<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 March 31, 1994
-------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -----------------
Commission file number 1-6179
----------------------------------------------------
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 April 30, 1994
- - - - - --------------------------------- ---------------------------------
Common Stock, $1.00 par value 18,917,719 shares
<PAGE>2
<TABLE>
<CAPTION>
THIOKOL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
INDEX
Page
<S> <C> <S> <C>
PART I. FINANCIAL INFORMATION ------
- - - - - ------------------------------
Item 1. Financial Statements
Consolidated Statements of Operations - Three months ended
and Nine months ended March 31, 1994 and 1993 3
Consolidated Balance Sheets -
March 31, 1994 and June 30, 1993 4
Consolidated Statements of Cash Flows - Nine
months ended March 31, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
PART II. OTHER INFORMATION
- - - - - --------------------------
Item 1. Legal Proceeding 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
<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 Nine Months Ended
March 31 March 31
------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $266,093 $277,936 $764,452 $874,412
Interest and other income 491 2,065 12,233 5,542
-------- -------- -------- --------
266,584 280,001 776,685 879,954
Deductions from income:
Cost of sales 220,538 228,755 632,684 728,031
General and administrative expense 16,830 16,196 50,732 51,103
Research and development expense 3,978 4,063 11,651 12,302
Interest expense 3,563 6,384 10,836 19,147
-------- -------- -------- --------
244,909 255,398 705,903 810,583
Income before income taxes and cumulative
effect of accounting changes 21,675 24,603 70,782 69,371
Income taxes 6,309 9,178 26,590 25,876
-------- -------- -------- --------
Income before cumulative effect
of accounting changes 15,366 15,425 44,192 43,495
Cumulative effect of accounting changes (63,838)
-------- -------- -------- --------
Net income (loss) $ 15,366 $ 15,425 $(19,646) $ 43,495
======== ======== ======== ========
Net income (loss) per share:
Income before cumulative effect
of accounting changes $ .77 $ .76 $ 2.18 $ 2.15
Cumulative effect of accounting changes (3.15)
-------- -------- -------- --------
Net income (loss) $ .77 $ .76 $ (.97) $ 2.15
======== ======== ======== ========
Dividends per share $ .17 $ .10 $ .51 $ .30
======== ======== ======== ========
Average number of common and common
equivalent shares outstanding 19,856 20,422 20,231 20,267
======== ======== ======== ========
See notes to consolidated financial statements
</TABLE>
<PAGE>4
<TABLE>
<CAPTION>
THIOKOL CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
March 31 June 30
1994 1993
--------- ---------
ASSETS (Unaudited)
- - - - - ------
Current assets
<S> <C> <C>
Cash and cash equivalents $ 63,736 $ 31,365
Receivables 177,055 225,818
Inventories 118,556 118,371
Deferred income tax assets 20,613 21,364
Prepaid expenses 6,803 2,935
-------- --------
Total current assets 386,763 399,853
Property, plant and equipment, at cost
Less allowances for depreciation 321,417 329,262
Other assets
Costs in excess of net assets of businesses
acquired, less amortization 54,508 55,921
Patents and other intangible assets 20,184 21,938
Other noncurrent assets 38,983 33,981
-------- --------
$821,855 $840,955
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - - - - ------------------------------------
Current liabilities
Short-term debt $ 21,832 $ 26,989
Accounts payable 28,909 33,233
Accrued compensation 41,639 48,042
Other accrued expenses 25,603 28,598
Income taxes 11,710 12,830
Current portion of long-term debt 34,628 34,679
-------- --------
Total current liabilities 164,321 184,371
Long-term debt 87,842 87,917
Accrued retiree benefits 80,911
Deferred income taxes 26,149 62,689
Accrued interest and other non-current liabilities 79,168 62,810
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 46,264 48,718
Retained earnings 351,313 381,082
-------- --------
418,115 450,338
Less cost of common stock in Treasury
1,349 shares, March 31, 1994 and
342 shares, June 30, 1993 (34,651) (7,170)
-------- --------
Total stockholders' equity 383,464 443,168
-------- --------
$821,855 $840,955
======== ========
See notes to consolidated financial statements
</TABLE>
<PAGE>5
<TABLE>
<CAPTION>
THIOKOL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
March 31
----------------------
1994 1993
--------- --------
Operating Activities
- - - - - --------------------
<S> <C> <S> <C> <C>
Net (loss) income from operations $(19,646) $ 43,495
