<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 APRIL 30, 1995
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.)
21240 BURBANK BOULEVARD,
WOODLAND HILLS, CALIFORNIA 91367-6675
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 598-5000
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 May 31, 1995 there were 46,145,726 shares of Common Stock outstanding.
Page 1 of 11
Exhibit Index appears on Page 9
================================================================================
<PAGE> 2
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX
REPORT ON FORM 10-Q
FOR QUARTER ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
Nine months ended April 30, 1995 and 1994............................... 3
Consolidated Statements of Operations
Three months ended April 30, 1995 and 1994.............................. 4
Consolidated Balance Sheets
April 30, 1995 and July 31, 1994........................................ 5
Consolidated Statements of Cash Flows
Nine months ended April 30, 1995 and 1994............................... 6
Notes to Consolidated Financial Statements................................ 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................... 9
Item 6. Exhibits and Reports on Form 8-K.......................................... 9
Signature............................................................................. 11
</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>
NINE MONTHS ENDED
APRIL 30,
--------------------------
1995 1994
---------- ----------
<S> <C> <C>
Sales and Service Revenues......................................... $2,344,650 $2,602,111
---------- ----------
Costs and Expenses
Cost of sales.................................................... 1,850,831 2,107,078
Selling, general and administrative.............................. 258,151 260,331
Depreciation and amortization.................................... 71,828 73,891
Interest -- net.................................................. 1,967 27,057
---------- ----------
Total.................................................... 2,182,777 2,468,357
---------- ----------
Earnings from Continuing Operations before Taxes on Income......... 161,873 133,754
Taxes on Income.................................................... (65,559) (54,170)
---------- ----------
Earnings from Continuing Operations................................ 96,314 79,584
Discontinued Operations............................................ -- (173,079)
---------- ----------
Net Earnings (Loss)...................................... $ 96,314 $ (93,495)
========== ==========
Primary Earnings (Loss) per Share
Continuing Operations............................................ $ 2.03 $ 1.73
Discontinued Operations.......................................... -- (3.79)
---------- ----------
Total Primary............................................ $ 2.03 $ (2.06)
========== ==========
</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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Sales and Service Revenues............................................. $861,442 $957,134
-------- --------
Costs and Expenses
Cost of sales........................................................ 682,077 784,746
Selling, general and administrative.................................. 94,171 88,010
Depreciation and amortization........................................ 24,839 24,614
Interest -- net...................................................... 458 8,920
-------- --------
Total........................................................ 801,545 906,290
-------- --------
Earnings from Continuing Operations before Taxes on Income............. 59,897 50,844
Taxes on Income........................................................ (24,259) (20,591)
-------- --------
Earnings from Continuing Operations.................................... 35,638 30,253
Discontinued Operations................................................ -- (7,465)
-------- --------
Net Earnings................................................. $ 35,638 $ 22,788
======== ========
Primary Earnings per Share
Continuing Operations................................................ $ 0.75 $ 0.64
Discontinued Operations.............................................. -- (0.16)
-------- --------
Total Primary................................................ $ 0.75 $ 0.48
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and marketable securities.................................... $ 152,007 $ 117,104
Accounts receivable, net.......................................... 347,708 320,985
Inventories less progress billings................................ 496,569 481,073
Deferred tax assets............................................... 303,978 330,495
Prepaid expenses.................................................. 19,004 14,416
---------- ----------
Total Current Assets...................................... 1,319,266 1,264,073
---------- ----------
Property, Plant and Equipment -- at cost............................ 1,535,429 1,484,538
Less accumulated depreciation..................................... (921,958) (886,922)
---------- ----------
Property, Plant and Equipment, Net.................................. 613,471 597,616
---------- ----------
Goodwill and Other Intangibles, Net................................. 165,966 138,395
---------- ----------
Long-term Investments and Other Assets.............................. 258,227 254,212
---------- ----------
Total Assets.............................................. $2,356,930 $2,254,296
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable.................................................. $ 579,841 $ 555,895
Payrolls and related expenses..................................... 245,687 225,124
Taxes on income................................................... 103,201 120,511
Notes payable and current portion of long-term obligations........ 31,399 97,734
Customer deposits and contract liabilities........................ 231,601 227,877
---------- ----------
