<PAGE> 1
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 DECEMBER 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 2-15299
RAYCHEM CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 94-1369731
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 Constitution Drive, Menlo Park, CA 94025-1164
(Address of principal executive offices) (Zip code)
</TABLE>
(415) 361-3333
(Registrant's telephone number, including area code)
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
----- -----
As of February 8, 1994 the registrant had outstanding 42,732,047 shares
of Common Stock, $1.00 par value.
<PAGE> 2
RAYCHEM CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1: Financial Information
Consolidated Condensed Statements of Income -
Three and Six Months Ended December 31, 1993 and 1992 1
Consolidated Condensed Balance Sheets -
December 31, 1993 and June 30, 1993 2
Consolidated Condensed Statements of Cash
Flows - Six Months Ended December 31, 1993 and 1992 3
Notes to Consolidated Condensed Financial
Statements 4-6
Item 2: Management's Discussion and Analysis 7-13
of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1: Legal Proceedings 14
Item 4: Submission of Matters to a Vote of Security Holders 14
Item 6: Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
<PAGE> 3
RAYCHEM CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- -------------------
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 353,835 $ 351,958 $ 709,267 $ 700,597
Cost of goods sold 187,984 175,064 371,714 353,839
Research and development expense 35,306 31,663 68,920 62,738
Selling, distribution and administrative
expense 119,858 119,954 234,080 231,073
Interest expense, net 3,345 3,876 6,048 7,921
Other expense, net 2,611 5,080 5,457 9,885
----------- ----------- ----------- -----------
Income before income taxes and
changes in accounting principles 4,731 16,321 23,048 35,141
Provision for income taxes 3,075 13,057 14,981 28,113
----------- ----------- ----------- -----------
Income before changes in accounting
principles 1,656 3,264 8,067 7,028
Cumulative effect of changes in
accounting principles, net of
$0 income taxes - - - 1,700
----------- ----------- ----------- -----------
Net income $ 1,656 $ 3,264 $ 8,067 $ 8,728
=========== =========== =========== ===========
Average number of common
shares and equivalents outstanding 43,171,602 40,885,231 43,065,406 40,590,927
=========== =========== =========== ===========
Earnings per common share:
Income before changes in
accounting principles $ 0.04 $ 0.08 $ 0.19 $ 0.18
Changes in accounting principles - - - 0.04
----------- ----------- ----------- -----------
Net income $ 0.04 $ 0.08 $ 0.19 $ 0.22
=========== =========== =========== ===========
Dividends per common share $ 0.08 $ 0.08 $ 0.16 $ 0.16
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
1
<PAGE> 4
RAYCHEM CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except share data)
<TABLE>
<CAPTION>
(Unaudited)
December 31, 1993 June 30, 1993
----------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 83,689 $ 133,946
Accounts receivable, net 266,269 245,344
Inventories:
Raw materials 104,175 79,528
Work in process 54,910 49,819
Finished goods 85,943 96,565
---------- ----------
Total inventories 245,028 225,912
Prepaid taxes 58,741 58,450
Other current assets 48,997 51,767
---------- ----------
Total current assets 702,724 715,419
Property, plant and equipment 1,045,317 1,021,344
Less accumulated depreciation and amortization 539,193 519,531
---------- -----------
Net property, plant and equipment 506,124 501,813
Other assets 114,716 115,038
---------- ----------
Total assets $1,323,564 $1,332,270
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks $ 19,929 $ 38,557
Accounts payable 64,079 66,301
Other accrued liabilities 164,228 181,534
Income taxes 26,948 25,052
Current maturities of long-term debt 3,900 3,152
---------- ----------
Total current liabilities 279,084 314,596
Long-term debt 246,977 233,853
Deferred income taxes 26,203 29,481
Other long-term liabilities 69,407 62,398
Minority interest 4,225 2,438
Stockholders' equity:
Preferred Stock, $1.00 par value
Authorized: 15,000,000 shares; Issued: none - -
Common Stock, $1.00 par value
Authorized: 72,150,000 shares
Issued: 42,456,870 and 41,874,773 shares,
respectively 42,457 41,875
Additional contributed capital 338,569 321,512
Retained earnings 333,150 331,850
Currency translation (15,805) (5,100)
Notes receivable from sale of stock (703) (633)
---------- ----------
Total stockholders' equity 697,668 689,504
---------- ----------
Total liabilities and stockholders' equity $1,323,564 $1,332,270
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE> 5
RAYCHEM CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months ended December 31 (in thousands) 1993 1992
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,067 $ 8,728
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Payments for restructuring and divestitures (3,696) (10,400)
