UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
-------------
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 1-8974
AlliedSignal Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2640650
-------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Columbia Road
P.O. Box 4000
Morristown, New Jersey 07962-2497
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(973)455-2000
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
-------- --------
At June 30, 1997 there were 282,984,589 shares of Common Stock
(par value $1 per share) outstanding, which does not reflect
the two-for-one stock split approved July 23, 1997.
<PAGE>
AlliedSignal Inc.
Index
-----
Page No.
--------
Part I. - Financial Information
Item 1. Condensed Financial Statements:
Consolidated Balance Sheet -
June 30, 1997 and December 31, 1996 3
Consolidated Statement of Income -
Three and Six Months Ended June 30, 1997 and 1996 4
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1997 and 1996 5
Notes to Financial Statements 6
Report on Review by Independent
Accountants 8
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 9
Part II.- Other Information
Item 6. Exhibits and Reports on Form 8-K 16
Signatures
2
<PAGE>
AlliedSignal Inc.
Consolidated Balance Sheet
(Unaudited)
June 30, December 31,
1997 1996
-------- ------------
(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,000 $ 1,465
Short-term investments 465 301
Accounts and notes receivable - net (Note 2) 1,594 1,661
Inventories - net (Note 3) 2,129 1,946
Other current assets 450 466
------- -------
Total current assets 5,638 5,839
Investments and long-term receivables 459 473
Property, plant and equipment 9,118 8,976
Accumulated depreciation and amortization (4,918) (4,757)
Cost in excess of net assets of acquired
companies - net 1,657 1,418
Other assets 958 880
------- -------
Total assets $ 12,912 $12,829
======= =======
LIABILITIES
Current Liabilities:
Accounts payable $ 1,180 $ 1,187
Short-term borrowings 27 32
Commercial paper 662 470
Current maturities of long-term debt 142 112
Accrued liabilities 1,583 1,895
------- -------
Total current liabilities 3,594 3,696
Long-term debt 1,263 1,317
Deferred income taxes 638 610
Postretirement benefit obligations other
than pensions 1,780 1,787
Other liabilities 1,285 1,239
SHAREOWNERS' EQUITY
Capital - common stock issued* 716 716
- additional paid-in capital* 2,296 2,189
Common stock held in treasury, at cost (2,184) (1,953)
Cumulative translation adjustment (112) 2
Unrealized holding gain on marketable
securities 6 12
Retained earnings 3,630 3,214
-------- --------
Total shareowners' equity 4,352 4,180
-------- --------
Total liabilities and shareowners' equity $12,912 $12,829
======== ========
*Reflects two-for-one stock split as described in Notes to Financial
Statements.
Notes to Financial Statements are an integral part of this statement.
3
<PAGE>
AlliedSignal Inc.
Consolidated Statement of Income
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars in millions except
per share amounts)
Net sales $3,578 $3,347 $6,905 $7,125
------ ------ ------ ------
Cost of goods sold (Note 6) 2,764 3,235 5,369 6,247
Selling, general and
administrative expenses 386 366 751 767
Gain on sale of business
(Note 7) - (655) - (655)
------ ------ ------ ------
Total costs and expenses 3,150 2,946 6,120 6,359
------ ------ ------ ------
Income from operations 428 401 785 766
Equity in income of
affiliated companies 55 46 96 73
Other income (expense)
(Note 6) 14 33 48 33
Interest and other financial
charges (39) (47) (81) (97)
------ ------ ------ ------
Income before taxes on income 458 433 848 775
Taxes on income 153 161 284 278
------ ------ ------ ------
Net income $ 305 $ 272 $ 564 $ 497
====== ====== ====== ======
Earnings per share of common
stock (Note 8)* $ .54 $ .48 $ 1.00 $ .88
====== ====== ====== ======
Cash dividends per share of
common stock* $ .13 $.1125 $ .26 $ .225
====== ====== ====== ======
*Reflects two-for-one stock split as described in Notes to Financial
Statements.
Notes to Financial Statements are an integral part of this statement.
4
<PAGE>
AlliedSignal Inc.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30
----------------
1997 1996
---- ----
(Dollars in millions)
Cash flows from operating activities:
Net income $ 564 $ 497
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of business -- (655)
Repositioning and other charges -- 622
Depreciation and amortization (includes goodwill) 305 323
Undistributed earnings of equity affiliates (22) (14)
Deferred income taxes 67 128
Decrease (increase) in accounts and notes
receivable 76 (147)
(Increase) in inventories (158) (135)
Decrease (increase) in other current assets 16 (11)
Increase in accounts payable 6 35
(Decrease) increase in accrued liabilities (345) 9
Taxes paid on gain on sale of braking business (5) (81)
Other (40) (325)
------- -------
Net cash provided by operating activities 464 246
------- -------
Cash flows from investing activities:
Expenditures for property, plant and equipment (309) (346)
Proceeds from disposals of property, plant and
equipment 16 56
Decrease in other investments 17 --
(Increase) in other investments (5) (2)
Cash paid for acquisitions - net (382) (35)
Proceeds from sales of businesses 34 1,187
(Increase) in short-term investments (164) --
------- -------
Net cash (used for) provided by investing
activities (793) 860
------- -------
Cash flows from financing activities:
Net increase in commercial paper 192 685
Net (decrease) in short-term borrowings (5) (296)
Proceeds from issuance of preferred stock of
subsidiary 112 --
Proceeds from issuance of common stock 101 79
Proceeds from issuance of long-term debt 12 5
Payments of long-term debt (65) (72)
Repurchases of common stock (290) (203)
Cash dividends on common stock (148) (130)
Other (45) --
------- -------
Net cash (used for) provided by financing
activities (136) 68
------- -------
Net (decrease) increase in cash and cash
equivalents (465) 1,174
------- -------
Cash and cash equivalents at beginning of year 1,465 540
------- -------
Cash and cash equivalents at end of period $1,000 $1,714
======= =======
Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
AlliedSignal Inc.
Notes to Financial Statements
(Unaudited)
(Dollars in Millions except per share amounts)
Note 1. In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments,
consisting only of normal adjustments, necessary to present fairly
the financial position of AlliedSignal Inc. and its consolidated
subsidiaries at June 30, 1997 and the results of operations for the
three and six months ended June 30, 1997 and 1996 and the cash flows
for the six months ended June 30, 1997 and 1996. The results of
operations for the three- and six-month periods ended June 30, 1997
should not necessarily be taken as indicative of the results of
operations that may be expected for the entire year 1997.
The financial information as of June 30, 1997 should be read in
conjunction with the financial statements contained in the Company's
Form 10-K Annual Report for 1996.
Note 2. Accounts and notes receivable consist of the following:
June 30, December 31,
1997 1996
---------- ------------
Trade $1,246 $1,330
Other 381 362
------- -------
1,627 1,692
Less-Allowance for doubtful
accounts and refunds (33) (31)
------- -------
$1,594 $1,661
======= =======
Note 3. Inventories consist of the following:
June 30, December 31,
1997 1996
---------- ------------
Raw materials $ 581 $ 538
Work in process 861 762
Finished products 841 814
Supplies and containers 91 88
-------- -------
2,374 2,202
Less-Progress payments (118) (126)
Reduction to LIFO cost basis (127) (130)
-------- -------
$2,129 $1,946
======== =======
Note 4. In the first quarter 1997, a subsidiary of the Company
issued $112 million of preferred stock to third-party investors.
