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX
REPORT ON FORM 10-Q
FOR QUARTER ENDED JANUARY 31, 1994
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<CAPTION>
Page
Number
- - - -
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
- - - -
Consolidated Statements of Operations
Six months ended January 31, 1994 and 1993 3
Consolidated Statements of Operations
Three months ended January 31, 1994 and 1993 5
Consolidated Balance Sheets
January 31, 1994 and July 31, 1993 6
Consolidated Statements of Cash Flows
Six months ended January 31, 1994 and 1993 8
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of
- - - - Financial Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
- - - -
Item 4. Submission of Matters to a Vote of Security Holders 17
- - - -
Item 6. Exhibits and Reports on Form 8-K 18
- - - -
Signature 23
</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>
Six Months Ended
January 31,
- - - - - - - - - - - - - -
1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C>
Sales and Service Revenues $1,644,977 $1,627,422
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Costs and Expenses
Cost of sales 1,322,332 1,298,645
Selling, general and administrative 172,321 172,371
Depreciation and amortization 49,277 54,158
Interest - net 18,137 31,835
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total 1,562,067 1,557,009
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Earnings from Continuing Operations before Taxes
on Income and Cumulative Effect of a Change in
Accounting Principle 82,910 70,413
Taxes on Income (33,579) (27,779)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Earnings from Continuing Operations
before Cumulative Effect of a Change
in Accounting Principle 49,331 42,634
Discontinued Operations:
Results of Western Atlas Inc. to be Distributed
to Litton Shareholders (165,614) 44,560
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Earnings (Loss) before Cumulative Effect of a Change
in Accounting Principle (116,283) 87,194
Cumulative Effect of a Change in Accounting Principle
Continuing Operations - (106,727)
Discontinued Operations:
Results of Western Atlas Inc. to be Distributed
to Litton Shareholders - (10,390)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net Loss $ (116,283) $ (29,923)
=================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE> 4
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(thousands of dollars, except per share amounts)
(continued)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
- - - - - - - - - -
1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C>
Primary Earnings (Loss) per Share
Earnings before Cumulative Effect of a
Change in Accounting Principle
Continuing Operations $ 1.07 $ 1.04
Discontinued Operations:
Results of Western Atlas Inc. to be
Distributed to Litton Shareholders (3.63) 1.10
Cumulative Effect of a Change in
Accounting Principle
Continuing Operations - (2.64)
Discontinued Operations:
Results of Western Atlas Inc. to be
Distributed to Litton Shareholders - (0.25)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net Loss Per Share $(2.56) $(0.75)
===========================================================================
Fully Diluted Earnings (Loss) per Share
Earnings before Cumulative Effect of a
Change in Accounting Principle
Continuing Operations $ 1.07 $ 1.04
Discontinued Operations:
Results of Western Atlas Inc. to be
Distributed to Litton Shareholders (3.63) 1.10
Cumulative Effect of a Change in
Accounting Principle
Continuing Operations - (2.64)
Discontinued Operations:
Results of Western Atlas Inc. to be
Distributed to Litton Shareholders - (0.25)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net Loss Per Share $(2.56) $(0.75)
===========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE> 5
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
- - - - - - - - - - -
1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C>
Sales and Service Revenues $ 803,928 $753,858
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Costs and Expenses
Cost of sales 645,442 596,327
Selling, general and administrative 86,511 84,744
Depreciation and amortization 24,217 26,748
Interest - net 8,493 15,622
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total 764,663 723,441
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Earnings from Continuing Operations before Taxes
on Income 39,265 30,417
Taxes on Income (15,861) (12,002)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Earnings from Continuing Operations 23,404 18,415
Discontinued Operations:
Results of Western Atlas Inc. to be Distributed
to Litton Shareholders (174,704) 26,019
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net Earnings (Loss) $(151,300) $ 44,434
===========================================================================
Primary Earnings (Loss) per Share
Earnings from Continuing Operations $ 0.51 $ 0.44
Discontinued Operations:
Results of Western Atlas Inc. to be
Distributed to Litton Shareholders (3.83) 0.63
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net Earnings (Loss) Per Share $(3.32) $ 1.07
===========================================================================
Fully Diluted Earnings (Loss) per Share
Earnings from Continuing Operations $ 0.51 $ 0.45
Discontinued Operations:
Results of Western Atlas Inc. to be
Distributed to Litton Shareholders (3.83) 0.55
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net Earnings (Loss) Per Share $(3.32) $ 1.00
===========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE> 6
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
<TABLE>
<CAPTION>
January 31, July 31,
1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C>
ASSETS
Current Assets
Cash and marketable securities $ 257,430 $ 353,737
Accounts receivable 353,650 470,970
Inventories less progress billings 489,694 509,078
Prepaid taxes on income and other expenses 332,767 326,756
Receivable from Western Atlas Inc. 567,710 -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total Current Assets 2,001,251 1,660,541
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Property, Plant and Equipment - at cost 1,502,251 1,557,386
Less accumulated depreciation (897,415) (919,348)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net Property, Plant and Equipment 604,836 638,038
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Goodwill and Other Intangibles, Net 136,094 137,193
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Long-term Investments and Other Assets (Includes
$100 million due from Western Atlas Inc.
