<PAGE>1 FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-6179
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THIOKOL CORPORATION
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2678716
- - ----------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2475 Washington Blvd., Ogden, Utah 84401-2398
----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code..........(801) 629-2052
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at October 31, 1994
- - ----------------------------- -------------------------------
Common Stock, $1.00 par value 18,496,057 shares
<PAGE>2
THIOKOL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page
- - -------------------------------- ----
Item 1. Financial Statements
Consolidated Statements of Operations - Three
months ended September 30, 1994 and 1993 3
Consolidated Balance Sheets -
September 30, 1994 and June 30, 1994 4
Consolidated Statements of Cash Flows - Three
months ended September 30, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
PART II. OTHER INFORMATION
- - ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
<PAGE>3
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS (UNAUDITED)
THIOKOL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
Three Months Ended
September 30
-----------------------
1994 1993
-------- --------
<S> <C> <C>
Net sales $238,151 $257,664
Interest and other income 913 4,621
-------- --------
239,064 262,285
Deductions from income:
Cost of sales 192,884 213,322
General and administrative expense 16,947 16,429
Research and development expense 2,910 3,747
Interest expense 2,707 3,662
------- -------
215,448 237,160
Income before income taxes and cumulative
effect of accounting changes 23,616 25,125
Income taxes 9,328 11,096
-------- --------
Income before cumulative effect
of accounting changes 14,288 14,029
Cumulative effect of accounting changes (63,838)
-------- --------
Net income (loss) $ 14,288 $(49,809)
======== ========
Net income (loss) per share:
Income before cumulative effect
of accounting changes $ .76 $ .68
Cumulative effect of accounting changes (3.10)
-------- --------
Net income (loss) $ .76 $ (2.42)
======== ========
Dividends per share $ .17 $ .17
======== ========
Average number of common and common
equivalent shares outstanding 18,927 20,614
======== ========
See notes to consolidated financial statements
</TABLE>
<PAGE>4
<TABLE>
<CAPTION>
THIOKOL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
Sept 30 June 30
1994 1994
-------- --------
ASSETS (Unaudited)
------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 70,904 $ 40,129
Receivables 154,849 195,414
Inventories 122,363 121,863
Prepaid expenses 8,673 4,496
-------- --------
Total current assets 356,789 361,902
Property, plant and equipment, at cost
less allowances for depreciation 323,487 322,070
Other assets
Costs in excess of net assets of businesses
acquired, less amortization 53,567 54,038
Patents and other intangible assets 18,950 19,557
Other noncurrent assets 49,914 42,919
-------- --------
$802,707 $800,486
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Short-term debt $ 29,038 $ 27,090
Accounts payable 38,167 40,285
Accrued compensation 38,796 46,442
Other accrued expenses 28,438 28,838
Income taxes 7,117 2,604
Current portion of long-term debt 142 136
------- -------
Total current liabilities 141,698 145,395
Long-term debt 87,945 87,916
Accrued retiree benefits 74,900 75,950
Deferred income taxes 16,783 16,838
Accrued interest and other non-current liabilities 90,908 89,852
Stockholders' equity
Common Stock (par value $1.00 per share)
Authorized - 200,000 shares
Issued - 20,455 shares including shares in Treasury 20,538 20,538
Additional paid-in capital 45,879 46,249
Retained earnings 375,373 364,249
-------- --------
441,790 431,036
Less cost of common stock in Treasury
2,009 shares, September 30, 1994, and
1,818 shares, June 30, 1994 (51,317) (46,501)
-------- --------
Total stockholders' equity 390,473 384,535
-------- --------
$802,707 $800,486
======== ========
See notes to consolidated financial statements
</TABLE>
<PAGE>5
<TABLE>
<CAPTION>
THIOKOL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
Three Months Ended
September 30
---------------------
1994 1993
-------- --------
Operating Activities
- - --------------------
<S> <C> <C>
Net income (loss) $14,288 $(49,809)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Cumulative effect of accounting changes 63,838
Depreciation and amortization 9,313 9,793
Changes in operating assets and liabilities:
Receivables 40,884 18,141
Inventories and prepaid expenses (4,211) (1,493)
Accounts payable and accrued expenses (10,371) (18,795)
Income taxes 4,432 4,198
Other (7,362) (4,466)
------- -------
Net cash provided by operating activities 46,973 21,407
Investing Activities
- - --------------------
Purchases of property, plant and equipment (net) (9,175) (2,964)
Financing Activities
- - --------------------
Net change in short-term debt 1,362 (2,835)
Repayment of long-term debt (35) (89)
Dividends paid (3,164) (3,452)
Purchase of common stock for treasury (5,838) (11,524)
Stock option transactions 652 4,181
------- -------
Net cash used for financing activities (7,023) (13,719)
------- -------
Increase in cash and cash equivalents 30,775 4,724
Cash and cash equivalents at beginning of year 40,129 31,365
------- -------
Cash and cash equivalents at end of period $70,904 $36,089
======= =======
See notes to consolidated financial statements
</TABLE>
<PAGE>6
THIOKOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
Basis of Presentation
- - ---------------------
The accompanying interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. The balance sheet at June 30, 1994,
reflects the Company's audited consolidated financial statements at that
date. In the opinion of management all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended September 30,
1994, are not necessarily indicative of the results to be expected for the
fiscal year ending June 30, 1995. The financial statements should be read
in conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report to Stockholders and Annual
Report on Form 10-K for the fiscal year ended June 30, 1994.