The preferred stock is reflected as a minority interest included as
part of Other Liabilities in the Consolidated Balance Sheet. In
July 1997, the preferred stock was redeemed by the Company.
Note 5. In June 1997 the Company amended its Five-Year Credit
Agreement by extending the maturity one year to June 30, 2002 and
increasing the amount available thereunder to $750 million. The
amendment also included certain other minor changes in terms and
conditions. The Company also terminated its $375 million 364-Day
Credit Agreement.
6
<PAGE>
Note 6. In the second quarter of 1996 the Company recorded a pretax
charge of $277 million relating to the costs of actions to
reposition some of its major business units. The components of the
repositioning charge include asset write-downs of $136 million,
severance costs of $127 million and other exit costs of $14 million.
All of the repositioning actions are generally expected to be
completed by 1998.
In the second quarter of 1996, the Company adopted the provisions of
the American Institute of Certified Public Accountants' Statement
of Position 96-1, "Environmental Remediation Liabilities" (SOP 96-
1). The adoption of SOP 96-1 resulted in a pretax charge of $175
million, and is accounted for as a change in estimate. The Company
also recorded other charges primarily related to changes made in
employee benefit programs and in connection with customer and former
employee claims.
Repositioning and other charges totaling $637 million are included
as part of cost of goods sold for 1996. Other income (expense) in
1996 includes a $15 million credit for repositioning and other
charges representing the minority interest share of such charges.
The total pretax impact of the repositioning and other charges for
1996 is $622 million (after-tax $359 million, or $0.63 per share).
Note 7. In April 1996 the Company sold its worldwide hydraulic and
anti-lock braking systems (ABS) businesses (braking business) to
Robert Bosch GmbH, a privately-held German company. The braking
business had 1995 sales and income from operations of approximately
$2.0 billion and $154 million, respectively. The Company received
consideration of $1.5 billion, subject to certain post-closing
adjustments. At June 30, 1996, approximately $300 million of this
amount was in escrow. The sale of the braking business resulted in
a gain of $655 million (after-tax $368 million, or $0.65 per share).
Note 8. On July 23, 1997, the Company's Board of Directors approved
a two-for-one common stock split for shareowners of record on August
21, 1997. The stock split is payable on September 15, 1997 and all
share and per share data in the financial statements reflect the
stock split for all periods presented. The weighted average number
of shares outstanding during each period, after adjusting for the
stock split, was: three months ended June 30, 1997, 565,383,810
shares, and 1996, 565,539,396 shares; and six months ended June 30,
1997, 566,185,136 shares and 1996, 565,620,152 shares. There is no
material dilutive effect on earnings per share of common stock due
to common stock equivalents.
7
<PAGE>
Report on Review by Independent Accountants
-------------------------------------------
To the Board of Directors
of AlliedSignal Inc.
We have reviewed the accompanying consolidated balance sheet of
AlliedSignal Inc. and its subsidiaries as of June 30, 1997, and the
consolidated statements of income for the three-month and six-month
periods ended June 30, 1997 and 1996 and of cash flows for the six-
month periods ended June 30, 1997 and 1996. This financial
information is the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the financial information referred to above
for it to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December
31, 1996, and the related consolidated statements of income, of
retained earnings, and of cash flows for the year then ended (not
presented herein); and in our report dated January 31, 1997 we expressed
an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
balance sheet information as of December 31, 1996, is fairly stated,
in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
Price Waterhouse LLP
4 Headquarters Plaza North
Morristown, NJ 07962
July 25, 1997
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
---------------------
Second Quarter 1997 Compared with Second Quarter 1996
- -----------------------------------------------------
Net sales in the second quarter of 1997 were $3.6 billion, an
increase of $231 million, or 7%, compared with the second quarter of
last year. Of this increase, $295 million was due to higher sales
volume, with acquisitions, net of divestitures, also contributing
$33 million of sales. The impact of foreign exchange on the
Automotive and Engineered Materials segments reduced sales by $52
million. Selling prices were lower by $45 million, mainly for the
Automotive and Engineered Materials segments.
Aerospace sales of $1,513 million in the second quarter of 1997
increased $143 million, or 10%, compared with the second quarter of
last year. Aerospace Equipment Systems had significantly higher
sales driven by aftermarket strength and higher air transport
original-equipment shipments. Aerospace Equipment Systems growth
was led by strong sales of environmental control systems, engine
fuel systems and aircraft landing systems; partially offset by lower
revenue from engineering services. Engines had moderately higher
sales due to increased shipments of auxiliary power units and continued
strength in the sales of spare parts and repair and overhaul services.
Commercial Avionics Systems sales were substantially higher reflecting
increased demand for flight management and safety avionics systems.
Electronic Systems sales were significantly lower due to order delays,
but Government Services had moderately higher sales.
Automotive sales of $976 million in the second quarter of 1997
were $21 million, or 2%, higher compared with the second quarter of
1996. Turbocharger sales were significantly higher as new products
continued to drive strong sales growth in Europe. Truck Brake
Systems sales in North America were also significantly higher as a
result of a strong aftermarket, an upturn in new truck builds and
increased installation rates of anti-lock braking systems.
Aftermarket sales were slightly higher, reflecting the acquisition
of Prestone Products Corporation in June 1997, partially offset by
continued weakness in market conditions. Safety Restraints had a
significant decline in sales mainly due to labor strikes at two key
North American customers and weak pricing in North America.
Engineered Materials sales of $1,089 million in the second
quarter of 1997 were $69 million, or 7%, higher compared with the
second quarter of last year. Polymers had moderately higher sales
due to increased demand for engineered plastics, carpet fibers and
industrial polyester. Engineered plastics benefited from new
products and applications in the automotive and packaging
industries. Polymers sales also benefited from expansion at two
industrial polyester plants and at the Company's phenol plant.
Sales of Specialty Chemicals were moderately stronger, primarily
reflecting strength in the industrial specialties and
pharmaceutical/agricultural market segments. Electronic Materials
also had a moderate sales increase driven by improved results at
laminate systems, as the printed wiring board industry starts to
show signs of a recovery, as well as by continued strength in the
advanced microelectronics business.
9
<PAGE>
Cost of goods sold as a percent of net sales decreased from
96.7% in the second quarter of 1996 to 77.2% in the second quarter
of 1997. The 1996 second quarter includes repositioning and other
charges totaling $637 million. (See Note 6 of Notes to Financial
Statements for further information.) Excluding repositioning and
other charges, cost of goods sold as a percent of net sales was
77.6% in the second quarter of 1996.
Gain on sale of business represents the pretax gain of $655
million on the sale of the braking business in April 1996. (See
Note 7 of Notes to Financial Statements for further information.)
