<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1995
================================================================================
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, 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 November 30, 1995 there were 46,242,929 shares of Common Stock
outstanding.
Page 1 of 9
Exhibit Index appears on Page 7.
================================================================================
<PAGE> 2
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX
REPORT ON FORM 10-Q
FOR QUARTER ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
Three months ended October 31, 1995 and 1994............................ 3
Consolidated Balance Sheets
October 31, 1995 and July 31, 1995...................................... 4
Consolidated Statements of Cash Flows
Three months ended October 31, 1995 and 1994............................ 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.......................................... 7
Signature............................................................................. 9
</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,
----------------------
1995 1994
-------- --------
<S> <C> <C>
Sales and Service Revenues............................................ $836,197 $788,778
-------- --------
Costs and Expenses
Cost of sales....................................................... 662,597 631,323
Selling, general and administrative................................. 87,315 78,861
Depreciation and amortization....................................... 24,122 23,392
Interest -- net..................................................... 522 1,289
-------- --------
Total....................................................... 774,556 734,865
-------- --------
Earnings before Taxes on Income....................................... 61,641 53,913
Taxes on Income....................................................... (24,963) (21,835)
-------- --------
Net Earnings................................................ $ 36,678 $ 32,078
======== ========
Primary Earnings per Share............................................ $ 0.77 $ 0.68
======== ========
</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,
1995 1995
---------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and marketable securities................................... $ 211,913 $ 110,696
Accounts receivable, net......................................... 371,553 420,937
Inventories less progress billings............................... 522,821 552,195
Deferred tax assets.............................................. 374,639 362,819
Prepaid expenses................................................. 21,765 18,609
---------- ----------
Total Current Assets..................................... 1,502,691 1,465,256
---------- ----------
Property, Plant and Equipment -- at cost........................... 1,537,514 1,546,264
Less accumulated depreciation.................................... (926,637) (924,425)
---------- ----------
Property, Plant and Equipment, Net................................. 610,877 621,839
---------- ----------
Goodwill and Other Intangibles, Net................................ 216,099 218,283
---------- ----------
Other Assets and Long-term Investments............................. 263,433 254,244
---------- ----------
Total Assets............................................. $2,593,100 $2,559,622
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable................................................. $ 666,349 $ 702,897
Payrolls and related expenses.................................... 256,910 238,999
Taxes on income.................................................. 125,613 117,947
Notes payable and current portion of long-term obligations....... 22,649 25,106
Other current liabilities........................................ 236,448 250,174
---------- ----------
Total Current Liabilities................................ 1,307,969 1,335,123
---------- ----------
Long-term Obligations.............................................. 103,619 103,631
---------- ----------
Postretirement Benefit Obligations Other than Pensions............. 205,887 204,883
---------- ----------
Deferred Tax Liabilities........................................... 60,816 51,836
---------- ----------
Other Long-term Liabilities........................................ 120,558 106,006
---------- ----------
Shareholders' Investment
Capital stock
Voting preferred stock -- Series B............................ 2,053 2,053
Common stock.................................................. 46,240 46,182
Additional paid-in capital....................................... 285,743 284,399
Retained earnings................................................ 488,331 451,862
Cumulative currency translation adjustment....................... (28,116) (26,353)
---------- ----------
Total Shareholders' Investment........................... 794,251 758,143
---------- ----------
Total Liabilities and Shareholders' Investment........... $2,593,100 $2,559,622
========== ==========
</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,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Cash and cash equivalents at beginning of period....................... $ 60,229 $ 44,526
-------- --------
Cash was provided by (used for)
Operating Activities
Net earnings......................................................... 36,678 32,078
Adjustments to reconcile net earnings to net cash provided by
operating activities
Depreciation and amortization..................................... 24,122 23,392
Deferred income tax charge (benefit).............................. 10,777 (700)
Decrease (increase) in accounts receivable........................ 49,565 (26,236)
Decrease in inventory............................................. 29,479 54,695
Increase in prepaid expenses...................................... (3,113) (1,014)
Decrease in accounts payable...................................... (39,203) (47,822)
Increase in payrolls and related expenses......................... 18,600 8,098
Increase in taxes on income....................................... 5,768 20,069
(Decrease) increase in other current liabilities.................. (13,726) 27,296
Other operating activities........................................ (7,036) 327
-------- --------
Cash provided by operating activities.................................. 111,911 90,183
-------- --------
Investing Activities