at July 31, 1993) 262,360 313,298
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net Assets of Western Atlas Inc. to be
Distributed to Litton Shareholders 946,089 1,085,353
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total Assets $3,950,630 $3,834,423
=================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE> 7
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
(continued)
<TABLE>
<CAPTION>
January 31, July 31,
1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable $ 540,966 $ 546,349
Payrolls and related expenses 232,248 263,801
Taxes on income 116,205 152,029
Notes payable and current portion of
long-term obligations 304,901 65,721
Customer deposits and contract liabilities 266,358 197,335
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total Current Liabilities 1,460,678 1,225,235
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Long-term Obligations 99,442 106,474
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Postretirement Benefit Obligations other
than Pensions 187,182 183,032
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Deferred Taxes on Income and Other Deferred Items 214,709 220,159
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Subordinated Debt 435,805 435,805
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Shareholders' Investment
Capital stock
Voting preferred stock - Series B 2,053 2,053
Common stock 45,718 45,520
Additional paid-in capital 714,506 706,191
Retained earnings 816,035 934,605
Cumulative currency translation adjustment (25,498) (24,651)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total Shareholders' Investment 1,552,814 1,663,718
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total Liabilities and Shareholders' Investment $3,950,630 $3,834,423
=================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-7-
<PAGE> 8
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
- - - - - - - - -
1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C>
Cash and cash equivalents at beginning of period $ 237,440 $ 169,972
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Cash Was Provided by (Used for)
Operating Activities
Continuing Operations
Net earnings (loss) 49,331 (64,093)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities
Depreciation and amortization 49,277 54,158
Deferred income tax credits (19,665) (73,265)
Cumulative effect of a change in
accounting principle - 106,727
Decrease in accounts receivable 117,524 64,953
Decrease in inventory 7,297 48,382
(Increase) decrease in prepaid taxes on income
and other expenses (5,937) 11,942
Decrease in accounts payable (64,565) (43,735)
Increase (decrease) in payrolls and related
expenses 32,092 (21,252)
Decrease in taxes on income (39,084) (49,738)
Increase (decrease) in customer deposits and
contract liabilities 69,023 (16,763)
Other operating activities (18,662) (1,310)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total from continuing operations 176,631 16,006
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net operating activities of discontinued operations (933) 144,955
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Cash provided by operating activities 175,698 160,961
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
See accompanying notes to consolidated financial statements.
-8-
<PAGE> 9
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
(continued)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
- - - - - - - - -
1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C>
Investing Activities
Continuing Operations
Purchase of capital assets (31,540) (37,937)
Proceeds from sale of property, plant
and equipment 10,113 3,899
(Increase) decrease in other current
marketable securities (7,492) 12,393
Other investing activities 22,555 6,610
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total from continuing operations (6,364) (15,035)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net investing activities of discontinued operations (571,988) (55,374)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Cash used for investing activities (578,352) (70,409)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Financing Activities
Continuing Operations
Receivable from Western Atlas Inc. (467,710) -
Short-term obligations, net 241,406 (102,749)
Other financing activities (1,913) (5,200)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total from continuing operations (228,217) (107,949)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net financing activities of discontinued operations 527,072 (72,521)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Cash provided by (used for) financing activities 298,855 (180,470)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Resulting in decrease in cash and
cash equivalents (103,799) (89,918)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Cash and cash equivalents at end of period $ 133,641 $ 80,054
=============================================================================
Supplemental disclosure of cash flow information
Interest paid $ 31,551 $ 32,824
Income taxes paid $ 104,204 $ 150,584
</TABLE>
See accompanying notes to consolidated financial statements.