Income from operations of $428 million in the second quarter of
1997 increased by $27 million, or 7%, compared with last year's
second quarter. The second quarter of 1996 includes the pretax gain
of $655 million on the sale of the braking business and
repositioning and other charges totaling $637 million (special
items). Excluding the impact of these special items, income from
operations in the second quarter of 1997 increased by $45 million,
or 12%. On a segment basis, Aerospace income from operations
increased 26% and Engineered Materials improved 12%, but Automotive
income from operations was 6% lower. The Company's operating margin
for the second quarter of 1997 was 12.0%, compared with 11.4% for
the same period last year adjusted for special items. See the
discussion of net income below for information by segment.
Productivity (the constant dollar basis relationship of sales
to costs) improved by 6.9% compared with the second quarter of 1996
primarily reflecting ongoing initiatives to lower materials and
manufacturing costs.
Equity in income of affiliated companies of $55 million
increased by $9 million, or 20%, compared with last year mainly due
to higher earnings from the UOP process technology joint venture
(UOP) and several other affiliates.
Other income (expense), $14 million income in the second
quarter of 1997, decreased by $19 million, or 58%, compared with the
same quarter last year, mainly due to the minority interest share of
the 1996 repositioning and other charges.
Interest and other financial charges of $39 million in the
second quarter of 1997 decreased by $8 million, or 17%, from the
prior year's second quarter reflecting lower levels of short-term
debt.
The effective tax rate in the second quarter of 1997 was 33.5%
compared with 37.2% in 1996. The decrease is principally due to the
higher taxes on the gain in 1996 on the sale of the braking systems
business.
Net income of $305 million, or $0.54 per share, in the second
quarter of 1997 was 16% higher than last year's net income, after
excluding special items, of $263 million, or $0.46 per share. The
prior year's net income, including special items, was $272 million,
or $0.48 per share. A discussion of the operations of the business
segments follows. Adjusted net income (see table below) for the
segments excludes the impact of the special items. (Dollars in
millions)
10
<PAGE>
Second Quarter
----------------------------------------------
Net Income Special Items Adjusted
as Reported (Gains)/Losses Net Income
----------- -------------- ------------
Aerospace
1997 $ 115 $ - $ 115
1996 (89) 179 90
------ ------ ------
Increase/(Decrease) $ 204 $ 179 $ 25
====== ====== ======
Automotive
1997 $ 48 $ - $ 48
1996 369 (319) 50
------ ------ ------
Increase/(Decrease) $(321) $(319) $ (2)
====== ====== ======
Engineered Materials
1997 $ 137 $ - $ 137
1996 47 71 118
------ ------ ------
Increase/(Decrease) $ 90 $ 71 $ 19
====== ====== ======
Aerospace net income for 1997 improved to $115 million from the
1996 adjusted net income of $90 million, an increase of $25 million,
or 28%. Strong sales growth and improvements in productivity
resulted in substantially higher earnings for Aerospace Equipment
Systems, Engines and Commercial Avionics Systems. Electronic Systems
incurred a substantial earnings decline due to lower sales.
Automotive net income for 1997 of $48 million was $2 million,
or 4%, lower than the adjusted net income in the prior year.
Earnings declined for Safety Restraints, mainly due to lower sales,
and for the Aftermarket and Filters & Spark Plugs due to continued
weakness in market conditions. Turbochargers had substantially
higher income on continued strong sales in Europe and Truck Brake
Systems also had substantial gains primarily reflecting strong
aftermarket sales.
Engineered Materials net income for 1997 increased to $137
million from the 1996 adjusted net income of $118 million, a $19
million, or 16%, increase. Specialty Chemicals had higher earnings,
driven primarily by productivity initiatives at Riedel-de Haen.
Electronic Materials had strong earnings, led by the advanced
microelectronics business. Polymers net income was flat due to
weaker selling prices for industrial polyester and acetone.
Six Months 1997 Compared with Six Months 1996
- ---------------------------------------------
Net sales in the first six months of 1997 totaled $6.9 billion,
a decrease of $220 million, or 3%, compared with the first six
months of last year. Net sales were lower reflecting the sale of
the Company's automotive braking business in April 1996. Excluding
the braking business, net sales increased $336 million,
11
<PAGE>
or 5%, driven principally by higher sales volumes. The impact of
foreign exchange and lower selling prices, mainly for the Automotive
and Engineered Materials segments, somewhat offset the higher sales
volumes.
Aerospace sales of $2,911 million in the first six months of
1997 increased $241 million, or 9%, compared with the first six
months of 1996. Engines had significantly higher sales from
aftermarket parts and repair and overhaul services, as well as
higher shipments of auxiliary power units. Aerospace Equipment
Systems sales were also significantly higher, driven by continued
aftermarket strength, and substantially higher original-equipment
shipments of engine fuel systems, environmental control systems and
aircraft landing systems, however, lower revenue from engineering
services was a partial offset. Sales of Commercial Avionics Systems
were higher, primarily due to strength in flight management and
safety avionics systems. Electronic Systems sales were significantly
lower due to order delays. Government Services had significantly
higher sales, mainly to NASA.
Automotive sales of $1,903 million in the first six months of
1997 were $528 million, or 22%, lower compared with the first six
months of 1996 reflecting the disposition of the braking business.
Excluding the braking business, Automotive sales increased $28
million, or 1%. Continued strength of the U.S. dollar negatively
impacted sales growth by 3%. Turbocharger sales were significantly
higher, primarily reflecting the flow of new products and the
popularity in Europe of turbocharged, diesel-powered cars. Truck
Brake Systems sales in North America improved moderately, benefiting
from a strong aftermarket, an upturn in truck builds and increased
installation rates of anti-lock braking systems. Safety Restraints
had a moderate decline in sales mainly due to lower airbag sales in
North America, in part reflecting labor strikes at two key customers.
Engineered Materials sales of $2,090 million in the first six
months of 1997 were $68 million, or 3%, higher compared with the
first six months of 1996. Polymer sales were slightly higher due
principally to greater demand for engineered plastics. Specialty
Chemicals sales also improved slightly reflecting growing demand for
chlorofluorocarbon (CFC) replacement products and performance
chemicals. Sales for Electronic Materials and environmental
catalysts were lower.
Cost of goods sold as a percent of sales decreased from 87.7%
in the first six months of 1996 to 77.8% in the first six months of
1997 as the 1996 period includes repositioning and other charges
totaling $637 million. (See Note 6 of Notes to Financial Statements
for further information.) Excluding repositioning and other
charges, cost of goods sold as a percent of net sales was 78.7% for
the first six months of 1996. The improvement in 1997 is due
primarily to productivity programs to lower manufacturing and
material costs.
Gain on sale of business represents the pretax gain of $655
million on the sale of the braking business in April 1996. (See
Note 7 of Notes to Financial Statements for further information.)
12
<PAGE>
Income from operations of $785 million in the first six months
of 1997 increased $19 million, or 2%, compared with last year's
first six months. The 1996 period includes a net pretax gain of $18
million from the impact of special items. Excluding the impact of
these special items, income from operations in the first six months
of 1997 increased by $37 million, or 5%. On a segment basis,
Aerospace income from operations increased 31%, but Automotive and
Engineered Materials income from operations decreased 21% and 2%,
respectively. The Company's operating margin for the first six
months of 1997 was 11.4% compared with 10.5% for the same period
last year adjusted for special items. See the discussion of net
income below for information by segment.