Changes in accounting principles - (1,700)
Depreciation and amortization 38,975 38,244
Deferred income tax 3 721
Changes in certain assets and liabilities, net of
effects from restructuring and divestitures:
Accounts receivable (26,665) 15,986
Inventories (23,309) (9,164)
Accounts payable and accrued liabilities (10,779) (8,928)
Income taxes (1,612) (11,118)
Other assets and liabilities 4,838 (606)
-------- --------
Net cash provided by (used in) operating activities (14,178) 21,763
-------- --------
Cash flows from investing activities:
Investment in property, plant and equipment (51,288) (35,534)
Disposition of property, plant and equipment 7,735 2,197
-------- --------
Net cash used in investing activities (43,553) (33,337)
-------- --------
Cash flows from financing activities:
Net proceeds from (payment of) short-term debt (16,419) 5,540
Proceeds from long-term debt 15,880 -
Payments of long-term debt (839) (1,142)
Common Stock issued under employee
benefits plans 17,639 20,703
Repayments of stockholder notes receivable 160 2,437
Cash dividends (6,767) (6,495)
-------- --------
Net cash provided by financing activities 9,654 21,043
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (2,180) (3,803)
-------- --------
Increase (decrease) in cash and cash equivalents (50,257) 5,666
Cash and cash equivalents at beginning
of period 133,946 148,862
-------- --------
Cash and cash equivalents at end of period $ 83,689 $154,528
======== ========
Supplemental Disclosures:
Cash paid for:
Interest (net of amounts capitalized) $ 7,211 $ 13,191
Income taxes 15,088 41,718
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE> 6
RAYCHEM CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
STATEMENT OF ACCOUNTING PRESENTATION
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements include all adjustments, including normal recurring
accruals, necessary to present fairly the results of operations for the three
and six months ended December 31, 1993 and 1992, the financial position as of
December 31, 1993 and the cash flows for the six months ended December 31, 1993
and 1992. The June 30, 1993 balance sheet included is derived from the
consolidated financial statements included in the company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1993. Certain prior-period
amounts have been reclassified to conform with the fiscal 1994 financial
statement presentation.
BUSINESS SEGMENTS
Revenues and operating income (loss) by business segment are as follows:
<TABLE>
<CAPTION>
In thousands
----------------------------------------------------------------------
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------------- -------------------------------
1993 1992 1993 1992
-------------- --------------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues
- --------
Electronics $ 127,476 $ 124,369 $ 254,080 $ 242,418
Industrial 108,611 119,072 221,349 235,010
Telecommunications 109,201 105,358 224,535 219,344
Raynet 8,547 3,159 9,303 3,825
------------- --------- ------------- ---------
Total revenues $ 353,835 $ 351,958 $ 709,267 $ 700,597
============= ========= ============= =========
Operating income (loss)
- -----------------------
Electronics $ 21,026 $ 16,743 $ 46,624 $ 27,693
Industrial 16,246 27,152 37,911 54,335
Telecommunications 23,047 20,431 50,141 49,254
Raynet (28,964) (21,342) (57,553) (44,026)
Corporate (20,668) (17,707) (42,570) (34,309)
------------- -------- ------------- ---------
Total operating income $ 10,687 $ 25,277 $ 34,553 $ 52,947
============= ======== ============= =========
</TABLE>
REVENUES
Effective in the third quarter of 1993, the company reclassified royalty and
license income from "other expense, net" to "revenues." Prior period amounts
have been reclassified to conform with this presentation. The following table
summarizes total revenues:
<TABLE>
<CAPTION>
In thousands
-----------------------------------------------------------------------
Three Months Ended Six Months Ended
December 31, December 31,
--------------------------------- ---------------------------
1993 1992 1993 1992
------------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues
- --------
Product sales $ 352,904 $ 349,477 $708,049 $ 698,025
Other revenue 931 2,481 1,218 2,572
------------- --------- -------- ---------
Total revenues $ 353,835 $351,958 $709,267 $ 700,597
============= ========= ======== =========
</TABLE>
4
<PAGE> 7
CHANGES IN ACCOUNTING PRINCIPLES
The company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" (FAS
106), effective as of July 1, 1992. This statement requires accrual accounting
for all postretirement benefits other than pensions. In the third quarter of
1993, the company elected, effective July 1, 1992, to immediately recognize the
transition obligation as the cumulative effect of a change in accounting
principle, resulting in a decrease to net income of $2.3 million, or $0.06 per
share.