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 30,494 33,950
Changes in operating assets and liabilities:
Decrease in receivables 48,669 4,631
(Increase) decrease in inventories and prepaid expenses (164) 23,647
Decrease in accounts payable and accrued expenses (16,512) (23,004)
Increase (decrease) in income taxes 486 (8,543)
Cumulative effect of accounting changes 63,838
Other (7,033) 5,002
-------- --------
Net cash provided by operating activities 100,132 79,178
Investing Activities
- - - - - --------------------
Acquisitions, net of acquired cash (12,065) (6,020)
Purchases of property, plant and equipment (net) (10,277) (15,792)
-------- --------
Net cash used for investing activities (22,342) (21,812)
Financing Activities
- - - - - --------------------
Net change in short-term debt (5,252) 10,297
Long-term borrowings 42 31
Repayment of long-term debt (151) (465)
Dividends paid (10,123) (6,026)
Purchase of common stock for treasury (39,799) (1,026)
Stock option transactions 9,864 3,464
-------- --------
Net cash (used for) provided by financing activities (45,419) 6,275
-------- --------
Increase in cash and cash equivalents 32,371 63,641
Cash and cash equivalents at beginning of year 31,365 135,838
-------- --------
Cash and cash equivalents at end of period $ 63,736 $199,479
======== ========
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, 1993,
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 nine months ended March 31, 1994, are
not necessarily indicative of the results to be expected for the fiscal
year ending June 30, 1994. 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, 1993.
Inventories
- - - - - -----------
Inventories are stated at the lower of cost or market. Propulsion systems
segment inventories represent estimated recoverable costs related to long-
term fixed price contracts and include costs incurred for production,
allocable indirect, and research and development costs, less related
progress payments received. Propulsion systems segment inventories of
$50,576 at March 31, 1994, and $58,043 at June 30, 1993, are after
reduction for progress payments received of $15,358 and $22,344,
respectively. Inventories for the fastening systems segment are
determined by the first-in, first-out (FIFO) method and amounted to
$67,980 at March 31, 1994, and $60,328 at June 30, 1993.
Accounting Changes
- - - - - ------------------
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106 "Employers' Accounting for
Postretirement Benefits Other than Pensions" and SFAS No. 112 "Employers'
Accounting for Postemployment Benefits." SFAS 106 requires the Company to
accrue the expected cost of postretirement benefits, primarily health
care, during the period of employee eligible service rather than as the
amounts are paid. The Company elected to record the transition obligation
as a one-time charge to earnings. SFAS 112 requires the Company to accrue
the expected cost of postemployment benefits provided to former employees
or their beneficiaries rather than the current method of charging these
costs against earnings as the amounts are paid. SFAS 112 was adopted
earlier than required by the provisions of the Statement. A significant
portion of the charges are expected to be recovered under government
contracts as amounts are funded or allocated to contracts.
At July 1, 1993, the accumulated postretirement obligation under SFAS No.
106 was $81,901. The effect on earnings and shareholders' equity was
$51,663 ($2.55 per share) after a deferred income tax benefit of $30,238.
The liability recognized at July 1, 1993, due to the adoption of SFAS No.
112 was $19,300. The effect on earnings and shareholders' equity was
$12,175 ($.60 per share) after a deferred income tax benefit of $7,125.
<PAGE>7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- - - - - ---------------------
Net income for the third quarter ended March 31, 1994, was unchanged from
the prior year quarter. Net income for the quarter was $15.4 million or
$.77 per share compared to $15.4 million or $.76 per share last year. Net
sales for the quarter of $266.1 million decreased 4 percent compared to
$277.9 million last year.
Net income for the quarter was favorably affected by Space Shuttle solid
rocket motor (RSRM) enhancement fees, higher fastening systems income,
lower interest expense and recognition of income tax refunds. The
completion of Peacekeeper motor deliveries during the first quarter
significantly decreased sales and income in the third quarter. Propulsion
systems' results for the prior year's quarter included $3.2 million of
nonrecurring recoveries in U.S. Government revenues of tax related costs
expensed in prior periods.