Productivity improved by 6.6% compared with last year's first
six months.
Equity in income of affiliated companies of $96 million
increased by $23 million, or 32%, compared with last year mainly due
to substantially higher earnings from UOP.
Other income (expense), $48 million income in the first six
months of 1997, improved by $15 million, or 45%, compared with the
same period last year mainly due to increased interest and dividend
income (included in the Corporate and Unallocated segment),
primarily reflecting the investment of cash received from the sale
of the braking business, and higher foreign exchange gains. A
partial offset was the minority interest share of the 1996
repositioning and other charges.
Interest and other financial charges of $81 million in the
first six months of 1997 decreased by $16 million, or 16%, compared
with the first six months of 1996 reflecting lower levels of short-
term debt.
The effective tax rate in the first six months of 1997 was
33.5% compared with 35.9% in 1996. The decrease is principally due
to the higher taxes on the gain in 1996 on the sale of the braking
systems business.
Net income of $564 million, or $1.00 per share, in the first
six months of 1997 was 16% higher than last year's net income, after
excluding special items, of $488 million, or $0.86 per share. The
prior year's net income, including special items, was $497 million,
or $0.88 per share. A discussion of the operations of the business
segments follows. Adjusted net income (see table below) for the
segments excludes the impact of the special items. (Dollars in
millions)
13
<PAGE>
Six Months Ended June 30
----------------------------------------------
Net Income Special Items Adjusted
as Reported (Gains)/Losses Net Income
------------ -------------- -----------
Aerospace
1997 $ 214 $ - $ 214
1996 (18) 179 161
------- ------- -------
Increase/(Decrease) $ 232 $ 179 $ 53
======= ======= =======
Automotive
1997 $ 100 $ - $ 100
1996 441 (319) 122
------- ------- -------
Increase/(Decrease) $(341) $(319) $(22)
======= ======= =======
Engineered Materials
1997 $ 245 $ - $ 245
1996 156 71 227
------- ------- -------
Increase/(Decrease) $ 89 $ 71 $ 18
======= ======= =======
Aerospace net income for 1997 improved to $214 million from the
1996 adjusted net income of $161 million, an increase of $53
million, or 33%. Engines had substantially stronger earnings due to
higher sales and a favorable mix of higher margin aftermarket sales.
Income from Aerospace Equipment Systems was also higher due
principally to increased sales. Earnings for Commercial Avionics
Systems were very strong, in part reflecting improved manufacturing
operations. Earnings for Electronic Systems decreased substantially
due to lower sales.
Automotive net income for 1997 declined to $100 million from
the 1996 adjusted net income of $122 million, a $22 million, or 18%,
decrease. The decrease reflects the absence of net income from the
disposed braking business. Excluding the braking business,
Automotive's net income increased $3 million, or 3%. Turbochargers
had substantially higher net income due to increased sales and
significant productivity improvements. Net income for Truck Brake
Systems, European Aftermarket and Friction Materials was also
favorable. However, earnings for Safety Restraints, Filters & Spark
Plugs and the North American Aftermarket were unfavorable.
Engineered Materials net income for 1997 increased to $245
million from the 1996 adjusted net income of $227 million, a $18
million, or 8% improvement. Specialty Chemicals had significantly
higher earnings, driven by UOP, as the petrochemical and refining
industries continued to be strong worldwide, as well as by
improvements for Riedel-de Haen and performance chemicals.
Electronic Materials also had higher income. Polymers had lower
income due to weak pricing in the polyester business and higher raw
material costs in the nylon business, mainly in the first quarter.
In the second quarter of 1996, the Company recorded a pretax
charge of $277 million related to the costs of actions to reposition
some of its major business units. Actions are being undertaken to
consolidate manufacturing facilities,
14
<PAGE>
rationalize manufacturing capacity and optimize operational
capabilities. Upon completion, the repositioning actions are
currently expected to generate additional annual income from
operations of approximately $170 million.
Financial Condition
-------------------
June 30, 1997 Compared with December 31, 1996
- ---------------------------------------------
On June 30, 1997, the Company had $1,465 million in cash and
cash equivalents and short-term investments compared with $1,766
million at year-end 1996. The current ratio at June 30, 1997 was
1.6X, the same as at year-end 1996.
The Company's long-term debt on June 30, 1997 was $1,263
million, a reduction of $54 million compared with year-end 1996.
Total debt of $2,094 million on June 30, 1997 was $163 million
higher than at year-end. The Company's total debt as a percent of
capital at June 30, 1997 was 30.3%, slightly higher than 29.5% at
year-end 1996.
During the first six months of 1997, the Company spent $309
million for capital expenditures compared with $346 million in the
corresponding period in 1996. Spending for the 1997 six-month period
was as follows: aerospace-$77 million; automotive-$76 million;
engineered materials-$140 million, and corporate-$16 million.
During the first six months of 1997, the Company repurchased
4.2 million shares (pre-split basis) of common stock for $290
million. Common stock is repurchased to meet the expected
requirements for shares issued under employee benefit plans and a
shareowner dividend reinvestment plan. At June 30, 1997, the Company
was authorized to repurchase 47.0 million shares (pre-split basis)
of common stock.
In June 1997, the Company acquired Prestone Products
Corporation (Prestone) for approximately $400 million, including
assumed liabilities. Prestone is a leading supplier of premium car
care products and has annual sales of approximately $300 million.
In July 1997, the Company completed its acquisition of Grimes
Aerospace (Grimes), a manufacturer of exterior and interior aircraft
lighting systems for approximately $400 million including assumed
liabilities. Grimes, which has annual sales of approximately $230
million, also manufactures aircraft engine components such as valves
and heat exchangers, as well as electronic systems, including flight
warning computers and active matrix liquid crystal displays.
The Company continuously assesses the relative strength of its
portfolio of businesses as to strategic fit, market position and
profit contribution in order to upgrade its combined portfolio and
identify operating units that will most benefit from increased
investment. The Company considers acquisition candidates that will
further its strategic plan and strengthen its existing core
businesses. The Company also identifies operating units that do not
fit into its long term strategic plan based on their market
position, relative profitability or otherwise. These operating
units are considered for potential divestiture, restructuring or
other action. During the second quarter 1997, the Company sold
certain non-strategic Engineered Materials businesses.
15
<PAGE>
Review by Independent Accountants
- ---------------------------------
The "Independent Accountants' Report" included herein is not a
"report" or "part of a Registration Statement" prepared or certified
by an independent accountant within the meanings of Section 7 and 11
of the Securities Act of 1933, and the accountants' Section 11
liability does not extend to such report.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed with
this Form 10-Q:
10.13 Amendment and Restatement of Five-Year Credit
Agreement dated as of June 13, 1997 by and
between the Company and the banks, financial
institutions and lenders listed on the
signature pages thereof (the "Lenders"),
Citibank, N.A., as agent, and The Chase
Manhattan Bank, N.A. and Morgan Guaranty
Trust Company of New York, as co-agents for
the Lenders.
