<PAGE> 1
Pursuant to Rule 424(b)(5)
Registration No. 33-44684
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 6, 1996
$400,000,000
[LOGO] LITTON INDUSTRIES, INC.
$300,000,000
7.75% DEBENTURES DUE MARCH 15, 2026
$100,000,000
6.98% DEBENTURES DUE MARCH 15, 2036
---------------------
Interest on the Debentures is payable on March 15 and September 15 of each
year, commencing September 15, 1996. The Debentures are redeemable, in whole or
in part, at the option of the Company at any time in the case of the 7.75%
Debentures Due March 15, 2026 and at any time after March 15, 2006 in the case
of the 6.98% Debentures Due March 15, 2036, in either case at a redemption price
equal to the greater of (i) 100% of the principal amount of such Debentures or
(ii) as determined by an Independent Investment Banker (as defined herein), the
sum of the present values of the remaining scheduled payments of principal and
interest thereon discounted to the date of redemption on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate (as defined herein), plus, in each case, accrued interest thereon
to the date of redemption. The registered holder of each 6.98% Debenture Due
March 15, 2036, may elect to have that Debenture, or any portion of the
principal amount thereof that is a multiple of $1,000, repaid on March 15, 2006
at 100% of the principal amount thereof, together with accrued interest to March
15, 2006. Such election, which is irrevocable when made, must be made within the
period commencing on January 15, 2006 and ending at the close of business on
February 15, 2006. No similar right is available to the holders of the 7.75%
Debentures Due March 15, 2026.
The Debentures offered hereby will be represented by global Debentures
registered in the name of the nominee of The Depository Trust Company.
Beneficial interests in the global Debentures will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as described herein, Debentures in definitive form will not
be issued. The Debentures will be issued only in registered form in
denominations of $1,000 and integral multiples thereof.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
------------------------------------------------------
<S> <C> <C> <C>
Per 7.75% Debenture Due March 15, 2026............. 99.571% 0.875% 98.696%
Total.............................................. $298,713,000 $2,625,000 $296,088,000
Per 6.98% Debenture Due March 15, 2036............. 100.000% 0.650% 99.350%
Total.............................................. $100,000,000 $ 650,000 $ 99,350,000
</TABLE>
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(1) Plus accrued interest from March 15, 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $400,000 payable by the Company.
---------------------
The Debentures offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the
Debentures will be ready for delivery in book-entry form only through the
facilities of DTC in New York, New York, on or about March 19, 1996, against
payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
---------------------
The date of this Prospectus Supplement is March 14, 1996.
<PAGE> 2
THE COMPANY
Litton Industries, Inc. (hereafter together with its consolidated
subsidiaries referred to as the "Company" or "Litton" unless the context
otherwise indicates) is mainly a high technology aerospace and defense
corporation which provides advanced electronic and defense systems and marine
engineering and production to U.S. and world markets. The Company also provides
electronic components and interconnect products to customers worldwide.
Approximately 73% of the Company's consolidated revenues for the fiscal year
ended July 31, 1995 were derived from sales to the U.S. Government.
The Company's businesses are reported in three business segments: Advanced
Electronics, Marine Engineering and Production, and Interconnect Products. The
Advanced Electronics segment is a major supplier of electronic systems and
related services to the U.S. and international military electronics markets and
also provides navigation systems and electronic components to a variety of
commercial customers. The Marine Engineering and Production segment is a leading
designer and builder of complex surface combatant ships for the U.S. Navy and
also provides modernization, overhaul and repair work. The Interconnect Products
segment is an international supplier of electronic connectors, multilayer
circuit boards and other interconnect products, primarily for the
telecommunications and computer industries.
The Company has completed or agreed to a number of acquisitions and
dispositions in the last two years. In March of 1994 the Company spun-off its
Western Atlas Inc. ("WAI") business. Since then it has acquired or agreed to
acquire businesses with combined annual revenues of approximately $1.3 billion
which include the PRC Inc. ("PRC") and Steerage Corp. ("Steerage") acquisitions
described below. All of these acquisitions complement existing businesses in the
Advanced Electronics segment, which is expected to account for an increasing
percentage of the Company's future revenues.
USE OF PROCEEDS
The net proceeds to be received by the Company from the issue and sale of
the Debentures offered hereby are estimated to be $395,038,000 and will be used
to reduce indebtedness outstanding under the Company's revolving credit
agreement. Such indebtedness was incurred to finance the acquisition of PRC
described below under "Recent Events." As of March 13, 1996, the balance owed
under the revolving credit agreement was $400,000,000. Borrowings under the
revolving credit agreement are due on or before April 18, 1996, unless extended
as provided in such agreement. Outstanding borrowings under the revolving credit
agreement currently bear interest at 5.5125%. Morgan Guaranty Trust Company of
New York, an affiliate of J.P. Morgan Securities Inc., is an agent and a lender
under the revolving credit agreement and will receive $45,000,000 of principal
repayment from the proceeds of this offering. See "Underwriting."
---------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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<PAGE> 3
RECENT EVENTS
ACQUISITION OF PRC INC.
On February 16, 1996, the Company completed the acquisition of PRC, an
indirect wholly-owned subsidiary of The Black & Decker Corporation, for a
preliminary purchase price of $425 million in cash. PRC, with revenue of more
than $700 million for the fiscal year ended December 31, 1995, is a diversified
information technology company that designs, develops, integrates and supports
computer-based information handling and processing systems and reengineers
business processes for the U.S. Government, commercial customers and state and
local governments. The net proceeds from the sale of the Debentures offered
hereby will be used to repay short term indebtedness incurred in connection with
the acquisition of PRC. See "Use of Proceeds."
PRC operates through four units: Information Technology, Systems
Integration, Information Systems and Applied Engineering. These PRC business
units provide information technology-based systems, along with consulting,
systems engineering, systems integration, technical support, operations and
maintenance and other services to the U.S. Government and other customers in the
following markets: defense, electronic commerce, criminal justice/public safety,
environment/ weather systems, health care and education.
Approximately 83% of PRC's revenues for the year ended December 31, 1995
were generated from contracts with various U.S. Government agencies, of which
55% were from contracts with the U.S. Department of Defense. PRC's current firm
unfunded backlog is approximately $1.6 billion.
ACQUISITION OF STEERAGE CORP.
On February 8, 1996, the Company entered into a definitive agreement to
acquire Steerage, which conducts operations through its wholly-owned subsidiary
Sperry Marine Inc., from a private investment partnership for approximately 2.2
million shares of Litton Common Stock, plus the assumption of approximately
$57.5 million of Steerage debt and approximately $7 million of Steerage
preferred stock. Promptly following consummation of the transaction, the Company
expects to repay such debt and retire such preferred stock. Steerage, with
revenues of approximately $145 million for the fiscal year ended December 31,
1995, is a provider of advanced electronic navigation and guidance systems to
commercial and military customers. The consummation of the transaction is
subject to governmental review.
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<PAGE> 4
CAPITALIZATION
The following table sets forth as of January 31, 1996 the historical
capitalization of the Company, the pro forma capitalization of the Company
reflecting the acquisition of PRC and Steerage (without reflecting the issuance
of the Debentures), and the pro forma capitalization as adjusted to reflect the
issuance of the Debentures offered hereby and the application of the net
proceeds therefrom after deducting estimated offering expenses and an assumed
underwriting discount. See "Use of Proceeds" above and "Unaudited Pro Forma
Combined Financial Statements" below.
<TABLE>
<CAPTION>
JANUARY 31, 1996
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
Short-Term Obligations:
Notes Payable to Banks.................................... $ 18 $ 18 $ 18
Current Portion of Long-Term Obligations.................. 11 11 11
---- ------ ------
Short-Term Obligations............................ $ 29 $ 29 $ 29
==== ====== ======
Long-Term Obligations:
Capital Lease Commitments................................. $ 9 $ 9 $ 9
Industrial Development Revenue Bonds...................... 21 21 21
Pension Accruals.......................................... 55 57 57
Other..................................................... 8 9 9
Borrowings Under Revolving Credit Agreement............... -- 400 --(1)
Debentures Due 2026....................................... -- -- 300
Debentures Due 2036....................................... -- -- 100
---- ------ ------
Long-Term Obligations............................. 93 496 496
---- ------ ------
Shareholders' Investment:
Voting Preferred Stock -- Series B........................ 2 2 2
Common Stock -- 120 million authorized at $1.00 par value;
46,317,874 shares outstanding at January 31, 1996...... 46 49 49
Additional Paid-in Capital................................ 288 291 291
Retained Earnings......................................... 521 523 523
Cumulative Currency Translation Adjustment................ (29) (28) (28)
---- ------ ------
Total Shareholders' Investment.................... 828 837 837
---- ------ ------
Total Capitalization......................... $921 $ 1,333 $ 1,333
==== ====== ======
</TABLE>
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(1) Borrowings under the revolving credit agreement in excess of the net
proceeds from the issue and sale of the Debentures are expected to be repaid
with internally generated cash.