Effective July 1, 1992 the company adopted Statement of Financial Accounting
Standards No. 109 (FAS 109), "Accounting for Income Taxes." The adoption of
this standard changed the company's method of accounting for income taxes from
the deferred method to an asset and liability method. The standard was adopted
on a prospective basis in the third quarter of 1993. The cumulative effect of
adopting the standard was a $4.0 million, or $0.10 per share, increase in net
income.
RECENT ACCOUNTING STANDARDS
In November 1992, the Financial Accounting Standards Board issued Statement No.
112, "Employers' Accounting for Postemployment Benefits." The statement
changes the method of accounting for certain postemployment benefits from a
cash basis to an accrual basis. The statement must be adopted in the first
quarter of 1995. The company has not yet fully determined the impact of
adoption on the company's results of operations or financial condition.
INCOME TAXES
On August 10, 1993 the U.S. federal corporate income tax rate was increased to
35% from 34%, effective January 1, 1993. The effect of this income tax rate
change was to increase the company's gross deferred tax assets by $5 million
and to correspondingly increase the valuation allowance by approximately $5
million.
LONG-TERM DEBT
In December 1992 the company entered into a three-year interest rate swap
agreement which effectively converted $100 million of notional principal amount
from a fixed rate to a floating rate. Under the agreement, which matures on
December 8, 1995, the company makes payments to a counter party at variable
rates based on LIBOR, reset every six months, and in return receives payments
based on a fixed rate of 5.715%. The LIBOR rate for the period from June 8,
1993 to December 8, 1993 was 3.4375% which reduced interest expense in the
period by $1.2 million. On December 8, 1993, the company terminated the swap
agreement. The termination resulted in a gain of $2.7 million which has been
deferred and will be amortized over the remaining life of the hedged debt. Of
this amount, $0.1 million of the gain was recognized through December 31, 1993
as a reduction of interest expense.
5
<PAGE> 8
CONTINGENCIES
The company has been named, among others, as a potentially responsible party
("PRP") in administrative proceedings alleging that it may be liable for the
costs of correcting environmental conditions at certain hazardous waste sites.
At most of the sites, the company is alleged to be a de minimis generator of
hazardous wastes, and the company believes that it has limited or no liability
for clean-up costs at these sites. At the only site where the company's
alleged involvement exceeds that of a de minimis generator, there are numerous,
large PRPs which already have undertaken clean-up work. As a result, the
company believes that it is highly unlikely that it will be held responsible
for the total clean-up costs. The company believes its liability, if any, will
not be material to the company. The company has also been notified by a state
environmental agency that it may be required to investigate the need for
remedial work at one of its manufacturing sites. The company currently is
conducting such investigations on a voluntary basis.
Additionally, the company and its subsidiaries have been named as defendants in
lawsuits arising from an environmental cost recovery matter and various
commercial matters, including product liability. The principal product
liability litigation involves a variety of claims arising from the company's
heat-tracing and freeze-protection products.