Total Current Liabilities................................. 1,191,729 1,227,141
---------- ----------
Long-term Obligations............................................... 101,042 105,621
---------- ----------
Postretirement Benefit Obligations Other than Pensions.............. 203,082 198,795
---------- ----------
Deferred Tax Liabilities............................................ 45,137 48,492
---------- ----------
Other Long-term Liabilities......................................... 105,978 63,833
---------- ----------
Shareholders' Investment
Capital stock
Voting preferred stock -- Series B............................. 2,053 2,053
Common stock................................................... 46,079 45,914
Additional paid-in capital........................................ 276,099 273,280
Retained earnings................................................. 413,366 317,681
Cumulative currency translation adjustment........................ (27,635) (28,514)
---------- ----------
Total Shareholders' Investment............................ 709,962 610,414
---------- ----------
Total Liabilities and Shareholders' Investment............ $2,356,930 $2,254,296
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
APRIL 30,
----------------------
1995 1994
-------- ---------
<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........................................................ 96,314 79,584
Adjustments to reconcile net earnings to net cash provided by
operating activities
Depreciation and amortization.................................... 71,828 73,891
Deferred income tax charges/(credits)............................ 569 (21,618)
Decrease in accounts receivable.................................. 34,705 136,935
(Increase) decrease in inventory................................. (6,887) 6,399
Decrease (increase) in deferred tax assets....................... 32,757 (15,553)
Increase in prepaid expenses..................................... (4,023) (2,308)
(Decrease) increase in accounts payable.......................... (29,932) 29,122
Increase (decrease) in payrolls and related expenses............. 16,172 (27,906)
Decrease in taxes on income...................................... (17,551) (17,634)
Increase in customer deposits and contract liabilities........... 40,824 32,483
Other operating activities....................................... (14,308) (23,592)
-------- ---------
Cash provided by operating activities................................. 220,468 249,803
-------- ---------
Investing Activities
Purchase of capital assets.......................................... (72,461) (45,772)
Purchase of businesses.............................................. (65,616) (2,152)
Decrease (increase) in other current marketable securities.......... 22,611 (268,221)
Proceeds from sale of business...................................... 16,385 --
Other investing activities.......................................... 10,270 29,774
-------- ---------
Cash used for investing activities.................................... (88,811) (286,371)
-------- ---------
Financing Activities
Decrease in short-term obligations, net............................. (66,945) (50,033)
Other financing activities.......................................... (7,698) 4,345
-------- ---------
Cash used for financing activities.................................... (74,643) (45,688)
-------- ---------
Net cash provided by (used for) continuing operations................. 57,014 (82,256)
-------- ---------
Net cash provided by discontinued operations.......................... -- 72,437
-------- ---------
Resulting in increase (decrease) in cash and cash equivalents......... 57,014 (9,819)
-------- ---------
Cash and cash equivalents at end of period............................ $101,540 $ 227,621
======== =========
Supplemental disclosure of cash flow information
Interest paid....................................................... $ 4,301 $ 32,840
Net income taxes paid............................................... $ 41,846 $ 124,188
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED APRIL 30, 1995
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. These condensed consolidated financial statements should 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 nine months ended April 30, 1995 are
not necessarily indicative of operating results for the entire year.
2. The components of inventory balances are summarized below:
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
1995 1994
--------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and work in process............................ $ 910,072 $ 925,415
Finished goods............................................... 39,964 40,768
--------- ---------
950,036 966,183
Less progress billings....................................... (453,467) (485,110)
--------- ---------
Net inventories.................................... $ 496,569 $ 481,073
========= =========
</TABLE>
3. Interest (expense) income is shown below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
APRIL 30, APRIL 30,
-------------------- --------------------
1995 1994 1995 1994
------- -------- ------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Interest expense.......................... $(9,088) $(45,605) $(2,864) $(16,607)
Interest income........................... 7,121 18,548 2,406 7,687
------- -------- ------- --------
Net interest expense............ $(1,967) $(27,057) $ (458) $ (8,920)
======= ======== ======= ========
</TABLE>
4. Discontinued operations for the periods ended April 30, 1994 related to the
operations of Western Atlas Inc. ("WAI"). Results included special charges
totalling $179 million, net of tax, of which $16 million was recorded in the
third quarter. These special charges were recorded to reflect the write-down
of net assets of a certain division and to provide for the obsolescence of
older technology equipment, vessels and inventory and the consolidation of
facilities. The common stock of WAI was distributed to holders of Litton
Common stock in March 1994.