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<PAGE> 5
SELECTED HISTORICAL FINANCIAL DATA
The Selected Historical Financial Data below should be read in conjunction
with the more detailed information appearing in the Company's Annual Report on
Form 10-K for the fiscal year ended July 31, 1995 and the other documents
available as described under "Incorporation by Reference" in the accompanying
Prospectus. The Selected Historical Financial Data for each of the five years
ended July 31, 1995 have been derived from audited financial statements, certain
of which are incorporated by reference herein. The Selected Historical Financial
Data for the six-month periods ended January 31, 1996 and January 31, 1995 are
derived from unaudited financial statements and, in the opinion of management,
include all adjustments (consisting only of normal recurring accruals) necessary
to present fairly the data for such periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31, YEAR ENDED JULY 31,
------------------- ------------------------------------------------------
1996 1995 1995 1994(1) 1993 1992(2) 1991(2)(3)
-------- -------- -------- -------- -------- -------- ----------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales and Service Revenues....................... $1,575.6 $1,483.2 $3,319.7 $3,446.1 $3,474.2 $3,710.8 $3,526.2
Segment Operating Profit......................... 142.1 128.8 280.5 181.4 264.1 289.9 178.9
Earnings before Interest Expense and Taxes on
Income......................................... 123.1 108.2 239.9 149.4 227.7 275.8 207.2
Earnings (Loss) before Extraordinary Item and
Cumulative Effect of a Change in Accounting
Principle
Continuing Operations.......................... $ 69.4 $ 60.7 $ 135.0 $ 51.3 $ 87.3 $ 87.3 $ 6.0
Discontinued Operations........................ -- -- -- (173.1) 95.0 87.1 57.5
Extraordinary Loss............................... -- -- -- (30.7) -- -- --
Cumulative Effect of a Change in Accounting
Principle
Continuing Operations.......................... -- -- -- -- (106.7) -- --
Discontinued Operations........................ -- -- -- -- (10.4) -- --
-------- -------- -------- -------- -------- -------- --------
Net Earnings (Loss).............................. $ 69.4 $ 60.7 $ 135.0 $ (152.5) $ 65.2 $ 174.4 $ 63.5
======== ======== ======== ======== ======== ======== ========
Sales to the U.S. Government as a Percent of
Total Sales.................................... N/A N/A 73% 73% 73% 70% 69%
FINANCIAL POSITION AT PERIOD END:
Total Assets..................................... $2,601.3 $2,261.7 $2,559.6 $2,254.3 $2,749.1 $2,953.1 $3,207.1
Shareholders' Investment......................... 827.5 673.2 758.1 610.4 578.4 322.3 111.3
Long-Term Obligations............................ 93.3 97.8 103.6 105.6 106.5 131.2 126.6
Convertible Subordinated Notes and Other
Subordinated Debentures........................ -- -- -- -- 435.8 735.6 1,151.9
Working Capital.................................. 174.2 96.8 130.1 36.9 435.3 365.0 878.9
Current Ratio.................................... 1.13 1.09 1.10 1.03 1.36 1.25 1.70
OTHER SELECTED FINANCIAL INFORMATION:
Ratio of Earnings to Fixed Charges(4)............ 12.6x 12.0x 12.2x 2.4x 2.6x 2.0x 1.4x
Capital Expenditures............................. $ 31.4 $ 42.8 $ 98.3 $ 80.6 $ 73.6 $ 81.5 $ 90.2
Depreciation and Amortization Expense............ 49.6 47.0 95.4 98.4 107.4 113.0 120.1
Research and Development Expenditures............ 98.5 99.1 227.1 220.1 254.6 201.9 224.5
Backlog at Period End............................ 5,519.5 5,848.8 5,137.8 5,466.6 6,700.4 6,570.0 6,654.4
Number of Employees at Period End................ 28,200 28,000 29,100 29,000 32,300 34,700 36,900
</TABLE>
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(1) Results for fiscal year 1994 included the settlement of a civil suit which
resulted in a pre-tax charge of $86.0 million ($53.8 million after tax).
Results for fiscal year 1994 also included an extraordinary loss on early
extinguishment of debt of $30.7 million after tax.
(2) Amounts related to fiscal years 1992 and 1991 have been restated to reflect
the WAI business as discontinued operations as a result of a spin-off on
March 17, 1994. See "Management's Discussion and Analysis of Historical
Financial Condition and Results of Operations -- Discontinued Operations."
(3) In the fourth quarter of fiscal year 1991, the Company provided for the loss
on sale of a division, which resulted in a charge to pre-tax earnings of
$120.0 million or $100.1 million after tax.
(4) The ratio of earnings to fixed charges is computed by dividing the sum of
historical Earnings before Taxes on Income and fixed charges, as adjusted,
by fixed charges. Fixed charges represent interest (including capitalized
interest) and amortization of debt discount and expense and that portion of
rental expense which is deemed to be representative of interest.
N/A Not available.
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<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF HISTORICAL
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information set forth below should be read in conjunction with the
consolidated financial statements and other information included in the
documents incorporated by reference in the accompanying Prospectus.
The Company operates principally in the defense industry which has
continued to consolidate and become increasingly competitive as a result of
worldwide reductions in defense spending. In response, Litton has initiated an
acquisition program focusing on businesses that will expand the Company's
business base and solidify its competitive position in the industry. In addition
to the acquisitions described above under "Recent Events," the Company has also
recently acquired the Inertial Systems Business Unit of Hughes Electronics
Corp.'s Delco Systems Operation and TELDIX GmbH, a European defense electronics
firm. During fiscal year 1995, the Company acquired Teledyne, Inc.'s Electronic
Systems operation and the Electro-Optical Systems operation of Imo Industries
Inc. These acquisitions, with estimated combined annual revenues of
approximately $1.3 billion, complement existing businesses in the Advanced
Electronics segment and are expected to help stabilize the Company's sales base
going forward. Additionally, Litton has continued its efforts to improve cost
efficiencies and to adjust capacity of its operations to enhance
competitiveness.
Information concerning the Company's business segments is set forth below.
<TABLE>
<CAPTION>
MARINE
YEAR ENGINEERING CORPORATE
ENDED ADVANCED AND INTERCONNECT AND OTHER
JULY 31, ELECTRONICS PRODUCTION PRODUCTS AMOUNTS TOTAL
-------- ----------- ----------- ------------ --------- ------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Sales............................ 1995 $ 1,700 $ 1,396 $286 $ (62) $3,320
1994 1,732 1,484 289 (59) 3,446
1993 1,841 1,393 307 (67) 3,474
Operating Profit (Loss).......... 1995 $ 128 $ 132 $ 22 $ (55) $ 227
1994 122(1) 141 8 (94) 177
1993 118 130 19 (123) 144
Operating Margins................ 1995 7.5% 9.4% 7.7% 8.4%(3)
1994 7.1(1) 9.5 2.8 7.8 (3)
1993 6.4 9.3 6.2 7.6 (3)
Capital Expenditures............. 1995 $ 49 $ 26 $ 12 $ 11 $ 98
1994 44 22 11 4 81
1993 43 23 7 1 74
Depreciation and Amortization
Expense........................ 1995 $ 65 $ 18 $ 10 $ 2 $ 95
1994 67 19 11 1 98
1993 75 18 11 3 107
Identifiable Assets at
Year End....................... 1995 $ 1,381 $ 392 $202 $ 585 $2,560
1994 1,156 330 197 571 2,254
1993 1,328 327 196 1,983(2) 3,834
</TABLE>
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(1) Excludes the effects of an $86 million charge relating to the settlement of
a civil suit.
(2) Includes net assets of WAI of $1,085 million.
(3) Represents segment operating profit as a percentage of sales.
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<PAGE> 7
SIX MONTHS ENDED JANUARY 31, 1996 AS COMPARED TO SIX MONTHS ENDED JANUARY 31,
1995
The Company reported sales of $1.58 billion for the six months ended
January 31, 1996, representing an improvement of 6% compared with $1.48 billion
for the prior year's period. Operating profit increased by 10%, improving to
$142.1 million for the current year's period compared with $128.8 million for
the corresponding period of the prior year.
The Advanced Electronics segment reported sales and operating profit for
the first six months of the current fiscal year of $790.6 million and $63.3
million, compared with $740.9 million and $57.8 million, respectively, for the
first six months of fiscal year 1995. The improvements were primarily
attributable to acquisitions completed during fiscal year 1995. Subsequent to
the end of the second quarter, the Company completed the acquisitions of PRC and
TELDIX GmbH. These acquisitions will enhance this segment's ability to provide
more comprehensive services. Backlog for this segment was $1.78 billion at
January 31, 1996 compared to $1.75 billion at July 31, 1995.
While the outlook on defense spending remains uncertain, this segment's
base of programs and participation in high priority defense requirements should
continue to help lessen the impact of further reductions. Additionally, the
Company will continue to focus on acquisitions which will enhance its
opportunity to participate in new programs.
The Marine Engineering and Production segment reported sales and operating
profit for the six month period ended January 31, 1996 of $657.9 million and
$65.9 million compared with $632.0 million and $60.7 million for the comparable
period in fiscal year 1995. The improved results were attributable to increased
construction activities on four Aegis guided missile destroyers currently under
construction and two multipurpose amphibious assault ships. A fifth Aegis guided
missile destroyer, nearing completion, is scheduled to be delivered in the third
quarter of fiscal year 1996. Backlog for this segment at January 31, 1996 was
$3.64 billion, including an award by the U.S. Navy to build a seventh
multipurpose amphibious assault ship and two additional Aegis guided missile
destroyers. Backlog at July 31, 1995 was $3.31 billion.
The Interconnect Products segment also contributed with improved results as
strong demand for its electronics-related products continued during the six
months ended January 31, 1996.
FISCAL YEAR ENDED JULY 31, 1995 AS COMPARED TO FISCAL YEAR ENDED JULY 31, 1994
Earnings from continuing operations were significantly higher in 1995
primarily because the 1994 results were impacted by a charge to operations for
the settlement of a civil suit. Additionally, interest expense was significantly
lower in 1995 as a result of the early extinguishment of certain subordinated
debt in July 1994 and there was a reduction in corporate expenses in 1995 as the
1994 results included costs related to WAI.
Sales for the Advanced Electronics segment were substantially comparable
with the prior year. The impact of reduced defense spending was offset by
contributions from the previously discussed acquisitions and the effects of
non-recurring revenues recognized upon completion of a long-term contract.
Operating margin improved to 7.5% for fiscal year 1995 compared with 7.1% for
fiscal year 1994, exclusive of the settlement of a civil suit. This improvement
reflects increased operating efficiency as a result of continuing efforts to
adjust the cost structure of these businesses. Backlog increased slightly to
$1.75 billion at July 31, 1995 compared with $1.70 billion at July 31, 1994,
primarily due to acquisitions made during 1995.
The Marine Engineering and Production segment maintained a comparable
profit margin on slightly lower sales in comparison with the prior year. The
decline in sales reflected the transition from the completion and winding down
of certain contracts to the startup of new contracts. Contracts completed and
delivered during fiscal year 1995 included four Aegis guided missile destroyers
and one multipurpose amphibious assault ship to the U.S. Navy, and two SA'AR 5
class corvettes to the Israeli government. During fiscal year 1995, the Company
received funding for the
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<PAGE> 8
construction of two additional destroyers with an aggregate estimated contract
value in excess of $700 million. Backlog at July 31, 1995 amounted to $3.31
billion compared with $3.69 billion at July 31, 1994. Backlog at July 31, 1995
included eight Aegis guided missile destroyers, of which six were under
construction, and two multipurpose amphibious assault ships, both of which were
in production.
The Interconnect Products segment maintained a comparable level of sales,
while operating profit was significantly higher in 1995. Operating profit for
1994 was affected by a charge recorded to adjust the carrying value of a
division which was subsequently sold.
Interest expense was significantly lower in 1995 compared with 1994 as a
result of the early extinguishment of certain subordinated debt in July 1994.