-9-
<PAGE> 10
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JANUARY 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 (also see Note 5). 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, 1993. The
results of operations for the six months ended January 31, 1994 are not
necessarily indicative of operating results for the entire year.
2. The components of inventory balances are summarized below:
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<CAPTION>
<S> <C> <C>
(thousands of dollars) January 31, 1994 July 31, 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Raw materials and work in process $ 971,051 $ 972,896
Finished goods 52,100 53,392
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
1,023,151 1,026,288
Less progress billings (533,457) (517,210)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net inventories $ 489,694 $ 509,078
===========================================================================
3. Net interest expense is composed of the following:
Six Months Ended Three Months Ended
January 31, January 31,
- - - - - - - - - - - - - - - - - -
(thousands of dollars) 1994 1993 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Interest expense $ 28,998 $39,334 $14,321 $19,633
Interest income (10,861) (7,499) (5,828) (4,011)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Interest - net $ 18,137 $31,835 $ 8,493 $15,622
===========================================================================
</TABLE>
-10-
<PAGE> 11
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JANUARY 31, 1994
(continued)
4. In the fourth quarter of fiscal year 1993, the Company adopted, effective
as of the beginning of the fiscal year, the provisions of Statement of
Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions. The Company elected immediate
recognition of the transition liability for such benefits and the resultant
cumulative effect of a change in accounting principle amounted to $106.7
million, net of tax. Financial information for the six months of fiscal
year 1993 has been restated for the cumulative effect of a change in
accounting principle.
5. The consolidated financial statements of Litton Industries, Inc. and
related notes thereto have been restated to present the businesses to be
distributed, the operations of Western Atlas Inc. ("WAI"), as discontinued
operations (also see Note 6). Six million dollars of the Company's
corporate interest cost have been attributed to WAI and, therefore,
reclassified to discontinued operations in the Company's Consolidated
Statements of Operations for each of the six months ended
January 31, 1994 and 1993.
Results of WAI for the second quarter of fiscal year 1994 included special
charges of $222.2 million, pre-tax, or $163 million, net of tax.
Approximately $126 million of these charges represents the write-off of
intangible assets of the Core Laboratories Division ("Core") of Western
Atlas International, Inc. ("WAII"). These charges were recorded to reflect
the net realizable value of Core in connection with WAI's decision to sell
Core and to provide for obsolescence of lower technology vessels, equipment
and tools and the consolidation of facilities. Results for the second
quarter of fiscal year 1994 also included transitional costs of
implementing new technologies in the oilfield services operations and, to a
lesser extent, introductory costs of new products and services in the
industrial automation systems operations.
Also in the second quarter of fiscal year 1994, WAI purchased from
Dresser Industries, Inc. ("Dresser") its 29.5% minority interest in WAII
for $358 million in cash and four subordinated notes of $50 million each
which mature, respectively, in each of the four years commencing in 1998.
The notes bear interest at 7 1/2%, payable semiannually. The purchase
price included goodwill of $278 million, which will be amortized over a
period of forty years. Additionally, WAI purchased the business and
substantially all of the assets of Halliburton Company's geophysical
services business for an estimated purchase price of $190 million, of which
$100 million was paid in cash and the remainder in notes bearing interest
at 5.65%, payable semiannually, maturing over periods of three and one-half
to four years following the closing date of the transaction. The cash used
to effect these transactions was advanced by Litton using existing cash and
certain short-term borrowings of approximately $250 million. Such funds
will be reimbursed to the Company upon distribution of Western Atlas Inc.