Receivables
- - -----------
The components of receivables are as follows:
Sept 30 June 30
1994 1994
------- --------
Receivables under U.S. Government contracts
and subcontracts:
Amounts billed $ 29,647 $ 57,615
Unbilled costs and accrued profits 86,903 91,505
-------- --------
Total receivables under U.S. Government
contracts and subcontracts 116,550 149,120
Accounts receivable 37,345 44,620
Other current receivables 954 1,674
------- -------
$154,849 $195,414
======== ========
Unbilled costs and accrued profits consist principally of revenues
recognized on U.S. Government contracts for which billings have not been
presented. Such amounts are billed on the basis of contract terms and
delivery schedules. It is expected that $45.8 million of the unbilled
amount at September 30, 1994, will be billed within 90 days. The
remaining $41.1 million primarily relates to amounts subject to final
negotiations of contract terms and rates and is expected to be collected
within two years.
Cost and incentive-type contracts and subcontracts are subject to
Government audit and review. It is anticipated that adjustments, if any,
will not have a material effect on the Company's results of operations or
financial condition.
Cost management award fees of $20 million have been recognized on the
current Space Shuttle Redesigned Solid Rocket Motor (RSRM) contract.
Realization of such fees is reasonably assured based on actual and
anticipated contract cost performance. However, under terms of the
contract, all of the cost management award fees remain at risk until
completion of the current contract and final National Aeronautical and
Space Administration (NASA) review.
<PAGE>7
THIOKOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
Unanticipated problems which erode cost management performance could cause
a reversal of some or all of the amounts previously recognized and would
be offset against NASA receivable amounts or be directly reimbursed.
Inventories
- - -----------
Inventories are stated at the lower of cost or market. Space systems and
defense systems inventories represent estimated recoverable costs related
to long-term fixed price contracts and include direct production costs and
allocable indirect costs, less related progress payments received.
Inventories for the fastening systems segment are determined by the first
in, first out (FIFO) method. Inventories are summarized as follows:
Sept 30 June 30
1994 1994
-------- --------
Finished goods $ 60,167 $ 56,064
Raw materials and work-in-progress 47,883 47,300
Inventoried costs related to U.S.
Government and other long-term
contracts 33,631 36,735
Progress payments received on
long-term contracts (19,318) (18,236)
-------- --------
$122,363 $121,863
======== ========
Operations by Industry Segment
- - ------------------------------
The Company and its subsidiaries design, develop, manufacture, and sell
products classified in three principal industry segments.
The space systems segment consists of solid rocket propulsion for NASA,
the Department of Defense and various commercial customers for space
applications.
The defense systems segment consists of propulsion, gas generator and
ordnance products, metal and composite components, and services to such
systems, principally under contracts and subcontracts with the Department
of Defense and aerospace prime contractors, for use primarily in defense
applications.
The fastening systems segment consists of high technology, specialty
fastening systems for a broad range of aerospace and industrial
applications worldwide.
The space systems segment and defense systems segment were reported
previously as one segment, propulsion systems. Separate reporting of the
two segments was accomplished to better reflect the Company's current
organization and management structure, resources employed, and product
markets and lines of business. The following fiscal year 1994 amounts
have been restated to conform with the segment realignment.
<PAGE>8
THIOKOL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
Three Months Ended
September 30
---------------------
1994 1993
-------- --------
Net Sales
Space Systems $112,654 $112,674
Defense Systems 75,907 105,408
Fastening Systems 49,590 39,582
-------- --------
Consolidated net sales $238,151 $257,664
======== ========
Operating Profit
Space Systems $13,270 $11,331
Defense Systems 9,290 10,853
Fastening Systems 4,545 3,355
------- -------
Operating profit 27,105 25,539
Interest and other income 568 4,498
Interest expense (2,707) (3,662)
Unallocated corporate expense (1,350) (1,250)
------- -------
Consolidated pre-tax income $23,616 $25,125
======= =======
<PAGE>9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- - ---------------------
Net income for the first quarter ended September 30, 1994, was $14.3
million or $.76 per share, a 2 percent increase compared to $14.0 million
or $.68 per share last year before recognition of accounting changes.