The use of cash for the extinguishment also resulted in lower interest income in
fiscal year 1995.
FISCAL YEAR ENDED JULY 31, 1994 AS COMPARED TO FISCAL YEAR ENDED JULY 31, 1993
Overall sales for 1994 were comparable to 1993. Earnings from continuing
operations before extraordinary item for 1994 were $51.3 million compared with
$87.3 million for 1993, before the cumulative effect of a change in accounting
for retiree health and life insurance benefits. Results for 1994 were affected
by a charge of $86.0 million pre-tax, or $53.8 million after tax, for the
settlement of a civil suit.
Sales for the Advanced Electronics segment were lower in 1994 as a result
of continued reductions in defense spending. Although operating profit was
affected by the $86.0 million charge, the settlement brought a conclusion to an
uncertainty which would have required the commitment of company resources on a
long-term basis. Exclusive of the charge, operating margin improved to 7.1% in
1994 compared with 6.4% for 1993. While the Company continued to focus on
improving the cost structures and capacity of these operations during 1994,
operating margin benefited from the effects of earlier efforts.
The Marine Engineering and Production segment continued its solid
performance and strong cash flow during 1994. Sales and operating profit were
higher in 1994 as a result of an increased level of activity. Profit margin also
improved slightly. Backlog at July 31, 1993 was $4.64 billion compared with
$3.69 billion at July 31, 1994 which did not include the options for two Aegis
destroyers funded in 1995.
Interest expense for fiscal year 1994 was lower than fiscal year 1993 due
mainly to the June 1993 call for redemption and subsequent conversion of certain
zero coupon convertible subordinated notes.
DISCONTINUED OPERATIONS
On March 17, 1994, Litton distributed all of the issued and outstanding
shares of common stock of its previously wholly-owned subsidiary, WAI, which was
reflected as discontinued operations for fiscal years 1994 and 1993. The balance
sheet effect of the distribution was a reduction to Litton's Shareholders'
Investment in the aggregate amount of $909.2 million representing the book value
of net assets distributed. Results for fiscal year 1994 included special charges
totalling $179 million, net of tax, recorded to reflect the write-down of net
assets of a certain division and to provide for obsolescence of older technology
equipment, vessels and inventory and the consolidation of facilities.
LIQUIDITY AND CAPITAL RESOURCES
The Company completed the first half of fiscal year 1996 with $133.8
million in cash and marketable securities, compared with $110.7 million at July
31, 1995. Cash flow from operations provided the funds for working capital needs
and for the acquisition of the Inertial Systems Business Unit of Hughes
Electronics Corp.'s Delco Systems Operation in the second quarter. In connection
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<PAGE> 9
with the acquisition of PRC on February 16, 1996, the Company borrowed $400
million under the existing revolving credit agreement with various banks at an
interest rate of 5.5125%. Net proceeds from the sale of the Debentures offered
hereby will reduce the borrowings under the revolving credit agreement.
ENVIRONMENTAL MATTERS
The Company has been named as a potentially responsible party in respect to
various sites to which certain of its operations may have contributed waste.
Also, the Company and certain of its divisions and subsidiaries have incurred
costs, which have not had a material impact on the Company's consolidated
financial statements in any one year, for cleaning up a number of sites owned or
leased by the Company. At this time, the Company believes that its ultimate
liability for additional expenditures associated with sites owned and other
sites to which it may have contributed waste will not have a material adverse
effect on its consolidated financial statements.
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<PAGE> 10
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial statements have been
prepared from the historical financial statements of Litton, PRC and Steerage.
On February 16, 1996, Litton acquired all of the issued and outstanding shares
of PRC for a preliminary purchase price of $425 million in cash. This
acquisition will be accounted for under the purchase method of accounting. The
acquisition cost will be allocated among the net assets of PRC based upon their
estimated fair market values. However, this allocation process has not yet been
completed. Accordingly, the excess purchase price over PRC's net book values is
presented as a separate caption in the pro forma combined balance sheet.
On February 8, 1996, Litton agreed to acquire Steerage. Litton will issue
approximately 2.2 million shares of Common Stock to effect the acquisition,
which will be accounted for under the pooling of interests method. Accordingly,
the amounts presented herein represent historical amounts with certain
reclassifications made to conform with Litton's presentation.
The operations of PRC and Steerage for the 12 months ended June 30, 1995
have been combined with Litton's operations for the fiscal year ended July 31,
1995 and the operations for the six months ended December 31, 1995 have been
combined with Litton's operations for the six months ended January 31, 1996.
Steerage results for the prior periods have been excluded because Steerage was
previously subject to a purchase acquisition in November 1993; accordingly, the
basis of its net assets was adjusted to the then fair market values, rendering
prior period operating results incomparable. The following pro forma combined
statements of operations give effect to the combinations as if they had occurred
on August 1, 1994. The pro forma combined balance sheet gives effect to the
combinations as if they had occurred on January 31, 1996. The pro forma
adjustments described in the accompanying notes reflect preliminary estimates
and assumptions that management believes are reasonable in the circumstances.
The unaudited pro forma combined financial statements are not necessarily
indicative of what the financial position or results of operations would have
been if the combinations had occurred on the above-mentioned dates.
Additionally, they are not indicative of future results of operations or
financial position. The unaudited pro forma combined financial statements should
be read in conjunction with Litton's historical consolidated financial
statements and notes thereto, along with PRC's financial statements for the year
ended December 31, 1995 incorporated by reference in the accompanying
Prospectus. See "Incorporation by Reference" in the accompanying Prospectus.
S-10
<PAGE> 11
LITTON INDUSTRIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
LITTON PRC STEERAGE
HISTORICAL HISTORICAL HISTORICAL
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
JANUARY 31, DECEMBER 31, DECEMBER 31, PRO FORMA COMBINED
1996 1995 1995 ADJUSTMENTS(1) TOTAL
----------- ------------ ------------ -------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Sales and Service Revenues......... $1,575,639 $400,770 $78,310 $2,054,719
Costs and Expenses
Cost of Sales.................... 1,230,620 314,533 57,303 1,602,456
Selling, General and
Administrative................ 178,708 58,273 10,177 247,158
Depreciation and Amortization.... 49,620 9,821 2,002 $ 2,615 (2) 64,058
Intercompany Interest to Black &
Decker........................ -- 10,897 -- (10,897)(3) --
Other Interest -- Net............ 39 -- 1,836 12,855 (4) 14,730
---------- -------- ------- -------- ----------
Total.................... 1,458,987 393,524 71,318 4,573 1,928,402
---------- -------- ------- -------- ----------
Earnings before Taxes on Income.... 116,652 7,246 6,992 (4,573) 126,317
Taxes on Income.................... (47,244) 10,712 (3,021) (11,781)(5) (51,334)
---------- -------- ------- -------- ----------
Net Earnings....................... $ 69,408 $ 17,958 $ 3,971 $(16,354) $ 74,983
========== ======== ======= ======== ==========
Earnings per Share(6):
Primary.......................... $ 1.45 $ 1.50
========== ==========
Fully Diluted.................... $ 1.45 $ 1.50
========== ==========
</TABLE>
See accompanying notes.
S-11
<PAGE> 12
LITTON INDUSTRIES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JANUARY 31, 1996
<TABLE>
<CAPTION>
PRC STEERAGE
LITTON HISTORICAL HISTORICAL
HISTORICAL AT AT AT
JANUARY 31, DECEMBER 31, DECEMBER 31, PRO FORMA COMBINED
1996 1995 1995 ADJUSTMENTS(1) TOTAL
-------------- ------------- ------------ -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and Marketable Securities......... $ 133,846 $ 1,052 $ 226 $(90,592)(7)(8)(9) $ 44,532
Accounts Receivable, Net............... 412,292 245,342 31,832 689,466
Inventories less Progress Billings..... 537,948 12,132 32,645 582,725
Deferred Tax Assets.................... 363,948 -- 2,714 366,662
Prepaid Expenses....................... 21,705 23,433 1,349 46,487
---------- -------- -------- -------- ----------
Total Current Assets............... 1,469,739 281,959 68,766 (90,592) 1,729,872
---------- -------- -------- -------- ----------
Property, Plant and Equipment, Net....... 618,087 21,797 29,882 669,766
Goodwill and Other Intangibles, Net...... 240,337 40,111 17,708 (40,111)(2) 258,045
Excess of Purchase Price over Net Assets
Acquired............................... -- -- -- 213,297 (2)(7) 213,297
Other Assets and Long-Term Investments... 273,126 46,194 3,285 (1,781)(8) 320,824
---------- -------- -------- -------- ----------
Total Assets....................... $2,601,289 $ 390,061 $119,641 $ 80,813 $3,191,804
========== ======== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts Payable....................... $ 677,307 $ 110,464 $ 26,161 $ (2,000)(10) $ 811,932
Intercompany Amounts due to Black &
Decker............................... -- 65,537 -- (65,537)(3) --
Payrolls and Related Expenses.......... 240,731 29,367 2,985 273,083
Taxes on Income........................ 97,681 -- 1,976 99,657
Notes Payable and Current Portion of
Long-Term Obligations................ 29,441 -- 12,050 (12,050)(8) 29,441
Other Current Liabilities.............. 250,390 -- 7,078 257,468
---------- -------- -------- -------- ----------
Total Current Liabilities.......... 1,295,550 205,368 50,250 (79,587) 1,471,581
---------- -------- -------- -------- ----------
Intercompany Notes Payable to Black &
Decker................................. -- 197,700 -- (197,700)(3) --
Long-Term Obligations.................... 93,272 4,916 47,530 350,050 (7)(8)(10) 495,768
Postretirement Benefit Obligations Other
than Pensions.......................... 206,211 -- -- 206,211
Deferred Tax Liabilities................. 58,127 (40,000) 2,699 40,000 (2) 60,826
Other Long-Term Liabilities.............. 120,590 -- -- 120,590
Redeemable Cumulative Preferred Stock.... -- -- 8,092 (8,092)(9) --
Shareholders' Investment
Capital Stock
Non-Voting Convertible Preferred
Stock.............................. -- -- 140 (140)(11) --
Voting Preferred Stock -- Series B... 2,053 -- -- 2,053
Common Stock......................... 46,318 1 10 2,189 (7)(11) 48,518
Additional Paid-in Capital............. 287,538 12,145 5,740 (14,195)(7)(11) 291,228
Retained Earnings...................... 520,856 9,931 3,682 (11,712)(7)(8) 522,757
Cumulative Currency Translation
Adjustment........................... (29,226) -- 1,498 (27,728)
---------- -------- -------- -------- ----------
Total Shareholders' Investment..... 827,539 22,077 11,070 (23,858) 836,828
---------- -------- -------- -------- ----------
Total Liabilities and Shareholders'
Investment....................... $2,601,289 $ 390,061 $119,641 $ 80,813 $3,191,804
========== ======== ======== ======== ==========
</TABLE>
See accompanying notes.