Common stock to Litton shareholders, along with an additional $100 million
for certain other intercompany indebtedness. The Company will use a
portion of these funds to repay any outstanding portion of the short-term
borrowings of approximately $250 million. Total receivable from WAI
at January 31, 1994 amounted to $567.7 million.
-11-
<PAGE> 12
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JANUARY 31, 1994
(continued)
6. On March 4, 1994, subsequent to the date of this report, the Company's
Board of Directors declared a dividend in the form of a distribution of
100 percent of the Common stock of Western Atlas Inc. to holders of Litton
Common stock, payable on March 17, 1994 (the Distribution date).
Shareholders of record as of March 14, 1994 will receive one share of
Western Atlas Inc. Common stock for each share of Litton Common stock
held. This transaction will be reported by Litton as a tax-free dividend
for tax reporting purposes.
-12-
<PAGE> 13
PART I. FINANCIAL INFORMATION
(continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
On March 4, 1994, subsequent to the date of this report, the Company's
Board of Directors declared a dividend in the form of a distribution of 100
percent of Western Atlas Inc. Common stock to holders of Litton Common stock,
payable on March 17, 1994 (see Note 6 of Item 1 of this Form 10-Q). The
Western Atlas Common stock is to be distributed on the basis of one share of
Western Atlas Common stock for each share of Litton Common stock held on the
Record Date of March 14, 1994. In the Company's consolidated financial
statements, the operations of WAI have been reported as discontinued
operations. Accordingly, the accounts of WAI have been reclassified to one
line in the Consolidated Statements of Operations and included in earnings
(loss) of the Company as earnings (loss) from discontinued operations.
Results of Continuing Operations:
Continuing operations are composed of the defense/electronics and marine
operations and the interconnect product businesses. The Company reported
earnings of $23.4 million and $49.3 million for the second quarter and six
months ended January 31, 1994, respectively. The comparable amounts for fiscal
year 1993 were $18.4 million and $42.6 million, respectively, exclusive of the
cumulative effect of a change in accounting principle. The improvement in the
current year periods was primarily attributable to the significant reduction in
interest expense pursuant to the conversion of substantially all of the
Company's zero coupon convertible subordinated notes into Litton Common stock,
following the call of the notes for redemption in the previous year's fourth
quarter. Sales and operating profit for the second quarter of the current
fiscal year were $803.9 million and $64 million, respectively, compared with
$753.9 million and $62.4 million, respectively, for the second quarter of
fiscal year 1993. For the six month period, sales and operating profit were
comparable with those of the previous fiscal year.
The Marine Engineering and Production segment reported sales and operating
profit of $315 million and $29.4 million, respectively, for the second
quarter of the current year, compared with $273.7 million and $26.3
million, respectively, for second quarter of fiscal year 1993. For the six
months ended January 31, 1994, sales and operating profit were $706.4 million
and $66.1 million, respectively, compared with $645.6 million and $61 million,
respectively, for the same period of fiscal year 1993. These increases were
due mainly to a higher level of activity on certain long-term contracts.
Backlog for this segment amounted to $4.1 billion at January 31, 1994. The
Advanced Electronics segment reported sales and operating profit of $439.7
million and $31.4 million for the second quarter of fiscal year 1994, compared
with $421.4 million and $30.8 million, respectively, for the previous year's
second quarter. Sales and operating profit for the six months of the current
fiscal year were $835.8 million and $60.2 million, compared with $860.9 million
and $63.6 million, respectively, for the six months of fiscal year 1993.
Although pressures on defense spending are continuing, this segment experienced
a slight improvement in sales and operating profit in the second quarter
-13-
<PAGE> 14
PART I. FINANCIAL INFORMATION
(continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
compared with prior year's second quarter. Backlog for this segment at January
31, 1994 of $1.8 billion was substantially comparable with that at fiscal year
end 1993 of $1.9 billion.
Net interest was significantly lower in the current year periods due primarily
to a decrease in interest expense. As discussed above, the June 28, 1993 call
for redemption of the zero coupon convertible subordinated notes led to a
significant reduction in interest expense in the current year. Additionally,
interest income for the second quarter and six months of the current year was
higher due mainly to higher average invested cash balances.