For the nine months ended March 31, 1994, net income before recognition of
a one-time, non-cash cumulative effect of accounting changes, was $44.2
million or $2.18 per share; a 2 percent increase compared to $43.5 million
or $2.15 per share for the prior year. Sales of $764.4 million for the
nine month period decreased 13 percent from $874.4 million last year.
The cumulative effect of accounting changes resulted from the July 1,
1993, adoption of Statement of Financial Accounting Standards (SFAS) No.
106 "Employers' Accounting for Postretirement Benefits Other than
Pensions" and SFAS No. 112 "Employers' Accounting for Postemployment
Benefits."
For the nine months ended March 31, 1994, the net loss including the one-
time after tax charge for the accounting changes, was $19.6 million or
$.97 per share. The one-time after tax charge of $63.8 million or $3.15
per share reflects the after tax liability recognized at July 1, 1993, due
to the adoption of SFAS No. 106 and 112 of $51.6 and $12.2 million,
respectively.
For the quarter Space sales of $129.7 million increased 14 percent or
$16.2 million compared to 1993 and related operating income increased 10
percent to $16.6 million from prior year's $15.1 million. Higher RSRM
revenues and income and increased STAR motor production contributed to
these results. The increased income was primarily the result of the
recognition of fee related to RSRM enhancement work which is nearing
completion. RSRM revenues were also positively affected by higher
material purchases. Prior year income was favorably affected by
nonrecurring recoveries in U.S. Government revenues of tax related costs
expensed in prior periods.
Strategic sales decreased 44 percent to $36.6 million while operating
income of $3.9 million decreased $6.8 million or 63 percent from $10.7
million in 1993. The sales and income decrease was caused primarily by
the completion of Peacekeeper motor deliveries during the first quarter.
Trident sales and income declined due to cost underruns and reduced motor
delivery requirements.
<PAGE>8
Tactical sales increased 17 percent to $23.5 million from $20 million last
year. The tactical product line operated at a break even level for the
quarter which was unchanged from last year. Higher Standard Missile and
HARM sales more than offset lower Maverick sales. The decline in military
spending has created a highly competitive pricing environment as the
number of tactical programs has declined. During this quarter low profit
margins on some programs were offset by losses on other programs.
Ordnance sales decreased 25 percent to $29.5 million compared to $39.4
million last year and operating income of $.4 million decreased $3.3
million from the prior year. The decrease in sales and income resulted
from lower operating levels at the government-owned, company-operated
ammunition plants combined with lower operating margins.
Current year-to-date propulsion systems income is lower due to the absence
of certain nonrecurring tax recoveries which benefitted 1993 income by
$9.4 million.
Huck's fastening systems segment sales of $46.8 million increased
17 percent for the quarter while operating income of $4.6 million
increased $1.5 million or 48 percent over last year's $3.1 million,
excluding a $1.9 million charge in 1993 for severance and restructuring
costs. Higher domestic industrial sales combined with lower operating
costs and improved efficiency contributed to the increase in income.
Aerospace fastener sales are still reflective of the weak commercial
aircraft market.
General and administrative expense for the quarter of $16.8 million
increased $.6 million or 4 percent compared to the prior year. The $2.8
million decrease in interest expense resulted primarily from the reduction
in long-term debt at June 30, 1993.
The decrease in the effective income tax rate for the quarter was the
result of favorable settlements of income tax issues.
The Company has a number of open year tax returns under review by the
Internal Revenue Service. 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. Tax refunds which relate to
timing issues will be utilized to pay the corresponding deferred tax
liabilities as amounts come due.
During the first nine months sales and profit derived from production of
and services for the RSRM accounted for approximately 43 percent of total
Company sales and 51 percent of operating income. The current contract
with NASA extends the Company's production of the RSRM through fiscal year
2000. NASA's continued emphasis on cost containment should produce a
slight decrease in RSRM sales this year. However, the opportunity under
contract incentives to reduce costs over the life of the program provides
for higher margin opportunities in the future. U.S. Government funding of
Space programs may impact the Space Shuttle launch schedule as currently
proposed. A reduction in the launch schedule would reduce related revenue
and profits to the Company. 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.
<PAGE>9
The ASRM program, which was being developed by a competitor to replace
Thiokol's current RSRM, was canceled by the U.S. Government during the
second quarter. The Company's contract for the ASRM nozzle development
has generated less than $1 million in sales this year and $11 million in
sales in 1993. The cancellation of the ASRM will have a minor impact on
sales and income over the next few years.