S-12
<PAGE> 13
LITTON INDUSTRIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995
<TABLE>
<CAPTION>
LITTON STEERAGE
HISTORICAL PRC HISTORICAL HISTORICAL
YEAR ENDED TWELVE MONTHS TWELVE MONTHS
JULY 31, ENDED JUNE 30, ENDED JUNE PRO FORMA COMBINED
1995 1995 30, 1995 ADJUSTMENTS(1) TOTAL
---------- -------------- ------------- -------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Sales and Service Revenues..... $3,319,725 $714,072 $134,738 $4,168,535
Costs and Expenses
Cost of Sales................ 2,646,342 543,048 94,684 3,284,074
Selling, General and
Administrative............ 348,014 123,786 23,101 494,901
Depreciation and
Amortization.............. 95,356 16,442 4,277 $ 5,042 (2) 121,117
Intercompany Interest to
Black & Decker............ -- 23,981 -- (23,981)(3) --
Other Interest -- Net........ 3,053 -- 4,286 25,837 (4) 33,176
---------- -------- ------- -------- ----------
Total................ 3,092,765 707,257 126,348 6,898 3,933,268
---------- -------- ------- -------- ----------
Earnings before Taxes on
Income....................... 226,960 6,815 8,390 (6,898) 235,267
Taxes on Income................ (91,945) -- (4,256) 33 (5) (96,168)
---------- -------- ------- -------- ----------
Net Earnings................... $ 135,015 $ 6,815 $ 4,134 $ (6,865) $ 139,099
========== ======== ======= ======== ==========
Earnings per Share(6):
Primary...................... $ 2.84 $ 2.80
========== ==========
Fully Diluted................ $ 2.84 $ 2.80
========== ==========
</TABLE>
See accompanying notes.
S-13
<PAGE> 14
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) The transaction costs to be incurred by Litton and Steerage, which are
estimated to be $400 thousand and $3 million, respectively, have not been
reflected in the pro forma combined statements of operations presented
herein. These costs will be expensed at the time of closing.
(2) The allocation of the excess PRC purchase price over the net assets
acquired between tangibles, intangibles with a definite life and
intangibles with an indefinite life has not been completed. The pro forma
combined statements of operations presented herein reflect the amortization
of this excess amount over an estimated composite life of 30 years, net of
PRC's historical goodwill amortization.
(3) To eliminate PRC intercompany debt due to its former parent which was not
assumed by Litton and to eliminate related intercompany interest expense on
the pro forma combined statements of operations.
(4) To record interest expense on long-term borrowings incurred in connection
with the PRC acquisition and reduction in interest income on the cash
portion of the purchase price. The estimated effective rates used were
based on the weighted-average of the applicable rates in effect during
fiscal year 1995 and the six months ended January 31, 1996, respectively.
The effects of a .125% change in the interest rates would be approximately
$500 thousand for the fiscal year ended July 31, 1995 and approximately
$250 thousand for the six months ended January 31, 1996.
(5) To provide for income taxes on pro forma adjustments and PRC's earnings at
an estimated combined statutory tax rate of 40%.
(6) Pro forma earnings per share is based on historical weighted average common
shares outstanding and common stock equivalent shares plus the estimated
number of shares, 2,200,000, to be issued in connection with the Steerage
acquisition. The historical number of primary and fully diluted shares for
fiscal year ended July 31, 1995 were 47,187,934 and 47,261,898,
respectively. The corresponding historical shares for the six months ended
January 31, 1996 were 47,490,275 and 47,644,726.
(7) To record the acquisition of PRC for $25 million in cash and $400 million
in long-term borrowings (the Debentures offered hereby) under the purchase
method of accounting.
(8) To reflect repayment of Steerage's notes and term loan payable at
acquisition.
(9) To reflect the mandatory redemption of Steerage's outstanding cumulative
preferred stock at acquisition.
(10) To exclude PRC liabilities totalling $6.5 million not assumed.
(11) To record issuance of Litton Common Stock to effect the acquisition of
Steerage under the pooling of interests method.
S-14
<PAGE> 15
BUSINESS
The Company is mainly a high technology aerospace and defense corporation
which provides advanced electronic and defense systems and marine engineering
and production to U.S. and world markets. The Company also provides electronic
components and interconnect products to customers worldwide. The Company was
founded in California in 1953 and has evolved into a major international
organization with approximately 28,200 employees at more than 20 divisions as of
January 31, 1996.
The Company's businesses are reported in three business segments: Advanced
Electronics, Marine Engineering and Production, and Interconnect Products. For
financial information concerning the Company's business segments, see
"Management's Discussion and Analysis of Historical Financial Condition and
Results of Operations" above.
The Company has completed or agreed to a number of acquisitions and
dispositions in the last two years. In March of 1994 the Company spun-off its
WAI business. Since then it has acquired or agreed to acquire businesses with
combined annual revenues of approximately $1.3 billion which include the PRC and
Steerage acquisitions described above. All of these acquisitions complement
existing businesses in the Advanced Electronics segment, which is expected to
account for an increasing percentage of the Company's future revenues.
ADVANCED ELECTRONICS
The Company is a major supplier of electronic systems and related services
to the United States and international military electronics markets. Principal
programs and products include development, manufacture and assembly of inertial
navigation, guidance and control systems; command, control and communications;
and electronic warfare systems. The Company participates in ongoing development
and production programs as well as upgrade and retrofit business worldwide to
serve both defense and commercial aerospace markets.
Litton strives to be at the forefront of technological development in
navigation, guidance and control systems. The Company's products are installed
on most tactical military aircraft. Litton also provides systems for commercial
aircraft, land vehicles, missiles, helicopters and ships. To date, Litton has
produced more than 36,000 inertial navigation systems. This installed base
offers large ongoing retro-fit opportunities. Significant contracts include a
contract concerning the development and delivery of the GPS Guidance Package
(GGP) based on high accuracy fiber optic gyro and Global Positioning System
(GPS) technology; a contract to continue production of guidance units for the
U.S. Navy's Tomahawk cruise missile; contracts to produce the LN-201 fiber optic
inertial measurement unit (IMU) for the U.S. Air Force's Advanced Medium Range
Air-to-Air Missile (AMRAAM); a contract to develop advanced instrument panel
displays that will significantly upgrade the combat capability of the U.S.
Army's Bradley Fighting Vehicles and contracts to supply similar Active Matrix
Liquid Crystal Displays (AMLCDs) for the U.S. Army's RAH-66 Comanche and the
British EH-101 Merlin helicopter programs and the Lockheed Martin C-130J
aircraft program.
In its command, control and communications business, Litton is continuing
work on the U.S. Army's Theater High Altitude Area Defense (THAAD) antimissile
system. To date, the Company has delivered five tactical shelter groups and its
first installment of battle command software for use during the
demonstration/validation flight test phase of the THAAD system at White Sands
Missile Range in New Mexico. In addition, a contract with the U.S. Army
establishes Litton as the U.S. Army's standard supplier of hand-held computers
for the next five years. In a similar program, Litton is part of an industrial
team led by TRW to provide hand-held computers and associated equipment to the
U.S. Army for a program called Force XXI -- Applique, the first large scale
development program aimed at integrating the latest information and
communications technology for organizations up to brigade level.
S-15
<PAGE> 16
In its electronic warfare systems business, the Company produces a wide
range of threat warning systems, electro-optical systems, electronic support
measures and laser range finder/target designators for U.S. and allied military
services. In fiscal 1995, Litton received a contract from the U.S. Air Force to
continue production of AN/ALR-56M advanced airborne radar warning systems. The
24-month pact is for a total of 46 systems to be installed in F-16 aircraft for
the U.S. and Taiwan, Republic of China. Recently Litton won a contract to supply
the U.S. military's requirements for AN/ALR-56M systems over the next three
years. Another contract was awarded to Litton by the German Ministry of Defense
to produce AN/ALR-68(V)3 airborne threat warning system upgrade kits. This
equipment will be installed on AN/ALR-68 systems currently aboard German F-4
aircraft. The U.S. Navy also selected Litton to provide more than 200
AN/ALR-66B(V)3 modification kits, which will be installed as upgrades to the
AN/ALR-66A(V)3 systems presently employed as the standard radar warning
receiver, electronic support measures and targeting system on the Navy's P-3C
maritime patrol aircraft.
Sales backlog for the Advanced Electronics segment was $1.78 billion and
$1.75 billion at January 31, 1996 and July 31, 1995, respectively.
Significant revenues of the Advanced Electronics segment are derived from
sales to the U.S. Government (approximately 64% for fiscal year 1995).
MARINE ENGINEERING AND PRODUCTION
The Company's Ingalls Shipbuilding subsidiary is a leading designer and
builder of complex surface combatant ships for the U.S. Navy. The subsidiary is
also a major provider of modernization, overhaul and repair work and continues
to explore opportunities internationally. Ingalls has delivered a total of 70
new destroyers, cruisers and amphibious assault ships to the Navy since 1975.
Ingalls is the leading builder of surface combatants and is one of two
shipyards designing and building Arleigh Burke (DDG-51) class Aegis guided
missile destroyers for the U.S. Navy. Seven of 14 ships ordered have been
delivered.
In addition to Aegis destroyers, Ingalls is building all of the Navy's LHD
class amphibious assault ships. The ship's primary mission is the embarkation,
deployment, landing and support of a fully equipped U.S. Marine force of 2,000
troops by helicopter from the flight deck and by landing craft from a huge
sheltered "well deck" in the stern section of the ship. Four of the six ships
ordered have been delivered with the final two currently in production. The U.S.
Navy, in December of 1995, exercised their option for a seventh LHD with an
estimated contract value in excess of $950 million.
Internationally, Ingalls is actively marketing adaptations of the SA'AR 5
corvette class ship, recently delivered to the Israeli Navy, to other countries.
Ingalls intends to participate in an upcoming bid to build corvettes for Kuwait.
Other opportunities may develop for building corvette class vessels for the
navies of Taiwan, Republic of China, Singapore and the Philippines.