In addition to cash and marketable securities of $257 million at January 31,
1994, the Company will be reimbursed, on the Distribution date, by WAI for funds
used in payment of the cash portion of $358 million of the purchase price for
the acquisition of Dresser's minority interest in WAII and in payment of the
cash portion of $100 million of the purchase price for the acquisition of the
geophysical services business of Halliburton Company (see Note 5 of Item 1 of
this Form 10-Q). The Company will also receive $100 million from WAI for
certain other intercompany indebtedness. Total receivable from WAI amounted to
$567.7 million at January 31, 1994. The short-term borrowings of approximately
$250 million obtained by the Company in connection with the above described
transactions will be fully repaid by the Distribution date. These borrowings
were obtained under credit commitments which provided for borrowings of up to
$700 million and which will terminate on the Distribution date. On February 26,
1994, subsequent to the date of this report, these borrowings were partially
repaid and the remainder replaced by a promissory note to a bank totalling
approximately $175 million, which the Company will repay on the Distribution
date. Effective on the Distribution date, the Company will have replacement
credit commitments which will provide for borrowings of up to $400 million for
general use.
Discontinued Operations:
In the second quarter ended January 31, 1994, WAI recorded special charges of
$222.2 million, pre-tax, or $163 million after tax. Approximately $126 million
of these charges represents the write-off of intangible assets of Core.
These charges were recorded to reflect the net realizable value of Core in
connection with WAI's decision to sell Core and to provide for obsolescence
of lower technology vessels, equipment and tools and the consolidation of
facilities. Results for the second quarter also included transitional costs of
implementing new technologies in the oilfield services operations and, to a
lesser extent, introductory costs of new products and services in the
industrial automation systems operations.
-14-
<PAGE> 15
PART I. FINANCIAL INFORMATION
(continued)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Also in the second quarter of fiscal year 1994, WAI purchased from Dresser
its 29.5% minority interest in WAII for $358 million in cash and four
subordinated notes of $50 million each. WAI also purchased the business and
substantially all of the assets of Halliburton Company's geophysical services
business for an estimated purchase price of $190 million, of which $100 million
was paid in cash and the remainder in notes. As previously discussed, the cash
used to effect these transactions was advanced by Litton and will be reimbursed
to Litton on the Distribution date along with an additional $100 million for
certain other intercompany indebtedness.
-15-
<PAGE> 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- - - - - - - - - - - - - - -
As previously reported in the Company's Annual Report on Form 10-K for the
fiscal year ended July 31, 1993, Litton Systems, Inc. ("LSI"), a subsidiary
of the Company, is a defendant in a civil suit pending in the United States
District Court for the Central District of California brought under the
so-called qui tam provisions of the False Claims Act, which permit an
individual to bring suit in the name of the Government and share in any
recovery received. This action was filed by James Carton, a former employee of
such subsidiary, and a nonprofit corporation calling itself "Taxpayers Against
Fraud." In March, 1989, the Government intervened in the action, assuming
principal responsibility for its prosecution. The Government has alleged
violations of the False Claims Act, payment by mistake, unjust enrichment and
fraud.
On July 23, 1992, the District Court granted plaintiff's motions for partial
summary judgement. In doing so, the Court ruled that Litton Computer
Services ("LCS"), a division of LSI, had violated its Government contracts with
respect to its cost accounting system, and its disclosure requirements to the
Government pertaining to that system at its Woodland Hills, California, data
processing center ("LCS-WH"). The Court also ruled that any claims by LSI
directly or indirectly to the Government from August 1, 1981 to July 15, 1988
containing any amounts for LCS-WH costs, for which claims have, in fact, been
increased because of the use of the then existing cost accounting system, are
"false" under the False Claims Act. In August, 1992, LSI moved the Court to
reconsider its July 23, 1992, rulings. On February 11, 1994, the Court denied
the motions for reconsideration. LSI has requested the Court to certify these
rulings for appeal and is awaiting the Court's action. A trial date has been
set for June 7, 1994.
-16-
<PAGE> 17
PART II. OTHER INFORMATION
(continued)
Item 4. Submission of Matters to a Vote of Security Holders
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Registrant's 1993 Annual Meeting of Shareholders was held December 8, 1993
in Los Angeles, California.