Purchase of capital assets........................................... (12,785) (14,370)
Decrease in other current marketable securities...................... 10,073 8,735
Other investing activities........................................... 3,092 362
-------- --------
Cash provided by (used for) investing activities....................... 380 (5,273)
-------- --------
Financing Activities
Decrease in short-term obligations, net.............................. (2,235) (64,288)
Other financing activities........................................... 1,234 (814)
-------- --------
Cash used for financing activities..................................... (1,001) (65,102)
-------- --------
Resulting in increase in cash and cash equivalents..................... 111,290 19,808
-------- --------
Cash and cash equivalents at end of period............................. $171,519 $ 64,334
======== ========
Supplemental disclosure of cash flow information
Interest paid........................................................ $ 1,074 $ 1,778
Net income taxes paid (received)..................................... $ 7,580 $ (850)
Reconciliation to Consolidated Balance Sheet at October 31, 1995:
Cash and cash equivalents.......................................... $171,519
Marketable securities.............................................. 40,394
--------
Total cash and marketable securities......................... $211,913
========
</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, 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 interim 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, 1995. The results of operations for the three months ended
October 31, 1995 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,
1995 1995
----------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and work in process........................... $ 913,844 $ 982,830
Finished goods.............................................. 38,199 44,565
---------- ----------
952,043 1,027,395
Less progress billings...................................... (429,222) (475,200)
---------- ----------
Net inventories................................... $ 522,821 $ 552,195
========== ==========
</TABLE>
3. Interest (expense) income is shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
-------------------
1995 1994
------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Interest expense................................................. $(3,844) $(3,600)
Interest income.................................................. 3,322 2,311
------- -------
Net interest expense................................... $ (522) $(1,289)
======= =======
</TABLE>
4. On December 13, 1995, the Company signed a definitive purchase agreement to
acquire all of the issued and outstanding shares of capital stock of PRC Inc.
(PRC), a subsidiary of The Black & Decker Corporation, for approximately $425
million in cash. PRC, with estimated annual revenues of over $700 million, is
a diversified information technology company involved in systems management
and integration. PRC designs, develops, integrates and supports
computer-based information systems and is also involved in the re-engineering
of business processes. The U.S. Government is a significant customer of PRC.
This acquisition will complement and expand the base of the Company's
existing command, control and communications business. The Company expects to
add up to $400 million in debt as a result of this transaction which is
anticipated to close in January 1996.
6
<PAGE> 7
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Sales and operating profit amounted to $836.2 million and $74.1 million,
respectively, for the first quarter of the current fiscal year, compared with
$788.8 million and $68.4 million, respectively, for the prior year's first
quarter. Net earnings rose 14 percent to $36.7 million, compared with $32.1
million for the prior year period.
The sales increase was primarily attributable to the Advanced Electronics
segment which reported sales of $400.7 million in the current period, compared
with $362.9 million for the prior year period. This segment benefited from the
acquisitions made during fiscal year 1995. The higher sales, along with the
effects of previous downsizing efforts, contributed to improved operating profit
for the segment. Backlog for this segment rose to $1.82 billion at October 31,
1995 from $1.75 billion at July 31, 1995. The Marine Engineering
and Production segment achieved comparable sales, while operating margin
increased slightly. Current
construction activities include six Aegis guided missile destroyers and two
multipurpose amphibious assault ships. Marine Engineering and Production backlog
was $2.97 billion at the end of the current quarter compared with $3.31 billion
at July 31, 1995. The Interconnect Products segment also contributed with
improved sales and operating profit as a result of strong demand for its
electronics-related products.
The Company completed the quarter with $211.9 million in cash and
marketable securities, compared with $110.7 million at July 31, 1995. Management
believes that cash flow from operations, along with available borrowing
capacity, will be sufficient to meet operating requirements.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation". This Statement establishes financial accounting and reporting
standards for stock-based employee compensation plans using a fair value based
method. However, SFAS 123 allows an entity to continue to measure compensation
cost using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock
Issued to Employees". The Company anticipates continuing to measure compensation
cost in accordance with the provisions of APB 25 and will make the pro forma
disclosures required by SFAS 123 in its financial statements for fiscal year
1997.
On December 13, 1995, the Company signed a definitive purchase agreement to
acquire all of the issued and outstanding shares of capital stock of PRC Inc., a
subsidiary of The Black & Decker Corporation, for approximately $425 million in
cash. The Company expects to add up to $400 million in debt as a result of this
acquisition, which will be accounted for by the purchase method of accounting.
See Note 4 of Item 1 for further discussion.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
Exhibit 11: Statement of Computation of Earnings per Share included herein on page 8.
Exhibit 27: Financial Data Schedule.
Exhibit 99: Press release dated December 13, 1995 announcing the Company's acquisition
of PRC Inc.