In addition to ship construction, Ingalls provides planning, engineering
and support services to the Navy which generated revenue of more than $100
million in fiscal 1995. Ingalls was selected to continue engineering and
technical services work for Spruance (DD-963) and Kidd (DDG-993) class
destroyers with similar services to be provided in support of the Arleigh Burke
(DDG-51) class Aegis destroyer and the Navy's Ticonderoga (CG-47) class of Aegis
guided missile cruisers.
Sales backlog for the Marine Engineering and Production segment was $3.64
billion and $3.31 billion at January 31, 1996 and July 31, 1995, respectively.
Substantially all of the revenues of the Marine Engineering and Production
segment are derived from sales to the U.S. Government (approximately 97% for
fiscal year 1995).
S-16
<PAGE> 17
INTERCONNECT PRODUCTS
The Interconnect Products group is an international supplier of electronic
connectors, multilayer circuit boards and other interconnect products. This
group is comprised of manufacturing businesses which serve primarily the
telecommunications and computer industries. The products range from printed
circuit boards, backpanel assemblies and signal connectors to solder, solder
paste and power connectors. Secondary markets include transportation, military,
instrumentation and nuclear customers.
U.S. GOVERNMENT CONTRACTS
Contracts with the U.S. Government are, in many cases, performed over
extended periods of time and are subject to changes in design, scope, schedules,
costs and funding. In addition, contracts with the U.S. Government are subject
to certain laws and regulations with which non-compliance by the contractor may
result in various sanctions including monetary penalties and fines as well as
debarment or suspension from further Government contracts.
Substantially all of the Company's contracts for and with the U.S.
Government are terminable at the option of the Government whenever it believes
that such termination would be in its best interests. Under contracts so
terminated, the Company is generally entitled to receive payment for work
completed and reasonable allowable costs incurred. Whether the occurrence of any
such termination would have an adverse effect on the Company would depend upon
the particular contract and the nature of the termination. At the present time,
management is not aware of any such circumstances which would result in a
material impact on its consolidated financial statements.
Approximately 73% of the Company's consolidated revenues for fiscal year
1995 were derived from sales to the U.S. Government.
RESEARCH AND DEVELOPMENT
Worldwide expenditures on research and development activities amounted to
$98.5 million, $227.1 million, $220.1 million and $254.6 million, of which
approximately 30%, 28%, 26% and 21% were Company-sponsored in the six months
ended January 31, 1996 and the fiscal years ended July 31, 1995, 1994 and 1993,
respectively. The Advanced Electronics segment accounted for almost all of the
total research and development expenditures in such periods.
ENVIRONMENTAL PROTECTION
During the six months ended January 31, 1996 and the fiscal year ended July
31, 1995 the amounts incurred in compliance with federal, state and local
regulations pertaining to environmental standards did not have a material effect
upon the capital expenditures or earnings of the Company.
NUMBER OF EMPLOYEES
At January 31, 1996, the Company had approximately 28,200 full-time
employees. Employment by business segment was as follows:
<TABLE>
<S> <C>
Advanced Electronics................................................ 13,400
Marine Engineering and Production................................... 12,800
Interconnect Products and Other..................................... 2,000
------
28,200
======
</TABLE>
S-17
<PAGE> 18
DESCRIPTION OF THE DEBENTURES
The following information concerning the 7.75% Debentures Due March 15,
2026 (the "Debentures Due 2026") and the 6.98% Debentures Due March 15, 2036
(the "Debentures Due 2036") offered hereby supplements and should be read in
conjunction with the statements in the accompanying Prospectus under the caption
"Description of Debt Securities." Capitalized terms not otherwise defined herein
shall have the meanings given to them in the accompanying Prospectus.
GENERAL
The Debentures will be issued as Senior Securities under the Senior
Indenture dated as of December 15, 1991 (the "Indenture"), which is more fully
described in the accompanying Prospectus.
The Debentures will be issued as unsecured obligations of the Company in an
aggregate principal amount of $400,000,000. The Debentures Due 2026 will be
limited to $300,000,000 aggregate principal amount and will mature on March 15,
2026. The Debentures Due 2036 will be limited to $100,000,000 aggregate
principal amount and will mature on March 15, 2036.
The Debentures will bear interest from March 15, 1996, payable
semi-annually in arrears on each March 15 and September 15, commencing September
15, 1996, at the rates set forth on the cover page of this Prospectus
Supplement, to the persons in whose names the Debentures are registered on the
preceding February 28 and August 31, respectively.
The Debentures Due 2036 are not subject to defeasance as described under
"Description of Debt Securities -- Senior Securities -- Defeasance" in the
accompanying Prospectus until after March 15, 2006.
RESTRICTIVE COVENANTS
The Debentures are entitled to the benefit of certain restrictive covenants
described in the accompanying Prospectus under the heading "Description of Debt
Securities -- Senior Securities -- Certain Covenants" except that the percentage
threshold in clause (d) of the first paragraph under such heading will be 15%
rather than 10%.
OPTIONAL REDEMPTION
The Debentures will be redeemable, in whole or in part, at the option of
the Company at any time in the case of the Debentures Due 2026 and at any time
after March 15, 2006 in the case of the Debentures Due 2036, in each case at a
redemption price equal to the greater of (i) 100% of the principal amount of
such Debentures or (ii) as determined by an Independent Investment Banker, the
sum of the present values of the remaining scheduled payments of principal and
interest thereon discounted to the redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate, plus, in each case, accrued interest thereon to the date of
redemption.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 0.10%.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Debentures to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Debentures. "Independent Investment Banker" means one of
the Reference Treasury Dealers appointed by the Trustee after consultation with
the Company.
S-18
<PAGE> 19
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the
Reference Treasury Dealer Quotations for such redemption date, after excluding
the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations. "Reference Treasury Dealer Quotations" means,
with respect to each Reference Treasury Dealer and any redemption date, the
average, as determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Treasury Reference
Dealer at 5:00 p.m. on the third Business Day preceding such redemption date.
"Reference Treasury Dealer" means each of Goldman, Sachs & Co., CS First
Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.
Morgan Securities Inc. and their respective successors; provided, however, that
if any of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Debentures to be
redeemed.
Unless the Company defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the Debentures or
portions thereof called for redemption.
The Debentures will not be entitled to the benefit of a sinking fund.
OPTIONAL REPAYMENT
The Debentures Due 2036 may be repaid on March 15, 2006, at the option of
the registered holders of the Debentures Due 2036, at 100% of their principal
amount, together with accrued interest to March 15, 2006. In order for a holder
to exercise this option, the Company must receive at its office or agency in New
York, New York, during the period beginning on January 15, 2006 and ending at
5:00 p.m. (New York City time) on February 15, 2006 (or, if February 15, 2006 is
not a Business Day, the next succeeding Business Day), the Debenture Due 2036
with the form entitled "Option to Elect Repayment on March 15, 2006" on the
reverse of the Debenture Due 2036 duly completed. Any such notice received by
the Company during the period beginning on January 15, 2006 and ending at 5:00
p.m. (New York City time) on February 15, 2006 shall be irrevocable. See
"-- Book-Entry System." The repayment option may be exercised by the holder of a
Debenture Due 2036 for less than the entire principal amount of the Debentures
Due 2036 held by such holder, so long as the principal amount that is to be
repaid is equal to $1,000 or an integral multiple of $1,000. All questions as to
the validity, form, eligibility (including time of receipt) and acceptance of
any Debenture Due 2036 for repayment will be determined by the Company, whose
determination will be final and binding.
Failure by the Company to repay the Debentures Due 2036 when required as
described in the preceding paragraph will result in an Event of Default under
the Indenture.
As long as the Debentures Due 2036 are represented by a Global Security,
the Depositary or the Depositary's nominee (as defined below) will be the
registered holder of the Debentures Due 2036 and therefore will be the only
entity that can exercise a right to repayment. See "-- Book-Entry System."
No similar right of repayment is available to holders of the Debentures Due
2026.
S-19
<PAGE> 20
BOOK-ENTRY SYSTEM
The Debentures will be represented by Global Securities that will be
deposited with, or on behalf of, The Depository Trust Company (the "Depositary")
and registered in the name of a nominee of the Depositary.
The Depositary has advised the company and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. The Depositary was created to hold securities of its participating
organizations ("participants") and to facilitate the clearance and settlement of
securities transactions, such as transfers and pledges, among its participants
in such securities through electronic computerized book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. Participants include securities brokers and dealers
(including the Underwriters), banks, trust companies, clearing corporations and
certain other organizations, some of whom (and/or their representatives) own the
Depositary. Access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. Persons who are not participants may beneficially own securities
held by the Depositary only through participants.
Unless and until they are exchanged in whole or in part for certificated
Debentures in definitive form, the Global Securities may not be transferred
except as a whole by the Depositary to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary.
The Debentures represented by the Global Securities will not be
exchangeable for certificated Debentures, provided that if the Depositary is at
any time unwilling, unable or ineligible to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the Company
will issue individual Debentures in definitive form in exchange for the Global
Securities. In addition, the Company may at any time and in its sole discretion
determine not to have Global Securities, and, in such event, will issue
individual Debentures in definitive form in exchange for the Global Securities
previously representing all such Debentures. In either instance, an owner of a
beneficial interest in a Global Security will be entitled to physical delivery
of Debentures in definitive form equal in principal amount to such beneficial
interest and to have such Debentures registered in its name. Individual
Debentures so issued in definitive form will be issued in denominations of
$1,000 and any larger amount that is an integral multiple of $1,000 and will be
issued in registered form only, without coupons.
Payments of principal of and interest on the Debentures will be made by the
Company through the Trustee to the Depositary or its nominee, as the case may
be, as the registered owner of the Global Securities. Neither the Company nor
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. The Company expects
that the Depositary, upon receipt of any payment of principal or interest in
respect of the Global Securities, will credit the accounts of the related
participants with payment in amounts proportionate to their respective holdings
in principal amount of beneficial interest in the Global Securities as shown on
the records of the Depositary. The Company also expects that payments by
participants to owners of beneficial interests in the Global Securities will be
governed by standing customer instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
participants.
S-20
<PAGE> 21
A further description of the Depositary's procedures with respect to the
Debentures is set forth in the accompanying Prospectus under the heading
"Description of Debt Securities -- Book-Entry Debt Securities."