10.15 First Amendment to the restated and amended
Agreement dated May 6, 1994 between the
Company and Lawrence A. Bossidy
15 Independent Accountants' Acknowledgment Letter
as to the incorporation of their report relating
to unaudited interim financial statements
27 Financial Data Schedule
(b) Reports on Form 8-K. During the three months ended
June 30, 1997, reports on Form 8-K were filed on April 15,
May 22 and June 19, in each case reporting, under Item 9,
unregistered sales of the Company's Common Stock in reliance on
Regulation S under the Securities Act.
16
<PAGE>
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.
AlliedSignal Inc.
Date: August 14, 1997 By: /s/ Nancy A.Garvey
--------------------
Nancy A. Garvey
Vice President and Controller
(on behalf of the Registrant
and as the Registrant's
Principal Accounting Officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
2 Omitted (Inapplicable)
3 Omitted (Inapplicable)
4 Omitted (Inapplicable)
10.13 Amendment and Restatement of Five-Year
Credit Agreement dated as of June 13,
1997 by and between the Company
and the banks, financial institutions
and lenders listed on the signature
pages thereof (the "Lenders"),
Citibank, N.A., as agent, and The
Chase Manhattan Bank, N.A. and Morgan
Guaranty Trust Company of New York, as
co-agents for the Lenders.
10.15 First Amendment to the restated and
amended Agreement dated May 6, 1994
between the Company and Lawrence A.
Bossidy
11 Omitted (Inapplicable)
15 Independent Accountants'
Acknowledgment Letter as to
the incorporation of their
report relating to unaudited
interim financial statements
18 Omitted (Inapplicable)
19 Omitted (Inapplicable)
22 Omitted (Inapplicable)
23 Omitted (Inapplicable)
24 Omitted (Inapplicable)
27 Financial Data Schedule
99 Omitted (Inapplicable)
18
EXECUTION COPY
AMENDMENT AND RESTATEMENT OF FIVE-YEAR CREDIT AGREEMENT
Dated as of June 13, 1997
ALLIEDSIGNAL INC., a Delaware corporation (the "Company"), the
banks, financial institutions and other institutional lenders which are
parties to the Existing Five-Year Credit Agreement referred to below
(collectively, the "Lenders"), CITIBANK, N.A., as agent (together with any
successor thereto appointed pursuant to Article VIII of the Existing
Five-Year Credit Agreement referred to below, the "Agent"), and THE CHASE
MANHATTAN BANK, N.A. and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as co-
agents (the "Co-Agents") for the Lenders, hereby agree as follows:
PRELIMINARY STATEMENTS
(1) The Company is party to a Five-Year Credit Agreement
dated as of June 30, 1995 (as amended, supplemented or otherwise
modified from time to time to (but not including) the date of this
agreement, the "Existing Five-Year Credit Agreement") with the
Lenders, the Agent and the Co-Agents. Capitalized terms not
otherwise defined in this Amendment and Restatement shall have the
same meanings as specified in the Existing Five-Year Credit
Agreement.
(2) The Company is also party to a 364-Day Credit
Agreement dated as of June 30, 1995 (as amended, supplemented or
otherwise modified from time to time to (but not including) the
date of this agreement, the ("Existing 364-Day Credit Agreement")
with the banks, financial institutions and other institutional
lenders party thereto, the Agent and the Co-Agents.
(3) The Company desires to terminate the Existing 364-
Day Credit Agreement and to correspondingly increase the amount of
the Existing Five-Year Credit Agreement to $750,000,000.
(4) The parties to this agreement (the "Amendment and
Restatement") agree to amend the Existing Five-Year Credit
Agreement as set forth herein and to restate the Existing Five-Year
Credit Agreement in its entirety to read as set forth in the
Existing Five-Year Credit Agreement with the following amendments.
SECTION 1. Amendments to the Existing Five-Year Credit
Agreement. The Existing Five-Year Credit Agreement is, effective
as of the date of this Amendment and Restatement and subject to the
satisfaction of the conditions precedent set forth in Section 2,
hereby amended as follows:
<PAGE>
(a) The Existing Five-Year Credit Agreement, the
Exhibits thereto and the Notes are hereby amended by deleting
each reference to the phrase "the Five-Year Credit Agreement
dated as of June 30, 1995" and substituting therefor the
phrase "the Amended and Restated Five-Year Credit Agreement
dated as of June 13, 1997".
(b) The Existing Five-Year Credit Agreement and the
Exhibits thereto are hereby amended by deleting each reference
to "ABN-AMRO BANK N.V." as Co-Agent and substituting therefor
"The Chase Manhattan Bank, N.A.".
(c) Section 1.01 is amended by deleting the definitions
of "Facility A Credit Agreement", "Income from Operations" and
"Interest and Other Financial Charges" in their entirety.
(d) Section 1.01 is further amended by deleting the
definitions of "Applicable Margin", "Applicable Percentage",
"Commitment", "Lenders" and "Termination Date" set forth
therein and replacing them, respectively, with the following
new definitions thereof:
"Applicable Margin" means, as of any date, a percentage
per annum determined by reference to the Public Debt Rating in
effect on such date as set forth below:
=========================================
Public Debt Rating Applicable Margin
S&P/Moody's
=========================================
Level 1
AA- /Aa3 or above .095%
-----------------------------------------
Level 2
Lower than AA-/Aa3 .135%
but at least A-/A3
-----------------------------------------
Level 3
Lower than A-/A3 .185%
but at least BBB/Baa2
-----------------------------------------
Level 4
Below BBB/Baa2 .300%
or unrated
=========================================
<PAGE>
"Applicable Percentage" means, as of any date, a
percentage per annum determined by reference to the Public
Debt Rating in effect on such date as set forth below:
=========================================
Public Debt Rating Applicable
S&P/Moody's Percentage
=========================================
Level 1
AA- /Aa3 or above .055%
-----------------------------------------
Level 2
Lower than AA-/Aa3 .065%
but at least A-/A3
-----------------------------------------
Level 3
Lower than A-/A3 .090%
but at least BBB/Baa2
-----------------------------------------
Level 4
Below BBB/Baa2 .150%
or unrated
=========================================
"Commitment" means as to any Lender (i) the Dollar amount
set forth opposite its name on the signature pages of the
Amendment and Restatement dated as of June 13, 1997 to the
Five-Year Credit Agreement dated as of June 30, 1995, as
amended, among the Company, the banks, financial institutions
and other institutional lenders, (ii) if such Lender has
become a Lender hereunder after such date pursuant to an
Assumption Agreement, the Dollar amount set forth as its
Commitment in such Assumption Agreement or (iii) if such
Lender has entered into any Assignment and Acceptance after
such date, the Dollar amount set forth for such Lender in the
Register maintained by the Agent pursuant to Section 9.07(d),
in each case as the same may be increased, terminated or
reduced, as the case may be, pursuant to Section 2.05(a), (b),
(c), (d) or (e) or Section 2.16.