Earnings per share was favorably impacted compared to fiscal year 1994 due
to the share repurchase program. Sales for the quarter of $238.2 million
decreased 8 percent when compared to $257.7 million last year.
The increase in net income for the quarter resulted from incentive fees
recognized on the RSRM program, higher fastening systems income, lower
interest expense and a lower effective income tax rate. The quarter was
also favorably affected by a $5.8 million pre-tax pension curtailment gain
associated with the downsizing of certain defense operations. Quarterly
income compared to the first quarter of fiscal year 1994 was adversely
impacted by the absence of Trident flight incentive fees and $3.9 million
of interest income from income tax refunds last year.
The 8 percent decline in sales reflected a continuing decrease in defense
sales resulting primarily from lower operating levels at the government-
owned, company operated ammunition plants (GOCO's) and lower Trident
sales. Partially offsetting the decrease were record fastening systems
sales.
Space systems sales of $112.7 million were unchanged from the prior year
while income of $13.3 million increased 17 percent from $11.3 million last
year. A slight increase in RSRM sales offset lower STAR motor and other
program sales. The increase in income resulted from additional cost
management incentive fees recognized on the RSRM program due to continued
achievements on cost management performance. An increase in the cost
management incentive fee rate resulted in $3.7 million of additional
income for the quarter, of which $3.0 million represented fee related to
costs incurred in prior years. The Company continuously evaluates actual
and forecasted cost performance and anticipates further incentive fee
increases during fiscal year 1995.
Defense systems sales decreased 28 percent to $75.9 million and income of
$9.3 million declined 14 percent from the prior year. The sales decrease
reflected a significant decrease in ordnance sales resulting primarily
from lower operating levels at the GOCO's. Also contributing to the sales
decline were lower Trident production and incentive fees and reduced
Sidewinder deliveries. The absence of Trident flight incentive fees this
year compared to $4.9 million in incentive fees in 1994, reduced ordnance
sales, and lower ordnance gross margins were the primary causes for the
decline in income. The quarter was also impacted by a $1.8 million loss
recognized on a recently awarded, competitively bid HARM contract.
Partially offsetting the lower defense systems income was a $5.8 million
pension curtailment gain resulting from the downsizing in the defense
segment.
Fastening systems sales of $49.6 million increased 25% from $39.6 million
in 1994 and income of $4.5 million increased 35 percent. Significantly
higher domestic industrial sales and a small acquisition in the third
quarter of 1994 were the principal causes of the sales increase. The $1.2
million rise in income resulted from record domestic industrial sales and
improved foreign operating results.
<PAGE>10
The lower fiscal year 1995 effective income tax rate compared to fiscal
1994 resulted primarily from a $1.5 million charge in the first quarter of
fiscal year 1994 due to the cumulative effect of a retroactive federal tax
rate increase.
General and administrative expense for the quarter of $16.9 million
increased 3 percent from $16.4 million in 1994. Interest expense
decreased $1.0 million primarily due to the reduction of $35 million in
long-term debt at June 30, 1994.
During the quarter, sales and profit derived from production of and
services for the RSRM accounted for approximately 47 percent of
consolidated net sales and 53 percent of consolidated operating income.
The current contract with NASA extends the Company's production of the
Space Shuttle solid rocket motors through fiscal year 2000. NASA's
continued emphasis on cost containment to control its budget should
produce a slight decrease in RSRM sales in fiscal year 1995. However,
contract incentives to reduce costs over the life of the contract should
result in higher incentive fees in the future based on actual and
anticipated contract cost performance. The Company believes there are
long-term growth opportunities in the expendable launch vehicle area and
is developing new solid rocket motors, including the Castor 120TM motor,
for this market.
Due to reductions in U.S. Government defense spending, the Company expects
its defense systems sales and income to decline in fiscal years 1995 and
1996. The Peacekeeper program was completed during the first quarter of
fiscal year 1994. Trident sales are projected to decrease beginning in
1995 as missile production is reduced. Decreased defense spending has
created a highly competitive pricing environment for tactical programs and
a decline in new program opportunities. The propulsion industry is
characterized by overcapacity. Industry consolidation of this business
segment is possible. Sales from the company-operated U.S. Army ordnance
plants will decline significantly in fiscal year 1995. Both of the
company-operated plants are on the Army's closure list but may be
maintained in an inactive status for an indefinite period. All U.S. Army
directed production is expected to be completed during fiscal year 1995.
The Company has negotiated long-term contracts for maintaining the plants,
managing inventory, and performing other non-production related projects.
In response to this current environment, the Company has downsized
operations to match current and projected operating conditions by
reductions in employment, consolidation of facilities, and related
spending reductions. The Company is pursuing demilitarization
opportunities in the United States and internationally.