7
<PAGE> 8
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Earnings from continuing operations increased to $35.6 million and $96.3
million for the third quarter and nine months ended April 30, 1995 compared with
$30.3 million and $79.6 million, respectively, for the fiscal 1994 periods.
Discontinued operations in the fiscal year 1994 periods related to the
operations of Western Atlas Inc.("WAI") which was spun off to Litton
shareholders in March 1994 (see Note 4 of Notes to Consolidated Financial
Statements in Item 1). The earnings increase in the current periods was mainly
attributable to a significant reduction in interest expense pursuant to the
early extinguishment of certain subordinated debt in July 1994 and a reduction
of corporate expenses as 1994 results included costs incurred through the
accounting date of the spinoff related to WAI. Sales and operating profit
amounted to $861.4 million and $73.2 million for the current year's third
quarter and $2.34 billion and $202.0 million for the nine months. The comparable
amounts for fiscal 1994 were $957.1 million and $73.3 million for the third
quarter and $2.60 billion and $207.0 million for the nine months.
The Advanced Electronics segment reported sales and operating profit of
$408.1 million and $31.8 million for the current year's third quarter and $1.15
billion and $89.5 million for the nine months. The comparable amounts for fiscal
1994 were $468.9 million and $33.2 million for the third quarter and $1.30
billion and $93.4 million for the nine months. Operating margins improved on
lower sales which continued to be affected by reduced defense spending and the
near-completion of a major contract. The January 1995 acquisition of the
Electronic Systems division from Teledyne, Inc., along with the June 1995
purchase (subsequent to the end of the third quarter) of the Electro-Optical
Systems operations from Imo Industries Inc., will complement the businesses in
this segment. Backlog for the segment increased from $1.70 billion at July 31,
1994 to $1.80 billion at April 30, 1995, before including any impact of the
acquisition of Electro-Optical Systems from Imo Industries Inc. Sales and
operating profit for the Marine Engineering and Production segment were $397.3
million and $37.2 million for the third quarter of the current year compared
with $421.6 million and $38.9 million for the third quarter of fiscal 1994. The
respective amounts for the nine months of fiscal 1995 were $1.03 billion and
$97.9 million compared with $1.13 billion and $105.0 million for the nine months
of fiscal 1994. The decrease in sales resulted from a lower level of activity
and winding down of certain long-term contracts. Backlog for the segment
amounted to $3.57 billion at April 30, 1995 compared with $3.69 billion at July
31, 1994.
Cash and marketable securities increased to $152.0 million at April 30,
1995 from $117.1 million at July 31, 1994, after a net paydown of approximately
$67 million in short-term obligations and the previously mentioned acquisition
of the Electronic Systems division from Teledyne, Inc. Additionally, the Company
has available credit commitments of up to $400 million for its general use.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 121 (SFAS No. 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
SFAS No. 121 requires that certain long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. The Company has not yet estimated the impact, if any, of
adopting SFAS No. 121 and has until its fiscal year 1997 to implement this
Standard.
8
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported in the Registrant's Annual Report on Form 10-K for
the fiscal year ended July 31, 1994, on August 31, 1993 a United States District
Court jury rendered a verdict in favor of Litton against Honeywell, Inc. in the
amount of $1.2 billion. The jury found that Honeywell willfully infringed a
Litton patent relating to the manufacture of ring laser gyro navigation systems
which are used in commercial aircraft. The jury also found that Honeywell
actively induced a Litton licensee to infringe Litton's patent and Honeywell
interfered with Litton's prospective economic advantage. Thereafter, in response
to certain post trial motions filed by both Honeywell and Litton, on January 9,
1995, the District Court released a Memorandum of Decision finding Litton's
patent invalid and unenforceable. As a result, the jury verdict was overturned.