"Lenders" means, collectively, (i) the banks, financial
institutions and other institutional lenders listed on the
signature pages of the Amendment and Restatement dated as of
June 13, 1997 to the Five-Year Credit Agreement dated as of
June 30, 1995, as amended, among the Company, the banks,
financial institutions and other institutional lenders, (ii)
each Assuming Bank that shall become a party hereto after such
date pursuant to Section 2.05(e) or Section 2.16 and (iii)
each Eligible Assignee that shall become a party hereto after
such date pursuant to Sections 9.07(a), (b) and (c).
<PAGE>
"Termination Date" means the earlier of (a) June 30,
2002, or such later date to which it may be extended pursuant
to Section 2.16, and (b) the date of termination in whole of
the Commitments pursuant to Section 2.05(a) or Section 6.01
or, if all Lenders elect to terminate their Commitments as
provided therein, Section 2.05(d).
(e) Section 2.04(b) is hereby amended by deleting the
phrase "as set forth in the letter dated June 6, 1995 between
the Company and the Agent" and substituting therefor the
phrase "as the Company and the Agent may separately agree".
(f) Section 2.05(c) is hereby amended by deleting the
figure "$90,000,000" contained in the eleventh line thereof
and substituting therefor the figure "$180,000,000".
(g) Section 2.05(e) is hereby amended by deleting the
figure "$150,000,000" and substituting therefor the figure
"$250,000,000".
(h) Section 3.03(i) is hereby amended by deleting the
letter "(A)" from the sixth line thereof and deleting the
following phrase in its entirety:
"(B) if such Revolving Credit Borrowing results in
incremental outstanding Advances or is the initial Revolving Credit
Borrowing of the Company, the representations set forth in the last
sentence of subsection (e) and in subsections (f), (h)-(l) and (n)
of Section 4.01 are correct on and as of the date of such Revolving
Credit Borrowing, before and after giving effect to such Revolving
Credit Borrowing and to the application of the proceeds therefrom,
as though made on and as of such date, and".
(i) Section 4.01(e) is hereby amended by deleting each
reference to the date "December 31, 1994" contained therein
and substituting therefor the date "December 31, 1996".
(j) Section 4.01(j) is hereby amended by deleting the
year "1993" contained therein and substituting therefor the
year "1995".
(k) Section 5.01(h) is hereby amended by deleting the
final sentence contained in each of subsections (i) and (ii)
thereof.
(l) Section 5.02 is hereby amended by deleting Section
5.02(c) thereof in its entirety and substituting therefore the
following:
"(c) Minimum Net Worth. At any time, permit the
amount of Consolidated total assets in excess of
Consolidated total liabilities to be less than
$3,100,000,000.".
<PAGE>
(m) Section 6.01(e) is hereby amended as follows:
(i) Deleting the reference to the number
"$25,000,000" contained in the fourth line thereof and
substituting therefor the number "$100,000,000"; and
(ii) Deleting the parenthetical "(but excluding
Debt outstanding hereunder)" and substituting therefor
"(but excluding Debt outstanding hereunder and Debt owed
by such party to any bank, financial institution or other
institutional lender to the extent the Borrower or any
Subsidiary has deposits with such bank, financial
institution or other institutional lender sufficient to
repay such Debt)".
(n) Section 6.01(g) is hereby amended by deleting the
figure "$25,000,000" contained in the second line thereof and
substituting therefor the figure "$100,000,000".
(o) Section 6.01(j) is hereby amended by deleting each
reference to the figure "$25,000,000" contained therein and
substituting therefor the figure "$100,000,000".
(p) Section 6.01 is hereby further amended by deleting
subsection (k) thereof in its entirety.
(q) A new Section 9.16 is added to the Existing Five-
Year Credit Agreement to read as follows:
"SECTION 9.16. Judgment. (a) If for the purposes of
obtaining judgment in any court it is necessary to convert a
sum due hereunder or under the Notes in any currency (the
"Original Currency") into another currency (the "Other
Currency"), the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange
used shall be that at which in accordance with normal banking
procedures the Agent could purchase the Original Currency with
the Other Currency at 9:00 A.M. (New York City time) on the
first Business Day preceding that on which final judgment is
given.
(b) The obligation of each Borrower in respect of any
sum due in the Original Currency from it to any Lender or the
Agent hereunder or under the Revolving Credit Note or
Revolving Credit Notes held by such Lender shall,
notwithstanding any judgment in any Other Currency, be
discharged only to the extent that on the Business Day
following receipt by such Lender or the Agent (as the case may
be) of any sum adjudged to be so due in such Other Currency,
such Lender or
<PAGE>
the Agent (as the case may be) may in accordance with normal banking
procedures purchase Dollars with such Other Currency; if the amount
of Dollars so purchased is less than the sum originally due to such
Lender or the Agent (as the case may be) in the Original Currency,
such Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or
the Agent (as the case may be) against such loss, and if the
amount of Dollars so purchased exceeds the sum originally due
to any Lender or the Agent (as the case may be) in the
Original Currency, such Lender or the Agent (as the case may
be) agrees to remit to such Borrower such excess.".
SECTION 2. Conditions of Effectiveness of this Amendment
and Restatement. This Amendment and Restatement shall become
effective as of the date first above written (the "Restatement
Effective Date") when and only if:
(a) The Agent shall have received counterparts of this
Amendment and Restatement executed by the Company, the Co-
Agents and the Lenders or, as to any of the Lenders, advice
satisfactory to the Agent that such Co-Agent or such Lender
has executed this Amendment and Restatement.
(b) All Commitments (as defined in the Existing 364-Day
Credit Agreement) under the Existing 364-Day Credit Agreement
shall have been terminated and the Company shall have paid any
and all amounts owing thereunder.
(c) The Agent shall have received on or before the
Restatement Effective Date the following, each dated such date
and (unless otherwise specified below) in form and substance
satisfactory to the Agent and in sufficient copies for each
Lender:
(i) The Revolving Credit Notes of the Company
to the order of the Lenders, respectively, in the amount
of the Commitment of each Lender as modified pursuant to
this Amendment and Restatement.
(ii) Certified copies of (i) the resolutions of
the Board of Directors of the Company authorizing this
Amendment and Restatement, the Revolving Credit Notes and
the matters contemplated hereby and thereby and (ii) all
documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this
Amendment and Restatement, the Revolving Credit Notes and
the matters contemplated hereby and thereby.
(iii) A certificate of the Secretary or an
Assistant Secretary of the Company certifying the names
and true signatures of the officers of the Company
authorized to sign this Amendment and Restatement, the
Revolving Credit Notes and the other documents to be
delivered hereunder.
<PAGE>
(iv) A favorable opinion of Victor P. Patrick,
Associate General Counsel for the Company in
substantially the form of Exhibit A hereto.
(v) A certificate signed by a duly authorized
officer of the Company stating that:
(A) The representations and
warranties contained in Section 4.01 of the Existing
Five-Year Credit Agreement are correct on and as of
the Restatement Effective Date as though made on and
as of such date; and
(B) No event has occurred and is
continuing that constitutes a Default.