Fastening systems accounted for approximately 17 percent of operating
profit for the quarter, compared to 13 percent in the same quarter last
year. Industrial profit margins are significantly up for the quarter,
compared to the same period in the prior year. Domestic and foreign
aerospace profits continue to be low, due to a slow commercial airplane
market and a depressed European economy. Due to continuing efforts to
improve manufacturing efficiencies and the strong industrial markets, the
Company anticipates sales and margins will continue to increase during
1995.
The Internal Revenue Service has completed its examination of federal
income tax returns through fiscal year 1985. Based upon preliminary
understandings, substantial tax refunds and interest payments may be
received by the Company. Such interest and a portion of the taxes
refunded will be recognized as income as audits are finalized.
<PAGE>11
Liquidity and Capital Resources
- - -------------------------------
Cash flow from operations was $47.0 million compared to $21.4 million in
fiscal year 1994. The difference resulted principally from a $40.9
million decrease in receivables in 1995 compared to a $18.1 million
decrease last year and a smaller decrease in accounts payable and accrued
expenses in 1995.
Investing activities consisted of purchases of property, plant and
equipment of $9.2 million compared to $3.0 million in the first quarter in
fiscal year 1994. Higher capital expenditures in 1995 reflect efforts at
Huck to increase industrial production capacity and efficiency and initial
capital spending at the Yellow Creek nozzle facility.
Cash flow used for financing activities of $7.0 million decreased $6.7
million from the first quarter in fiscal year 1994. The majority of the
increase was due to a $5.7 million decrease in the purchase of common
stock compared to 1994. During the quarter approximately 231,000 shares
of common stock were repurchased under the 1.5 million share extended
repurchase program announced in June 1994.
Thiokol's current ratio at September 30, 1994, was 2.5; basically
unchanged from June 30, 1994. Working capital at September 30, 1994, of
$215.1 million decreased $1.4 million since June 30, 1994.
The Company has current outstanding authorizations for capital
expenditures of approximately $120 million. A large portion of the
capital investment will be expended to complete a nozzle facility at
NASA's Yellow Creek, Mississippi complex. The Company has agreed with
NASA to transfer its RSRM nozzle manufacturing operation in Utah to the
new facility at Yellow Creek.
Future estimated cash flow from operations, current financial resources
and available credit facilities are expected to be adequate to fund the
Company's anticipated working capital requirements, capital expenditures,
dividend payments and stock repurchase program for the current fiscal
year. As of September 30, 1994, the Company had available, but unused, a
revolving credit facility of $100 million.
<PAGE>12
<TABLE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on October 25, 1994. During the
meeting the stockholders voted for the following:
1) Election of Directors:
<S> <C> <C>
Name For Withheld
- - -------------------------- ---------- ----------
L. Dennis Kozlowski 15,696,279 59,726
James M. Ringler 15,693,822 62,183
Other members of the Board of Directors who continue in office include Neil A. Armstrong,
James R. Burnett, U. Edwin Garrison, Charles S. Locke, Donald C. Trauscht, and James R.
Wilson.
2) By a vote of 15,705,433 to 22,092 Ernst & Young was reappointed as the Company's
independent auditors for the fiscal year ending June 30, 1995.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
No 8-K reports were filed during the quarter ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THIOKOL CORPORATION
-------------------
(Registrant)
Date: November 8, 1994 /s/ Richard L. Corbin
- - ------------------------------ -------------------------------
Richard L. Corbin, Senior
Vice President and Chief
Financial Officer
/s/ Royce W. Searle
--------------------------------
Royce W. Searle, Vice President
and Controller
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Thiokol
Corporation financial statements incorporated in the Form 10-Q for the period
ending September 30, 1994, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1994
<CASH> 70,904
<SECURITIES> 0
<RECEIVABLES> 155,929
<ALLOWANCES> 1,080
<INVENTORY> 122,363
<CURRENT-ASSETS> 356,789
<PP&E> 633,832
<DEPRECIATION> 310,345
<TOTAL-ASSETS> 802,707
<CURRENT-LIABILITIES> 141,698
<BONDS> 88,087
<COMMON> 20,538
0
0
<OTHER-SE> 369,935
<TOTAL-LIABILITY-AND-EQUITY> 802,707
<SALES> 238,151
<TOTAL-REVENUES> 239,064
<CGS> 192,884
<TOTAL-COSTS> 197,544
<OTHER-EXPENSES> 15,197
<LOSS-PROVISION> 124
<INTEREST-EXPENSE> 2,707
<INCOME-PRETAX> 23,616
<INCOME-TAX> 9,328
<INCOME-CONTINUING> 14,288
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,288
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
</TABLE>