On February 10, 1995 the District Court entered judgment to this effect. On
February 27, 1995 Litton filed a notice of appeal to the United States Court of
Appeals for the Federal Circuit (the "Federal Circuit"). On May 4, 1995,
Litton's opening brief was filed with the Federal Circuit asking that the
District Court's finding that Litton's patent was invalid and unenforceable be
reversed and that the jury's verdict be reinstated. Litton intends to vigorously
pursue this appeal.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11: Statement of Computation of Earnings per Share included herein
on page 10.
Exhibit 27: Financial Data Schedule.
(b) Reports on Form 8-K: There were no reports on Form 8-K filed for the quarter
ended April 30, 1995.
9
<PAGE> 10
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)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
APRIL 30, APRIL 30,
------------------------ ------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<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........ $ 96,314 $ 79,584 $ 35,638 $ 30,253
Provision for cash dividends on preferred
stock (Series B).......................... (616) (616) (206) (206)
---------- ---------- ---------- ----------
Net earnings from continuing operations...... 95,698 78,968 35,432 30,047
Discontinued operations...................... -- (173,079) -- (7,465)
---------- ---------- ---------- ----------
Net earnings (loss) available for common
shares and common stock equivalent shares
deemed to have a dilutive effect............ $ 95,698 $ (94,111) $ 35,432 $ 22,582
========== ========== ========== ==========
Primary earnings (loss) per share:
Continuing operations...................... $ 2.03 $ 1.73 $ 0.75 $ 0.64
Discontinued operations.................... -- (3.79) -- (0.16)
---------- ---------- ---------- ----------
Total Primary...................... $ 2.03 $ (2.06) $ 0.75 $ 0.48
========== ========== ========== ==========
FULLY DILUTED EARNINGS (LOSS) PER SHARE
Net earnings (loss) available for common
shares and common stock equivalent shares
deemed to have a dilutive effect............ $ 95,698 $ (94,111) $ 35,432 $ 22,582
========== ========== ========== ==========
Fully diluted earnings (loss) per share:
Continuing operations...................... $ 2.03 $ 1.73 $ 0.75 $ 0.64
Discontinued operations.................... -- (3.79) -- (0.16)
---------- ---------- ---------- ----------
Total Fully Diluted................ $ 2.03 $ (2.06) $ 0.75 $ 0.48
========== ========== ========== ==========
Shares used in primary earnings (loss) per
share computation
Weighted average common shares outstanding
(net of treasury shares).................. 45,987,894 45,667,830 46,035,736 45,776,442
Common stock equivalents................... 1,160,096 -- 1,153,312 1,031,300
---------- ---------- ---------- ----------
Total common shares and common stock
equivalent shares deemed to have a
dilutive effect........................... 47,147,990 45,667,830 47,189,048 46,807,742
========== ========== ========== ==========
Shares used in fully diluted earnings (loss)
per share computation
Total common shares and common stock
equivalent shares deemed to have a
dilutive effect........................... 47,147,990 45,667,830 47,189,048 46,807,742
Additional potentially dilutive securities
(equivalent in common stock):
Stock options............................ -- -- -- 24,506
---------- ---------- ---------- ----------
Total.............................. 47,147,990 45,667,830 47,189,048 46,832,248
========== ========== ========== ==========
</TABLE>
10
<PAGE> 11
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)
June 14, 1995
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT APRIL 30, 1995 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED APRIL 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> APR-30-1995
<CASH> 101,540
<SECURITIES> 50,467
<RECEIVABLES> 347,708
<ALLOWANCES> 0
<INVENTORY> 496,569
<CURRENT-ASSETS> 1,319,266
<PP&E> 1,535,429
<DEPRECIATION> 921,958
<TOTAL-ASSETS> 2,356,930
<CURRENT-LIABILITIES> 1,191,729
<BONDS> 101,042
0
2,053
<COMMON> 46,079
<OTHER-SE> 661,830
<TOTAL-LIABILITY-AND-EQUITY> 2,356,930
<SALES> 2,344,650
<TOTAL-REVENUES> 2,344,650
<CGS> 1,850,831
<TOTAL-COSTS> 1,850,831
<OTHER-EXPENSES> 71,828
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,967
<INCOME-PRETAX> 161,873
<INCOME-TAX> 65,559
<INCOME-CONTINUING> 96,314
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,314
<EPS-PRIMARY> 2.03
<EPS-DILUTED> 2.03
</TABLE>