Proxies for the meeting were solicited on behalf of the Board of Directors of
the Company. There was no solicitation in opposition to the Board of
Directors' nominees for election of directors as listed in the Company's
definitive Proxy Statement dated October 29, 1993. All of the nominees were
elected as follows:
<TABLE>
<CAPTION>
Nominee For Withheld
- - - - - - - - - - -
<S> <C> <C>
Paul Bancroft, III 38,492,678 262,592
Wallace W. Booth 38,491,020 264,250
Alton J. Brann 38,494,797 260,473
Joseph T. Casey 38,490,004 265,266
William C. Edwards 38,481,825 273,445
Carol B. Hallett 38,468,268 287,002
Thomas B. Hayward 38,494,038 261,232
Orion L. Hoch 38,493,027 262,243
Robert H. Lentz 38,491,420 263,850
Steven B. Sample 38,492,631 262,639
C. B. Thornton, Jr. 38,493,085 262,185
</TABLE>
On the Distribution date, Paul Bancroft, III, William C. Edwards and Steven B.
Sample will resign as members of Litton's Board of Directors and will become
members of Western Atlas Inc.'s Board of Directors. Joining Litton's Board on
the Distribution date will be John M. Leonis, who will also serve as president
and chief executive officer, and Rudolph E. Lang, Jr., who will also serve as
senior vice president and chief financial officer.
In addition to electing directors, the shareholders voted to: ratify the
appointment of Deloitte & Touche as independent auditors by the following votes:
38,564,043 shares "for", 54,618 shares "against", and 136,609 shares "abstain";
approve the adoption of an amendment to the Litton Industries, Inc. 1984
Long-Term Stock Incentive Plan by the following votes: 33,377,101 shares
"for", 5,111,357 shares "against", and 266,812 shares "abstain"; and approve
the terms of certain proposed adjustments to outstanding stock options held by
employees and directors of the Company in connection with the distribution of
the stock of Western Atlas Inc. to the shareholders of Litton by the following
votes: 36,656,298 shares "for", 1,827,676 shares "against", and 271,296 shares
"abstain".
-17-
<PAGE> 18
PART II. OTHER INFORMATION
(continued)
Item 6. Exhibits and Reports on Form 8-K
- - - - - - - - - - - - - - - - - - - - - -
(a) Exhibit 11: Statement of Computation of Earnings per Share included
herein as Exhibit 11 on page 19.
(b) Reports on Form 8-K
(1) In a report filed on Form 8-K dated January 13, 1994, the Company
reported that Western Atlas International, Inc., a majority-owned
subsidiary of Western Atlas Inc., purchased the business and
substantially all of the assets of the geophysical services business
of Halliburton Company and certain of its subsidiaries. (See Note 5
of Item 1 of this Form 10-Q for further information.)
(2) In a report filed on Form 8-K dated January 14, 1994, the Company
reported that Litton Systems, Inc., a wholly-owned subsidiary of the
Company, settled all charges and claims of the Government in
connection with the "Operation Ill Wind" investigation of defense
contractor marketing practices by pleading guilty, under the legal
doctrine of respondeat superior, to certain offenses and by paying
the Government an aggregate of $3.9 million in fines, restitution
and settlement amounts.