Due to reductions in U.S. Government defense spending, the Company expects
its defense sales and income to decline materially this year and in fiscal
year 1995. The Peacekeeper program was completed during the first
quarter. Trident sales will likely decrease as missile production is
reduced in future years. Sales from the Company-operated U.S. Army
ordnance plants will decline significantly in the next two years. Both of
the Company-operated plants are on the Army's closure list. Production at
the Longhorn plant, under the current operating contract, is scheduled to
be discontinued this year. The Louisiana plant is targeted for closure at
September 30, 1994.
In response to the declining Department of Defense environment, the
Company has taken steps to downsize operations to match current and
projected operating conditions by reductions in employment, consolidation
of facilities, and spending reductions.
Fastening systems income should continue to benefit the current year due
to strong domestic industrial sales and lower costs.
Liquidity and Capital Resources
- - - - - -------------------------------
Cash flow provided by operations was $100.1 million compared to $79.2
million in 1993. The increase resulted principally from a $48.7 decrease
in receivables this year compared to a $4.6 million decrease in
receivables in 1993. Cash flow decreased from the prior year as a result
of a $23.6 decrease in inventories and prepaid expenses in 1993 compared
to a $.2 million increase this year.
Investing activities, which consumed approximately $22 million in cash
this year and in 1993, include purchases of property, plant and equipment
and acquisitions. During the quarter the Company acquired certain assets
of Deutsch Fastener Corporation of Lakewood, California. Deutsch
Fastener, with annual sales of approximately $15 million, produces a broad
line of high performance fasteners for the commercial aircraft market,
including threaded bolts, high strength bolts, lock nuts and captive
screws, markets not previously served by Huck.
A $38.8 million increase in purchases of common stock for treasury over
1993, a modest net decrease in short-term debt compared to a net increase
in 1993, and a 68 percent increase in cash dividends over last year
accounted for the majority of the $51.7 million decrease in cash flow from
financing activities this year compared to 1993.
During the quarter 555,900 shares of common stock were repurchased under
the Company's share repurchase program announced in April 1993.
Approximately .4 million shares remain to be repurchased under the
existing 2.5 million share authorization. The current share repurchase
program is targeted for completion by June 30, 1994. Outstanding common
shares have decreased from 20.1 million at March 31, 1993 to 19.2 million
shares at March 31, 1994.
Thiokol's current ratio at March 31, 1994, of 2.4 represented an increase
from 2.2 at June 30, 1993. Working capital at March 31, 1994, of $222.4
million increased $7.0 million since June 30, 1993.
<PAGE> 10
The Company has current outstanding authorizations for capital
expenditures of $35 million.
As a result of the ASRM cancellation, the Company has agreed to transfer
its RSRM nozzle manufacturing operation in Utah to a new facility at
NASA's Yellow Creek Mississippi complex. The uncompleted Yellow Creek
facility was being constructed to manufacture the ASRM. The use of the
new Yellow Creek nozzle facility will allow the Company to enhance its
nozzle manufacturing process and strengthen its position in the solid
propulsion industry. An estimated $80 to $90 million capital investment
($13 million of which has been authorized by the Board of Directors) will
be required over the next few years to complete the nozzle facility.
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, debt repayment,
capital expenditures, dividend payments, and stock repurchase program for
the current fiscal year.
During the first quarter of fiscal year 1994 the Company negotiated a new
$100 million revolving credit facility with a group of banks which expires
in September 1996. As of March 31, 1994, no funds had been drawn on this
credit facility.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDING
The Company executed an Administrative Consent Order with the state of New
Jersey. Under the order, the Company has agreed to replace an air
stripper which is owned by Rockaway Township. The cost of the air
stripper is estimated to be approximately $.25 million.
Item 5. OTHER INFORMATION
On April 26, 1994, the Company announced that Richard L. Corbin will
become Senior Vice President and Chief Financial Officer, effective May
15, 1994.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any 8-K reports during the fiscal quarter ended
March 31, 1994.
<PAGE>11
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: 3 May 1994 /s/ James R. Wilson
--------------------- -------------------------------------
James R. Wilson, President,
Chief Executive Officer, and
Chief Financial Officer
Date: 3 May 1994 /s/ Royce W. Searle
--------------------- -------------------------------------
Royce W. Searle, Vice President
and Controller