The effectiveness of this Amendment and Restatement is conditioned
upon the accuracy of the factual matters described herein. This
Amendment and Restatement is subject to the provisions of Section
9.01 of the Existing Five-Year Credit Agreement.
SECTION 3. Reference to and Effect on the Existing Five-
Year Credit Agreement and the Notes. (a) On and after the
effectiveness of this Amendment and Restatement, each reference in
the Existing Five-Year Credit Agreement to "this Agreement",
"hereunder", "hereof" or words of like import referring to the
Existing Five-Year Credit Agreement, and each reference in the
Notes to "the Credit Agreement", "thereunder", "thereof" or words
of like import referring to the Existing Five-Year Credit
Agreement, shall mean and be a reference to the Existing Five-Year
Credit Agreement, as amended and restated by this Amendment and
Restatement.
(b) The Existing Five-Year Credit Agreement, as
specifically amended and restated by this Amendment and
Restatement, are and shall continue to be in full force and effect
and are hereby in all respects ratified and confirmed.
(c) Without limiting any of the other provisions of the
Existing Five-Year Credit Agreement, as amended and restated by
this Amendment and Restatement, any references in the Existing Five-
Year Credit Agreement to the phrases "on the date hereof", "on the
date of this Agreement" or words of similar import shall mean and
be a reference to the date of the Existing Five-Year Credit
Agreement (which is June 30, 1995).
SECTION 4. Costs and Expenses. The Company agrees to
pay on demand all reasonable out-of-pocket costs and expenses of
the Agent in connection with the preparation, execution, delivery
and administration, modification and amendment of this Amendment
and Restatement, the Notes and the other documents to be delivered
hereunder (including, without limitation, the reasonable and
documented fees and expenses of counsel
<PAGE>
for the Agent with respect hereto and thereto) in accordance with the
terms of Section 9.04 of the Existing Five-Year Credit Agreement.
SECTION 5. Execution in Counterparts. This Amendment
and Restatement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this
Amendment and Restatement by telecopier shall be effective as
delivery of a manually executed counterpart of this Amendment and
Restatement.
SECTION 6. Governing Law. This Amendment and
Restatement shall be governed by, and construed in accordance with,
the laws of the State of New York.
[The remainder of this page has been intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Restatement to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
ALLIEDSIGNAL INC., as Borrower
By: /s/ Robert F. Friel
-----------------------------
Name: Robert F. Friel
Title: Vice President and Treasurer
$50,000,000 CITIBANK, N.A.,
as Agent and as Lender
By: /s/ Steven R. Victorin
----------------------------
Name: Steven R. Victorin
Title: Attorney-in-fact
$50,000,000 THE CHASE MANHATTAN BANK, N.A.,
as Co-Agent and as Lender
By: /s/ Richard C. Smith
---------------------------
Name: Richard C. Smith
Title: Vice President
$50,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Co-Agent and as Lender
By: /s/ Penelope J. B. Cox
---------------------------
Name: Penelope J. B. Cox
Title: Vice President
<PAGE>
$37,500,000 BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ Deborah J. Graziano
---------------------------
Name: Deborah J. Graziano
Title: Vice President
$37,500,000 BANK OF MONTREAL
By: /s/ Thurston W. Pettus
--------------------------
Name: Thurston W. Pettus
Title: Director
$37,500,000 BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By: /s/ Michael C. Irwin
--------------------------
Name: Michael C. Irwin
Title: Vice President
$37,500,000 BANQUE NATIONALE DE PARIS
By: /s/ Richard L. Sted
--------------------------
Name: Richard L. Sted
Title: Senior Vice President
By: /s/ Robert S. Taylor, Jr.
--------------------------
Name: Robert S. Taylor, Jr.
Title: Senior Vice President
<PAGE>
$37,500,000 CIBC INC.
By: /s/ William J. Koslo, Jr.
--------------------------
Name: William J. Koslo, Jr.
Title: Director
$37,500,000 DEUTSCHE BANK AG NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By: /s/ Jean M. Hannigan
---------------------------
Name: Jean M. Hannigan
Title: Vice President
By: /s/ V. Shannon Sewsankar
---------------------------
Name: V. Shannon Sewsankar
Title: Assistant Vice President
$37,500,000 MELLON BANK, N.A.
By: /s/ Caroline R. Walsh
---------------------------
Name: Caroline R. Walsh
Title: Assistant Vice President
$37,500,000 MIDLAND BANK PLC, NEW YORK BRANCH
By: /s/ J.P. Bollington
---------------------------
Name: J.P. Bollington
Title: Vice President
<PAGE>
$37,500,000 NATIONSBANK, N.A.
By: /s/ Thomas J. Kane
---------------------------
Name: Thomas J. Kane
Title: Vice President
$37,500,000 ROYAL BANK OF CANADA
By: /s/ Michael Korine
---------------------------
Name: Michael Korine
Title: Senior Manager
$37,500,000 THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By: /s/ John C. Kissinger
---------------------------
Name: John C. Kissinger
Title: Joint General Manager
$37,500,000 THE BANK OF NEW YORK
By: /s/ Ernest Fung
---------------------------
Name: Ernest Fung
Title: Vice President
$37,500,000 THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Thang Dao
---------------------------
Name: Thang Dao
Title: Corporate Banking Officer
<PAGE>
$37,500,000 THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By: /s/ J. Kenneth Biegen
----------------------------
Name: J. Kenneth Biegen
Title: Senior Vice President
$37,500,000 UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: /s/ Dieter Hoeppli
----------------------------
Name: Dieter Hoeppli
Title: Vice President
By: /s/ Samuel Azizo
----------------------------
Name: Samuel Azizo
Title: Vice President
$37,500,000 WACHOVIA BANK, N.A.
By: /s/ James Barwis
----------------------------
Name: James Barwis
Title: Vice President
$750,000,000 TOTAL COMMITMENTS
<PAGE>
CONSENT
Reference is made to the foregoing Amendment and Restatement
dated as of June 13, 1997 (the "Amendment and Restatement";
capitalized terms being used herein as therein defined) of the
Existing Five-Year Credit Agreement among AlliedSignal Inc., as
Borrower, the banks, financial institutions, and other
institutional lenders party thereto, as Lenders, Citibank, N.A., as
Agent and The Chase Manhattan Bank, N.A. and Morgan Guaranty Trust
Company of New York, as Co-Agents.
Each of the undersigned, being an existing Lender ("Existing
Lender") under the Existing Credit Agreement, have declined to
participate in the Amendment and Restatement. Conditioned upon the
effectiveness of the foregoing Amendment and Restatement, from and
after the Restatement Effective Date, the undersigned shall
relinquish all of its rights and be released from all of its
obligations under the Existing Credit Agreement.
Prior to the effectiveness of the Amendment and Restatement,
and prior to giving effect to any release under this Consent, the
undersigned represents and warrants that as of the Restatement
Effective Date, its Commitment is in the dollar amount specified as
its "Terminating Commitment" below, and the aggregate outstanding
principal amount of Advances owing to it under the Revolving Credit
Facility is in the dollar amount specified as the "Aggregate
Outstanding Principal Amount of Advances Owed" to the undersigned
below.