-18-
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT 11
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
PRIMARY EARNINGS (LOSS) PER SHARE AND FULLY DILUTED EARNINGS (LOSS) PER SHARE
(thousands of dollars, except per share data)
Six Months Ended Three Months Ended
January 31, January 31,
- - - - - - - - - - - - - - - - - -
1994 1993 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE
- - - - - - - - - - - - - - - - - -
Earnings available for common shares and common stock
equivalent shares deemed to have a dilutive effect:
Earnings from continuing operations $ 49,331 $ 42,634 $ 23,404 $18,415
Provision for cash dividends on preferred stock (Series B) (410) (410) (205) (205)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net earnings from continuing operations 48,921 42,224 23,199 18,210
Discontinued operations:
Results of Western Atlas Inc. to be Distributed
to Litton Shareholders (165,614) 44,560 (174,704) 26,019
Cumulative effect of a change in accounting principle:
Continuing operations - (106,727) - -
Discontinued operations:
Results of Western Atlas Inc. to be Distributed
to Litton Shareholders - (10,390) - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Net earnings (loss) available for common shares and common stock
equivalent shares deemed to have a dilutive effect $(116,693) $ (30,333) $(151,505) $44,229
=================================================================================================================================
</TABLE>
-19-
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT 11
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
PRIMARY EARNINGS (LOSS) PER SHARE AND FULLY DILUTED EARNINGS (LOSS) PER SHARE
(thousands of dollars, except per share data)
(continued)
Six Months Ended Three Months Ended
January 31, January 31,
- - - - - - - - - - - - - - - - - -
1994 1993 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Primary earnings (loss) per share before cumulative
effect of a change in accounting principle:
Continuing operations $ 1.07 $ 1.04 $ 0.51 $0.44
Discontinued operations:
Results of Western Atlas Inc. to be
Distributed to Litton Shareholders (3.63) 1.10 (3.83) 0.63
Cumulative effect of a change in accounting principle:
Continuing operations - (2.64) - -
Discontinued operations:
Results of Western Atlas Inc. to be
Distributed to Litton Shareholders - (0.25) - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total Primary $(2.56) $(0.75) $(3.32) $1.07
===================================================================================================================================
</TABLE>
-20-
<PAGE> 21
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT 11
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
PRIMARY EARNINGS (LOSS) PER SHARE AND FULLY DILUTED EARNINGS (LOSS) PER SHARE
(thousands of dollars, except per share data)
(continued)
Six Months Ended Three Months Ended
January 31, January 31,
- - - - - - - - - - - - - - - - - - - - -
1994 1993 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C> <C>
FULLY DILUTED EARNINGS (LOSS) PER SHARE
- - - - - - - - - - - - - - - - - - - - -
Net earnings (loss) available for common shares and common stock
equivalent shares deemed to have a dilutive effect $(116,693) $(30,333) $(151,505) $44,229
Add: Interest on zero coupon convertible subordinated notes,
net of applicable income taxes - - - 3,387
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total $(116,693) $(30,333) $(151,505) $47,616
===============================================================================================================================
Fully diluted earnings (loss) per share:
Continuing operations $ 1.07 $ 1.04 $ 0.51 $0.45
Discontinued operations:
Results of Western Atlas Inc. to be Distributed
to Litton Shareholders (3.63) 1.10 (3.83) 0.55
Cumulative effect of a change in accounting principle:
Continuing operations - (2.64) - -
Discontinued operations:
Results of Western Atlas Inc. to be Distributed
to Litton Shareholders - (0.25) - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total Fully Diluted $(2.56) $(0.75) $(3.32) $1.00
===============================================================================================================================
</TABLE>
-21-
<PAGE> 22
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT 11
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
PRIMARY EARNINGS (LOSS) PER SHARE AND FULLY DILUTED EARNINGS (LOSS) PER SHARE
(thousands of dollars, except per share data)
(continued)
Six Months Ended Three Months Ended
January 31, January 31,
- - - - - - - - - - - - - - - - - - - - - - -
1994 1993 1994 1993
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<S> <C> <C> <C> <C>
Shares used in primary earnings (loss) per share computation
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Weighted average common shares outstanding
(net of treasury shares) 45,611,760 40,490,750 45,665,300 40,520,906
Common stock equivalents - - - 937,059
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total common shares and common stock equivalent shares
deemed to have a dilutive effect 45,611,760 40,490,750 45,665,300 41,457,965
=======================================================================================================================
Shares used in fully diluted earnings (loss) per share computation
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total common shares and common stock equivalent shares
deemed to have a dilutive effect 45,611,760 40,490,750 45,665,300 41,457,965
Additional potentially dilutive securities
(equivalent in common stock):
Zero coupon convertible subordinated notes - - - 6,126,000
Stock options - - - 66,493
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Total 45,611,760 40,490,750 45,665,300 47,650,458
=======================================================================================================================
</TABLE>
-22-
<PAGE> 23
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/ Rudolph E. Lang, Jr.
- - - - - - - - - - - - -
Rudolph E. Lang, Jr.
Senior Vice President and
Controller (Chief Accounting
Officer)
March 16, 1994
-23-