So long as the Debentures Due 2036 are represented by a Global Security,
the Depositary or the Depositary's nominee will be the only entity that can
exercise a right to repayment pursuant to the Holder's option to elect repayment
of its Debentures Due 2036. Notice by participants or by owners of beneficial
interests in a Global Security held through such participants of the exercise of
the option to elect repayment of beneficial interests in Debentures Due 2036
represented by a Global Security must be transmitted to the Depositary in
accordance with its procedures on a form required by the Depositary and provided
to participants. In order to ensure that the Depositary or the Depositary's
nominee will timely exercise a right to repayment with respect to a particular
Debenture Due 2036, the beneficial owner of such Debenture Due 2036 must
instruct the broker or other participant through which it holds an interest in
such Debenture Due 2036 to notify the Depositary of its desire to exercise a
right to repayment. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other participant through which it holds an interest in a
Debenture Due 2036 in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to the
Depositary. The Company will not be liable for any delay in delivery of such
notice to the Depositary.
S-21
<PAGE> 22
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Debentures set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
DEBENTURES DEBENTURES
UNDERWRITER DUE 2026 DUE 2036
- ------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Goldman, Sachs & Co. ........................................ $ 75,000,000 $ 25,000,000
CS First Boston Corporation ................................. 75,000,000 25,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... 75,000,000 25,000,000
J.P. Morgan Securities Inc. ................................. 75,000,000 25,000,000
----------- -----------
Total.............................................. $300,000,000 $100,000,000
=========== ===========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Debentures, if any are
taken.
The Underwriters propose to offer the Debentures Due 2026 in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of 0.50% of the principal amount of the Debentures Due
2026. The Underwriters may allow, and such dealers may reallow, a concession not
to exceed 0.25% of the principal amount of the Debentures Due 2026 to certain
brokers and dealers. After the Debentures Due 2026 are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the Underwriters.
The Underwriters propose to offer the Debentures Due 2036 in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of 0.40% of the principal amount of the Debentures Due
2036. The Underwriters may allow, and such dealers may reallow, a concession not
to exceed 0.25% of the principal amount of the Debentures Due 2036 to certain
brokers and dealers. After the Debentures Due 2036 are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the Underwriters.
The Debentures are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that they intend to
make a market in the Debentures but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Debentures.
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates engage and may in the future engage in
investment banking and commercial banking activities with the Company and its
subsidiaries. The net proceeds of this offering will be used to reduce
borrowings under the Company's revolving credit agreement under which Morgan
Guaranty Trust Company of New York, an affiliate of J.P. Morgan Securities Inc.,
is an agent and a lender. See "Use of Proceeds." Accordingly, this offering will
be made in accordance with Section 44(c)(8) of Article III of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. J.P. Morgan
Securities Inc. will not receive any benefit in connection with this offering
other than customary managing, underwriting and selling fees.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
S-22
<PAGE> 23
VALIDITY OF SECURITIES
The validity of the Debentures offered hereby will be passed upon for the
Company by John E. Preston, Esq., Senior Vice President and General Counsel of
the Company, and for the Underwriters by Sullivan & Cromwell, Los Angeles,
California. As of March 5, 1996, Mr. Preston held 7,497 shares of Common Stock
of the Company and options to acquire 31,220 such shares.
EXPERTS
The consolidated financial statements of the Company as of July 31, 1995
and 1994, and for each of the three years in the period ended July 31, 1995,
have been audited by Deloitte & Touche LLP, independent auditors, as set forth
in their report with respect thereto, and are incorporated by reference in the
accompanying Prospectus in reliance upon such report given upon the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements of the business and operations of PRC
(which were purchased by Litton Industries, Inc. on February 16, 1996) as of
December 31, 1995 and for the year then ended have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report with respect thereto,
and are incorporated by reference in the accompanying Prospectus in reliance
upon such report given upon the authority of said firm as experts in accounting
and auditing.
S-23
<PAGE> 24
PROSPECTUS
LITTON INDUSTRIES, INC.
DEBT SECURITIES
---------------------
Litton Industries, Inc. (the "Company") may from time to time offer its
Debt Securities (the "Debt Securities"), which may be either senior (the "Senior
Securities") or subordinated (the "Subordinated Securities") in priority of
payment for proceeds of up to $600,000,000 on terms determined by market
conditions at the time of sale. The designation, principal amount, offering
price, maturity, interest rate and any redemption provisions of the Debt
Securities are described in the accompanying Prospectus Supplement, together
with other terms and matters related to the offering.
The Debt Securities may be sold directly or through agents, underwriters or
dealers. If agents of the Company or underwriters are involved in the sale of
the Debt Securities, their names and descriptions of their compensation and
indemnification arrangements are contained in the Prospectus Supplement.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is March 6, 1996.
<PAGE> 25
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports, proxy statements
and other information with the Securities and Exchange Commission, which can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street N.W., Room 1024, Washington, D.C. 20549, at its
New York Regional Office, 7 World Trade Center (Suite 1300), New York, New York
10048, and at its Chicago Regional Office, Citicorp Center, 500 West Madison
Street (Suite 1400), Chicago, Illinois 60661. Copies of such material can be
obtained at prescribed rates by writing to the Securities and Exchange
Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549. Reports, proxy statements and other information about the Company can
also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005 and The Pacific Stock Exchange, 301 Pine
Street, San Francisco, California 94104. This Prospectus does not contain all
the information set forth in the related registration statement and exhibits
thereto which the Company has filed with the Securities and Exchange Commission
under the Securities Act of 1933 and to which reference is hereby made.
INCORPORATION BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated by reference in this Prospectus:
(a) Annual Report on Form 10-K for the fiscal year ended July 31,
1995;
(b) Quarterly Report on Form 10-Q for the quarterly period ended
October 31, 1995; and
(c) Current Reports on Form 8-K and 8-K/A dated February 22, 1996 and
March 4, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of this Prospectus
and prior to the termination of the offering of the Debt Securities shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the respective dates of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein or in any Prospectus Supplement modifies or supersedes such
statement. Any statement so modified or so superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of Debt Securities, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of any or all of the documents
that have been incorporated by reference in this Prospectus (not including
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Litton
Industries, Inc., 21240 Burbank Boulevard, Woodland Hills, California
91367-6675, Attention: Investor Relations; telephone: (818) 598-5000.
2
<PAGE> 26
THE COMPANY
The Company is mainly a high technology aerospace and defense corporation
which provides advanced electronic and defense systems and marine engineering
and production to U.S. and world markets. The Company also provides electronic
components and interconnect products to customers worldwide. Approximately 73%
of the Company's consolidated revenues for the fiscal year ended July 31, 1995
were derived from sales to the U.S. Government. The Company was founded in
California in 1953 and has evolved into a major international organization with
approximately 28,200 employees at more than 20 divisions as of January 31, 1996.
The principal executive offices of the Company are located at 21240 Burbank
Boulevard, Woodland Hills, California 91367-6675, and its telephone number is
(818) 598-5000.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is computed by dividing the sum of
historical Earnings before Taxes on Income and fixed charges, as adjusted, by
fixed charges. Fixed charges represent interest (including capitalized interest)
and amortization of debt discount and expense and that portion of rental expense
which is deemed to be representative of interest. The calculations for fiscal
years 1994, 1993, 1992 and 1991 exclude the results of Western Atlas Inc.
("WAI"), a former subsidiary the common stock of which was distributed to
holders of Litton common stock in March 1994. The results of WAI were reported
as discontinued operations.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED FISCAL YEAR
JANUARY 31, ENDED JULY 31,
-------------- ----------------------------------------------
1996 1995 1995 1994(1) 1993 1992 1991(2)
----- ----- ----- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges................... 12.6x 12.0x 12.2x 2.4x 2.6 x 2.0 x 1.4x
</TABLE>
- ---------------
(1) Pre-tax earnings for fiscal year 1994 included a charge of $86.0 million
related to the settlement of a civil suit.
(2) In fiscal year 1991, the Company provided for the loss on sale of a
division, which resulted in a charge to pre-tax earnings of $120.0 million.
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement, the
net proceeds from the sale of the Debt Securities offered hereby will be added
to the working capital of the Company which combined with internally generated
funds, possible future borrowings, and existing cash and marketable securities
may be used for capital expenditures, possible future acquisitions, repurchase
of the Company's outstanding capital stock, refinancing of outstanding
indebtedness, increased working capital requirements, and other corporate
purposes.
3
<PAGE> 27
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either Senior Securities of the Company
or Subordinated Securities of the Company. The Senior Securities will be issued
under a senior indenture dated as of December 15, 1991 (the "Senior Indenture"),
between the Company and The Bank of New York, as senior trustee (in such
capacity, the "Senior Trustee"). The Subordinated Securities will be issued
under a subordinated indenture dated as of December 15, 1991 (the "Subordinated
Indenture"), between the Company and The Bank of New York, as subordinated
trustee (in such capacity, the "Subordinated Trustee"). The Senior Indenture and
the Subordinated Indenture are collectively referred to herein as the
"Indentures."
A copy of each of the Indentures is filed as an exhibit to the registration
statement relating hereto. Certain provisions of the Indenture are referred to
and summarized below. The summaries do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the applicable Indenture. Capitalized terms not otherwise defined
herein shall have the meanings given to them in the applicable Indenture. All
section references below are to both Indentures other than section references
under "Senior Securities" and "Subordinated Securities" below, which are
references to the Senior Indenture and Subordinated Indenture, respectively.
GENERAL
The aggregate principal amount of Debt Securities which can be issued under
the Indentures is unlimited (Section 301). The Debt Securities to which this
Prospectus relates will be issued from time to time in amounts the proceeds of
which will aggregate up to $600,000,000 and will be offered to the public on
terms determined by market conditions at the time of sale. The Debt Securities
may be issued in one or more series with the same or various maturities and may
be sold at par or at an original issue discount. Debt Securities sold at an
original issue discount may bear no interest or interest at a rate which is
below market rates. The Debt Securities will be unsecured obligations of the
Company issued in fully registered form without coupons or in bearer form with
coupons. The Senior Securities will rank as to priority of payment with all
other outstanding unsubordinated and unsecured indebtedness of the Company,
while the indebtedness represented by the Subordinated Securities will be
subordinated as described under "Subordinated Securities."
Reference is made to the Prospectus Supplement for the following terms to
the extent they are applicable to the Debt Securities: (a) designation and
denomination of and any limit upon the aggregate principal amount of such Debt
Securities, (b) whether such Debt Securities are Senior Securities or
Subordinated Securities, (c) the percentage of principal amount at which such
Debt Securities will be issued, (d) the date on which such Debt Securities will
mature, (e) the rate or rates (which may be fixed or floating) per annum at
which such Debt Securities will bear interest, if any, or the method of
determining the same, (f) the times at which interest will be payable, (g) the
terms of any redemption provisions at the option of the Company or any repayment
provisions at the option of the holder, (h) whether such Debt Securities are to
be issued in book-entry form, and if so, the identity of the depositary and
information with respect to book-entry procedures, (i) federal income tax
consequences and (j) other terms of such Debt Securities.