</TABLE>
(b) Reports on Form 8-K: There were no reports on Form 8-K filed during the
first quarter ended October 31, 1995.
7
<PAGE> 8
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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
-----------------------
1995 1994
-------- --------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings available for common shares and common stock equivalent
shares deemed to have a dilutive effect:
Earnings.......................................................... $36,678 $32,078
Provision for cash dividends on preferred stock (Series B)........ (205) (205)
------- -------
Net earnings available for common shares and common stock equivalent
shares deemed to have a dilutive effect............................ $36,473 $31,873
======= =======
Primary earnings per share.......................................... $ 0.77 $ 0.68
======= =======
FULLY DILUTED EARNINGS PER SHARE
Net earnings available for common shares and common stock equivalent
shares deemed to have a dilutive effect........................... $36,473 $31,873
======= =======
Fully diluted earnings per share.................................... $ 0.77 $ 0.68
======= =======
</TABLE>
<TABLE>
<S> <C> <C>
Shares used in primary earnings per share computation
Weighted average common shares outstanding (net of treasury
shares)......................................................... 46,208,504 45,946,946
Common stock equivalents.......................................... 1,208,303 1,174,237
---------- ----------
Total common shares and common stock equivalent shares deemed to
have a dilutive effect.......................................... 47,416,807 47,121,183
========== ==========
Shares used in fully diluted earnings per share computation
Total common shares and common stock equivalent shares deemed to
have a dilutive effect......................................... 47,416,807 47,121,183
========== ==========
</TABLE>
8
<PAGE> 9
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, 1995
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT OCTOBER 31, 1995 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> OCT-31-1995
<CASH> 171,519
<SECURITIES> 40,394
<RECEIVABLES> 371,553
<ALLOWANCES> 0
<INVENTORY> 522,821
<CURRENT-ASSETS> 1,502,691
<PP&E> 1,537,514
<DEPRECIATION> 926,637
<TOTAL-ASSETS> 2,593,100
<CURRENT-LIABILITIES> 1,307,969
<BONDS> 103,619
0
2,053
<COMMON> 46,240
<OTHER-SE> 745,958
<TOTAL-LIABILITY-AND-EQUITY> 2,593,100
<SALES> 836,197
<TOTAL-REVENUES> 836,197
<CGS> 662,597
<TOTAL-COSTS> 662,597
<OTHER-EXPENSES> 24,122
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 522
<INCOME-PRETAX> 61,641
<INCOME-TAX> 24,963
<INCOME-CONTINUING> 36,678
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,678
<EPS-PRIMARY> 0.77
<EPS-DILUTED> 0.77
</TABLE>
<PAGE> 1
EXHIBIT 99
LITTON
________________________________________________________________________________
Corporate Litton Industries, Inc.
21240 Burbank Boulevard
Woodland Hills, California
91367-6675
Tel 818 598-2026
Fax 818 598-3363
NYSE Symbol: LIT
News
Release
FOR IMMEDIATE RELEASE
LITTON PLANS PURCHASE OF PRC INC.
WOODLAND HILLS, CA, December 13 -- Litton Industries, Inc. has signed a
definitive purchase agreement for Litton's purchase of PRC Inc. from The Black
& Decker Corporation for approximately $425 million in cash.
Located in McLean, Virginia, PRC is a diversified information
technology company involved in systems management and integration. PRC designs,
develops, integrates and supports computer-based information systems and
re-engineers business processes for the U.S. government, commercial customers
and state and local governments. The business has estimated 1995 sales of
approximately $720 million.
The transaction is subject to review by government regulatory agencies.
Litton Chairman and Chief Executive Officer John M. Leonis said, "The
acquisition of PRC will add significant capabilities in the area of
information technology and will particularly enhance our existing command,
control and communications (C3) business. Litton is a C3 systems integrator, an
expertise that is driven by developments in the information technology arena.
PRC is a major supplier of information products and services to growing
government markets. The combination of our businesses will enhance Litton's
ability to provide more comprehensive service to our C3 customers, while
expanding the capabilities of our other defense electronics businesses.
"This purchase will continue the execution of our strategy to grow by
acquisition," Leonis said. "In fiscal 1995 we acquired businesses with annual
revenues of $280 million. To date in fiscal 1996, including PRC, we have
announced further transactions with approximately $800 million in annual
revenues."
Litton is a leader in worldwide technology markets for advanced
electronic and defense systems, and a major designer and builder of surface
combat ships for the U.S. Navy and allied nations.
12/13/95 #### 4379
For information call: Kathleen Wailes (818) 598-2026