===========================================================================
Existing Lender Terminating Commitment Aggregate Outstanding
Principal Amount of
Advances Owed
- ---------------------------------------------------------------------------
ABN AMRO BANK N.V. $23,000,000 $0
- ---------------------------------------------------------------------------
NATIONAL WESTMINSTER
BANK PLC (NEW YORK AND/ $18,000,000 $0
OR NASSAU BRANCHES)
- ---------------------------------------------------------------------------
THE TORONTO-DOMINION $18,000,000 $0
BANK
===========================================================================
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Restatement to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
ABN-AMRO BANK N.A.,
as former Co-Agent and Lender
By /s/ Nancy W. Lanzoni
----------------------------------
Name: Nancy W. Lanzoni
Title: Group Vice President
By /s/ John M. Kinney
----------------------------------
Name: John M. Kinney
Title: Assistant Vice President
THE TORONTO-DOMINION BANK, as former Lender
By /s/ Jimmy Simien
----------------------------------
Name: Jimmy Simien
Title: Mgr. Cr. Admin.
NATIONAL WESTMINSTER BANK PLC (NEW YORK BRANCH)
By /s/ Maria Amaral-LeBlanc
---------------------------------
Name: Maria Amaral-LeBlanc
Title: Vice President
NATIONAL WESTMINSTER BANK PLC (NASSAU BRANCH)
By /s/ Maria Amaral-LeBlanc
---------------------------------
Name: Maria Amaral-LeBlanc
Title: Vice President
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
DATED MAY 6, 1994
AGREEMENT, dated as of May 12, 1997, between AlliedSignal
Inc., a Delaware corporation (the "Corporation"), and Lawrence A.
Bossidy (the "Executive").
WHEREAS, the Corporation and the Executive are parties to an
Agreement dated as of May 6, 1994 (the "1994 Agreement") under
which the Executive has served the Corporation in the capacities
of Chairman of the Board of Directors and Chief Executive Officer
and has agreed to continue such employment through April 1, 2000;
WHEREAS, the Corporation desires to recognize the Executive
for his extraordinary performance on behalf of its shareowners,
to provide an incentive for Executive's continued contributions
to the market value of the Corporation through and beyond his
retirement date, and to make certain arrangements for the period
following his retirement as an employee of the Corporation; and
WHEREAS, the Executive recognizes his significant interest
in the continued success of AlliedSignal following his retirement
and agrees to be available following his retirement to serve as
an advisor to or representative of the Corporation to such extent
as may be mutually agreed by the Executive and his successor.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and other good and valuable consideration, the
parties hereby agree that the 1994 Agreement is amended as set
forth below. All other terms and provisions of the 1994
Agreement, shall remain in full force and effect, without any
increase in Executive's base salary, incentive bonus target and
eligibility for Restricted Units.
1. Section 4(a)(ii) of the 1994 Agreement is hereby
amended to read in its entirety as follows:
" . . . (ii) upon Executive's death, an annuity payable to
his surviving spouse for her lifetime equal to 45 percent of
Executive's final average compensation, also reduced by the
sum of the amounts of the comparable annuit(ies) payable
under such plans as indicated in (i) above.
2. The first sentence of Section 4(b) of the 1994
Agreement is hereby amended to read in its entirety as follows:
"(b) In the event Executive's employment with the
Corporation is terminated by reason of death, the
Corporation will pay a benefit equal to an annuity for the
lifetime of his spouse, if she shall survive, equal to 45
percent of the Executive's final average compensation
(without taking into account the reductions provided in
paragraph (a)(i))
<PAGE>
for Executive's lifetime if his employment had terminated on
the day before his death. . . ."
3. A new Section 11, entitled "Post-Retirement Services"
is hereby added to the 1994 Agreement and shall read in its
entirety as follows:
Section 11. Post-Retirement Services
------------------------
(a) Executive agrees that following his retirement
from the Corporation he shall be available to serve as an
advisor to and representative of the Corporation as
mutually agreed by Executive and his successor.
(b) The Corporation agrees to provide the Executive
for the period beginning on April 1, 2000, and for the
remainder of his life thereafter (and, with respect to
financial and tax planning services, for the remainder of
his spouse's life) certain facilities, services, and other
arrangements comparable to those provided prior to
retirement, including office and clerical support, executive
transportation and other security services, financial and
tax planning services, continued access to certain other
general facilities and services, and reimbursement for
properly documented expenses, if any, incurred on behalf of
AlliedSignal and at the request of his successor.
IN WITNESS WHEREOF, by order of the Board of Directors,
AlliedSignal Inc. has caused this Agreement to be signed in its
corporate name by one of its directors and its corporate seal to
be hereunto affixed and to be attested by its General Counsel, and
Lawrence A. Bossidy has hereunto set his hand, all as of the day and
year first above written.
[Corporate Seal] AlliedSignal Inc.
Attest:
/s/ Peter M. Kreindler By: /s/ Robert P. Luciano
- ------------------------------- -------------------------------
Robert P. Luciano, Director and
Chairman of the Management
Development and Compensation
Committee
/s/ Lawrence A. Bossidy
--------------------------------
Lawrence A. Bossidy
Exhibit 15
August 14, 1997
Securities and Exchange Commission
450 Fifth Street
Washington, D.C. 20549
Dear Ladies and Gentlemen:
We are aware that the June 30, 1997 Quarterly Report on Form
10-Q of AlliedSignal Inc. which includes our report dated
July 25, 1997 (issued pursuant to the provisions of
Statement on Auditing Standard No. 71) will be incorporated
by reference in the Prospectuses constituting part of
AlliedSignal Inc.'s Registration Statements, on Forms S-8
(Nos. 33-09896, 33-51455, 33-55410, 33-58347, 33-60261, 33-
62963, 33-64295 and 333-14673), on Forms S-3 (Nos. 33-13211,
33-14071, 33-55425, 33-64245 and 333-22355) and on Form S-8
(filed as an amendment to Form S-14, No. 2-99416-01). We
are also aware of our responsibilities under the Securities
Act of 1933.
Very truly yours,
/s/ Price Waterhouse LLP
Price Waterhouse LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet at June 30, 1997 and the consolidated statement
of income for the six months ended June 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,000
<SECURITIES> 465
<RECEIVABLES> 1,246
<ALLOWANCES> 33
<INVENTORY> 2,129
<CURRENT-ASSETS> 5,638
<PP&E> 9,118
<DEPRECIATION> 4,918
<TOTAL-ASSETS> 12,912
<CURRENT-LIABILITIES> 3,594
<BONDS> 1,263
0
0
<COMMON> 716
<OTHER-SE> 3,636
<TOTAL-LIABILITY-AND-EQUITY> 12,912
<SALES> 6,905
<TOTAL-REVENUES> 6,905
<CGS> 5,369
<TOTAL-COSTS> 5,369
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> 848
<INCOME-TAX> 284
<INCOME-CONTINUING> 564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 564
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 0
</TABLE>