The Debt Securities are obligations exclusively of the Company. Because the
operations of the Company are currently conducted through subsidiaries, the cash
flow and the consequent ability to service debt of the Company, including the
Debt Securities, are dependent, in part, upon the earnings of its subsidiaries
and the distribution of those earnings to the Company or upon loans or other
payments of funds by those subsidiaries to the Company. The subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Debt Securities or to make any
funds available therefor, whether by dividends, loans, or other payments. In
addition, the payment of dividends and the making of loans and advances to the
Company by its subsidiaries may be subject to statutory or contractual
restrictions,
4
<PAGE> 28
are contingent upon the earnings of those subsidiaries and are subject to
various business considerations.
The Debt Securities will be effectively subordinated to all liabilities,
including trade payables, of the Company's subsidiaries. Any right of the
Company to receive assets of any of its subsidiaries upon their liquidation or
reorganization (and the consequent right of the holders of the Debt Securities
to participate in those assets) will be effectively subordinated to the claims
of that subsidiary's creditors (including trade creditors), except to the extent
that the Company is itself recognized as a creditor of such subsidiary, in which
case the claims of the Company would still be subordinate to any security
interests in the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by the Company.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other person or
convey, transfer or lease all or substantially all of its assets to any other
person, unless, among other things, (i) the resulting, surviving or transferee
person (if other than the Company) is organized and existing under the laws of
the United States, any state thereof or the District of Columbia and such person
expressly assumes all obligations of the Company under the Debt Securities and
the Indentures, and (ii) the Company or such successor person shall not
immediately thereafter be in default under the Indentures. Upon the assumption
of the Company's obligations by such a person in such circumstances, subject to
certain exceptions, the Company shall be discharged from all its obligations
under the Debt Securities and the Indentures (Section 801).
Other than the restrictions on liens and sale and leaseback transactions
set forth in the Senior Indenture and described below under "Senior
Securities -- Certain Covenants," the Indentures and the Debt Securities do not
contain any covenants or other provisions designed to afford holders of Debt
Securities protection in the event of a highly leveraged transaction involving
the Company or any of its subsidiaries. The covenants in the Senior Indenture
restricting liens and sale and leaseback transactions are not contained in the
Subordinated Indenture, and holders of Subordinated Securities will accordingly
have no right to enforce such covenants, nor will the consent of the holders of
Subordinated Securities be required in connection with any waiver of such
restrictive covenants.
AMENDMENT AND WAIVER
Other than amendments not adverse to holders of the Debt Securities,
amendments of the Indentures or the Debt Securities may be made only with the
consent of the holders of a majority in principal amount of the Debt Securities
affected (acting as one class). Waivers of compliance with any provision of the
Indentures or the Debt Securities with respect to any series of Debt Securities
may be made only with the consent of the holders of a majority in principal
amount of the Debt Securities of that series. The consent of all holders of
affected Debt Securities will be required to (a) change the stated maturity
thereof, (b) reduce the principal amount thereof, (c) reduce the rate of
interest or change the manner of calculating the same or the time of payment
thereof, or (d) impair the right to institute suit for the payment of principal
thereof or interest thereon (Section 902). The holders of a majority in
aggregate principal amount of Debt Securities affected may waive any past
default under the applicable Indenture and its consequences, except a default
(1) in the payment of the principal of or interest on such Debt Securities, or
(2) in respect of a provision which cannot be waived or amended without the
consent of all holders of Debt Securities affected (Sections 513 and 902).
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in the form of one or more
Global Securities that will be deposited with a Depositary or its nominee
identified in the applicable Prospectus Supple-
5
<PAGE> 29
ment. In such a case, one or more Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of Outstanding Debt Securities of the series to be represented
by such Global Security or Securities. Unless and until it is exchanged in whole
or in part for certificates evidencing Debt Securities in definitive form, a
Global Security may not, subject to certain exceptions, be registered for
transfer or exchange except to the Depositary for such Global Security or a
nominee of such Depositary (Sections 204 and 305).
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interest in such Global Security will be limited to participants or Persons that
may hold interests through participants. Ownership of beneficial interests by
participants in such Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the
Depositary for such Global Security. Ownership of beneficial interests in such
Global Security by Persons that hold through participants will be shown on, and
the transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. The foregoing limitations and
such laws may impair the ability to transfer beneficial interests in such Global
Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as provided in the Indenture governing Debt Securities
represented by a Global Security, owners of beneficial interests in such Debt
Securities will not (a) be entitled to have such Debt Securities registered in
their names, (b) receive or be entitled to receive physical delivery of
certificates representing such Debt Securities in definitive form, (c) be
considered the owners or holders thereof under the Indenture governing such Debt
Securities or (d) have any rights under the Indenture governing such Debt
Securities with respect to such Global Security. Accordingly, each Person owning
a beneficial interest in such Global Security must rely on the procedures of the
Depositary and, if such person is not a participant, on the procedures of the
participant through which such Person owns its interest, to exercise any rights
of a Holder under the Indenture. The Company understands that under existing
industry practices, if the Company requests any action of Holders or an owner of
a beneficial interest in such Global Security desires to give any notice or take
any action a Holder is entitled to give or take under the Indenture, the
Depositary would authorize the participants to give such notice or take such
action, and participants would authorize beneficial owners owning through such
participants to give such notice or take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
6
<PAGE> 30
The Company, in its sole discretion, may at any time determine that any
series of Debt Securities issued or issuable in the form of a Global Security
shall no longer be represented by such Global Security and such Global Security
shall be exchanged for securities in definitive form pursuant to the Indenture
governing such Debt Securities (Section 204).
INFORMATION CONCERNING THE TRUSTEE
The Company maintains banking relationships in the ordinary course of
business with the Trustee, which has loaned the Company $33 million under the
Company's revolving credit facility between the Company and the bank parties
thereto.
The occurrence of a default under either Indenture could create a
conflicting interest for the Trustee under the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990 (the "Trust Indenture Act").
If the default has not been cured or waived within 90 days after the Trustee has
or acquires a conflicting interest, the Trustee generally is required by the
Trust Indenture Act to eliminate such conflicting interest or resign as Trustee
with respect to the Senior Securities or Subordinated Securities. In the event
of the Trustee's resignation, the Company shall promptly appoint a successor
trustee with respect to the affected Debt Securities.
SENIOR SECURITIES
The Senior Securities will be direct, unsecured obligations of the Company
and will rank as to priority of payment on a parity basis with all outstanding
unsubordinated and unsecured indebtedness of the Company.
Certain Covenants
Unless otherwise provided in the Senior Securities, the Company will
covenant not to create, assume or suffer to exist any lien on any Restricted
Property (described below) to secure any debt of the Company, any subsidiary or
any other person, or permit any subsidiary so to do, without securing the Senior
Securities of any series having the benefit of the covenant equally and ratably
with such debt for so long as such debt shall be so secured, subject to certain
exceptions specified in the Senior Indenture. Exceptions include: (a) existing
liens or liens on facilities of corporations at the time they become
subsidiaries; (b) liens existing on facilities when acquired, or incurred to
finance the purchase price, construction or improvement thereof; (c) certain
liens required by contracts with, and in favor of, governmental entities; and
(d) liens otherwise prohibited by such covenant, securing indebtedness which,
together with the aggregate amount of outstanding indebtedness secured by liens
otherwise prohibited by such covenant and the value of certain sale and
leaseback transactions, does not exceed 10% of the Company's consolidated net
tangible assets (defined in the Senior Indenture as total assets less current
liabilities and intangible assets) (Section 1006).
Unless otherwise provided in the Senior Securities, the Company will also
covenant not to, and not to permit any subsidiary to, enter into any sale and
leaseback transaction covering any Restricted Property unless (a) the Company
would be entitled under the provisions described above to incur debt equal to
the value of such sale and leaseback transaction, secured by liens on the
facilities to be leased, without equally and ratably securing the Senior
Securities, or (b) the Company, during the six months following the effective
date of such sale and leaseback transaction, applies an amount equal to the
value of such sale and leaseback transaction to the voluntary retirement of
long-term indebtedness or to the acquisition of Restricted Property (Section
1007).
The Senior Indenture defines Restricted Property as (a) any manufacturing
facility (or portion thereof) owned or leased by the Company or any subsidiary
and located within the continental United States which, in the opinion of the
Board of Directors, is of material importance to the business of the Company and
its subsidiaries taken as a whole, but no such manufacturing facility (or
portion thereof) shall be deemed of material importance if its gross book value
(before
7
<PAGE> 31
deducting accumulated depreciation) is less than 2% of the Company's
consolidated net tangible assets, or (b) any shares of capital stock or
indebtedness of any subsidiary owning any such manufacturing facility (Section
101).
There are no other restrictive covenants contained in the Senior Indenture.
Events of Default
Events of Default with respect to any series of Senior Securities under the
Senior Indenture will include: (a) default in the payment of any principal of,
or any premium on, such series; (b) default in the payment of any installment of
interest on such series and continuance of such default for a period of 30 days;
(c) default in the performance of any other covenant in the Senior Indenture or
in the Debt Securities and continuance of such default for a period of 90 days
after receipt by the Company of notice of such default from the Senior Trustee
or by the Company and the Senior Trustee from the holders of at least 25% in
principal amount of Senior Securities of such series then outstanding; or (d)
certain events of bankruptcy, insolvency or reorganization in respect of the
Company (Section 501). The Senior Trustee may withhold notice to the holders of
a series of Senior Securities of any default (except in the payment of principal
of, premium on or interest on such series of Senior Securities) if it considers
such withholding to be in the interest of holders of the Senior Securities
(Section 602). Not all Events of Default with respect to a particular series of
Senior Securities issued under the Senior Indenture necessarily constitute
Events of Default with respect to any other series of Senior Securities.
On the occurrence of an Event of Default with respect to a series of Senior
Securities, the Senior Trustee or the holders of at least 25% in principal
amount of Senior Securities of such series then outstanding may declare the
principal (or in the case of Senior Securities sold at an original issue
discount, the amount specified in the terms thereof) and accrued interest
thereon to be due and payable immediately (Section 502).
Within 120 days after the end of each fiscal year, an officer of the
Company must inform the Senior Trustee whether such officer knows of any
default, describing any such default and the status thereof (Section 1004).
Subject to provisions relating to its duties in case of default, the Senior
Trustee is under no obligation to exercise any of its rights or powers under the
Senior Indenture at the direction of any holders of Senior Securities unless the
Senior Trustee shall have received a satisfactory indemnity (Section 601).
Defeasance
The Senior Indenture provides that the Company, at the Company's option,
(a) will be discharged from all obligations in respect of the Senior Securities
of a series (except for certain obligations to register the transfer or exchange
of Senior Securities, replace stolen, lost or destroyed Senior Securities,
maintain paying agencies and hold moneys for payment in trust), or (b) need not
comply with certain restrictive covenants of the Senior Indenture described
under "Certain Covenants," in each case if the Company irrevocably deposits in
trust with the Senior Trustee money or obligations of or guaranteed by the
United States of America which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money, in an
amount sufficient to pay all the principal of (including any mandatory
redemption payments) and interest on the Senior Securities of such series on the
dates such payments are due in accordance with the terms of such Senior
Securities. To exercise either option, the Company is required to deliver to the
Senior Trustee an opinion of nationally recognized independent tax counsel to
the effect that the deposit and related defeasance would not cause the holders
of the Senior Securities of such series to recognize income, gain or loss for
Federal income tax purposes. To exercise the option described in clause (a)
above, such opinion must be based on a ruling of the Internal Revenue Service, a
regulation of the Treasury Department or a provision of the Internal Revenue
Code (Section 403).
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SUBORDINATED SECURITIES
The Subordinated Securities will be subordinated in right of payment, as
set forth in the Subordinated Indenture, to the prior payment in full of all
existing and future Senior Indebtedness (Sections 101 and 1201). "Senior
Indebtedness" means the principal of and any premium and interest on (a) all
indebtedness of the Company or any Consolidated Subsidiary (including
indebtedness of others guaranteed by the Company or any Consolidated Subsidiary)
(other than the Subordinated Securities), whether outstanding on the date of the
Subordinated Indenture or thereafter created, incurred or assumed, that is (A)
for money borrowed or (B) evidenced by a note or similar instrument given in
connection with the acquisition of any businesses, properties or assets of any
kind, except in the ordinary course of business, (b) obligations of the Company
or any Consolidated Subsidiary as lessee under capitalized leases or leases of
property made as part of any sale and leaseback transaction, and (c) amendments,
renewals, extensions, modifications and refundings of any such indebtedness or
obligation, unless in any case in the instrument creating or evidencing any such
indebtedness or obligation or pursuant to which the same is outstanding it is
provided that such indebtedness or obligation is not superior in right of
payment to the Subordinated Securities. Notwithstanding the foregoing, no
provision of the Subordinated Indenture will create or modify any indebtedness
or obligation of the Company with respect to any indebtedness or obligation of
any Consolidated Subsidiary or constitute any guarantee or other obligation of
the Company with respect to any indebtedness or other obligation of any
Consolidated Subsidiary except to the extent specifically provided in the
instrument creating or evidencing such obligation or indebtedness of such
Consolidated Subsidiary.
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceedings, upon any distribution of assets, (i)
the holders of Subordinated Securities will be required to pay over their share
of such distribution in respect of the Subordinated Securities to the holders of
Senior Indebtedness until such Senior Indebtedness is paid in full and (ii)
creditors of the Company who are not holders of Senior Indebtedness may recover
less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than holders of Subordinated Securities (Section 1202).
As of January 31, 1996, outstanding Senior Indebtedness consisted of
approximately $65 million of indebtedness of the Company. There are no
restrictions in the Subordinated Indenture on the creation of additional
indebtedness, including Senior Indebtedness.
Events of Default
Events of Default with respect to any series of Subordinated Securities
under the Subordinated Indenture will include: (a) default in the payment of any
principal of, or any premium on, such series; (b) default in the payment of any
installment of interest on such series and continuance of such default for a
period of 30 days; (c) default in the performance of any other covenant in the
Subordinated Indenture or in the Subordinated Securities and continuance of such
default for a period of 90 days after receipt by the Company of notice of such
default from the Subordinated Trustee or by the Company and the Subordinated
Trustee from the holders of at least 25% in principal amount of Subordinated
Securities of such series then outstanding; or (d) certain events of bankruptcy,
insolvency or reorganization in respect of the Company (Section 501). The
Subordinated Trustee may withhold notice to the holders of a series of
Subordinated Securities of any default (except in the payment of principal of,
premium on or interest on such series of Subordinated Securities) if it
considers such withholding to be in the interest of holders of the Subordinated
Securities (Section 602). Not all Events of Default with respect to a particular
series of Subordinated Securities issued under the Subordinated Indenture
necessarily constitute Events of Default with respect to any other series of
Subordinated Securities.
On the occurrence of an Event of Default with respect to a series of
Subordinated Securities, the Subordinated Trustee or the holders of at least 25%
in principal amount of Subordinated
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<PAGE> 33
Securities of such series then outstanding may declare the principal (or in the
case of Subordinated Securities sold at an original issue discount, the amount
specified in the terms thereof) and accrued interest thereon to be due and
payable immediately (Section 502).
Within 120 days after the end of each fiscal year, an officer of the
Company must inform the Subordinated Trustee whether such officer knows of any
default, describing any such default and the status thereof (Section 1004).
Subject to provisions relating to its duties in case of default, the Trustee is
under no obligation to exercise any of its rights or powers under the
Subordinated Indenture at the direction of any holders of Subordinated
Securities unless the Subordinated Trustee shall have received a satisfactory
indemnity (Section 601).
Defeasance
The Subordinated Indenture provides that the Company, at the Company's
option, will be discharged from all obligations in respect of the Subordinated
Securities of a series (except for certain obligations to register the transfer
or exchange of Subordinated Securities, replace stolen, lost or destroyed
Subordinated Securities, maintain paying agencies and hold moneys for payment in
trust) if the Company irrevocably deposits in trust with the Subordinated
Trustee money or obligations of or guaranteed by the United States of America
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money, in an amount sufficient to pay
all the principal of (including any mandatory redemption payments) and interest
on the Subordinated Securities of such series on the dates such payments are due
in accordance with the terms of such Subordinated Securities. To exercise such
option, the Company is required to deliver to the Subordinated Trustee an
opinion of nationally recognized independent tax counsel to the effect that the
deposit and related defeasance would not cause the holders of the Subordinated
Securities of such series to recognize income, gain or loss for Federal income
tax purposes and such opinion must be based on a ruling of the Internal Revenue
Service, a regulation of the Treasury Department or a provision of the Internal
Revenue Code (Section 403).
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (a) directly to purchasers, (b)
through agents, (c) to dealers as principals, and (d) through underwriters.
Offers to purchase Debt Securities may be solicited directly by the Company
or by agents designated by the Company from time to time. Any such agent, who
may be deemed to be an underwriter as that term is defined in the Securities Act
of 1933, involved in the offer or sale of the Debt Securities is named, and any
commissions payable by the Company to such agent are set forth, in the
Prospectus Supplement.
If a dealer is utilized in the sale of the Debt Securities, the Company
will sell such Debt Securities to the dealer as principal. The dealer may then
resell such Debt Securities to the public at varying prices to be determined by
such dealer at the time of resale.
If an underwriter or underwriters are utilized in the sale of the Debt
Securities, the Company will enter into an underwriting agreement with such
underwriters at the time of sale to them. The names of the underwriters and the
terms of the transaction will be set forth in the Prospectus Supplement, which
will be used by the underwriters to make resales of the Debt Securities.
Agents, dealers or underwriters may be entitled under agreements which may
be entered into with the Company to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act of
1933, and may be customers of, engage in transactions with or perform services
for the Company in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or agents to solicit offers by certain institutions to purchase
Debt Securities from the Company at the
10
<PAGE> 34
public offering price set forth in the Prospectus Supplement pursuant to Delayed
Delivery Contracts providing for amounts, payment and delivery as described in
the Prospectus Supplement. Institutions with whom the contracts may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions, but shall in all cases be subject to the approval of the Company.
A commission described in the Prospectus Supplement will be paid to underwriters
and agents soliciting purchases of Debt Securities pursuant to contracts
accepted by the Company. Contracts will not be subject to any conditions except
that (a) the purchase by an institution of the Debt Securities covered by its
contract shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject and (b)
the Company shall have sold and delivered to any underwriters named in the
Prospectus Supplement that portion of the issue of Debt Securities as is set
forth therein. The underwriters and agents will not have any responsibility in
respect of the validity or the performance of the contracts.
The place and time of delivery for the Debt Securities will be set forth in
the Prospectus Supplement.
VALIDITY OF SECURITIES
The validity of the Debt Securities will be passed upon for the Company by
John E. Preston, Esq., Senior Vice President and General Counsel of the Company,
and for the underwriters, if any, by the person or firm specified in the
accompanying Prospectus Supplement. As of March 5, 1996, Mr. Preston held 7,497
shares of Common Stock of the Company and options to acquire 31,220 such shares.
EXPERTS
The Consolidated Financial Statements of the Company incorporated herein by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1995 have been so incorporated in reliance on the report of Deloitte &
Touche LLP, independent auditors, given on their authority as experts in
auditing and accounting.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
TABLE OF CONTENTS
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PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company............................. S-2
Use of Proceeds......................... S-2
Recent Events........................... S-3
Capitalization.......................... S-4
Selected Historical Financial Data...... S-5
Management's Discussion and Analysis of
Historical Financial Condition and
Results of Operations................. S-6
Unaudited Pro Forma Combined Financial
Data.................................. S-10
Business................................ S-15
Description of the Debentures........... S-18
Underwriting............................ S-22
Validity Of Securities.................. S-23
Experts................................. S-23
PROSPECTUS
Available Information................... 2
Incorporation by Reference.............. 2
The Company............................. 3
Ratio of Earnings to Fixed Charges...... 3
Use of Proceeds......................... 3
Description of Debt Securities.......... 4
Plan of Distribution.................... 10
Validity of Securities.................. 11
Experts................................. 11
</TABLE>
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$400,000,000
LITTON INDUSTRIES, INC.
$300,000,000
7.75% DEBENTURES
DUE MARCH 15, 2026
$100,000,000
6.98% DEBENTURES
DUE MARCH 15, 2036
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LOGO
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GOLDMAN, SACHS & CO.
CS FIRST BOSTON
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
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