Legal proceedings tend to be unpredictable and costly. Based on currently
available information, however, management believes that the resolution of
pending claims, regulatory inquiries, and legal proceedings will not have a
material adverse effect on the company's operating results or financial
position.
SUBSEQUENT EVENTS
On January 18, 1994 the company's Board of Directors declared a quarterly cash
dividend of $0.08 per share of Common Stock, payable on March 9, 1994 to
stockholders of record as of February 9, 1994.
6
<PAGE> 9
RAYCHEM CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The company reported second quarter 1994 net income of $2 million, or $0.04 per
share, versus net income of $3 million, or $0.08 per share, in the second
quarter of 1993. Revenues of $354 million increased 6% from the year-ago
quarter on a constant currency basis. For the six months ended December 31,
1993, net income was $8 million, or $0.19 per share, compared to net income of
$9 million, or $0.22 per share, for the same period in the prior year.
Revenues for the six-month period ended December 31, 1993, increased 9% on a
constant currency basis to $709 million. In the third quarter of 1993, the
company adopted, effective July 1, 1992, Statements of Financial Accounting
Standards Nos. 106 and 109. The cumulative effect of these accounting changes
(a credit of $2 million, or $.04 per share) has been reflected in the restated
results for the six months ended December 31, 1992.
Excluding the effect of Raynet, Raychem's pretax income decreased to $35
million in the three months ended December 31,1993, from $39 million a year
earlier, in part reflecting adverse currency movements in Europe. The Raynet
pretax loss for the quarter was $30 million, compared with a $22 million loss
in the previous year's second quarter. Raynet's results included a $2 million
severance provision reflecting a restructuring and work force reduction of
approximately 80 people throughout the organization, roughly 10% of Raynet's
employment.
The company's estimated annual effective tax rate was 65% compared to 80% in
the prior-year period. The lower tax rate resulted primarily from an
anticipated reduction of losses to be generated by U.S. operations in 1994.
A tentative ruling has been entered in Raychem's favor for $9 million in its
action against the company's insurers arising out of the settlement of a class
action securities suit in December 1991. No benefit has been recognized in the
second quarter 1994 financial results because the matter is subject to further
judicial proceedings.
The following discussion of the results of operations is presented based on the
company's business segments--electronics, industrial, and
telecommunications--(which along with the corporate groups are referred to
collectively as the "core business") and Raynet Corporation, which was
established as a separate subsidiary in calendar 1987 to commercialize certain
fiber-optic technology for the telecommunications and cable television markets.
This discussion is supplemented with condensed consolidating financial
statements included on pages 11 through 13.
7
<PAGE> 10
CORE BUSINESS OPERATIONS
Core business revenues for the second quarter of 1994 decreased to $345 million
from $349 million in the prior-year period. Revenue growth was 4% on a
constant currency basis. Revenues for the six months ended December 31, 1993,
were $700 million compared to $697 million in the comparable prior-year period,
a constant currency increase of 8%.
Revenues in the electronics business segment were $127 million for the three
months ended December 31, 1993, representing a 5% increase in constant currency
terms over the prior-year quarter. Increased sales of PolySwitch were partially
offset by reduced shipments of Wire and Cable and Thermofit products. Operating
income grew to $21 million from $17 million a year ago reflecting increased
sales volume and reduced operating expenses which more than offset a slight
decline in gross profit percentage. Revenues for the six months ended
December 31, 1993, were $254 million compared to $242 million in the comparable
prior-year period. Operating income in the six months ended December 31, 1993,
increased to $47 million from $28 million in the comparable prior year period,
in part reflecting increased sales and profitability in the segment's
PolySwitch division.
Revenues in the industrial business segment for the three months ended December
31, 1993, were $109 million, a slight reduction on a constant currency basis
over the prior-year period. Shipments by the Electrical Products and Ultratec
divisions were impacted by the recession in Europe. In addition, shipments of
several pipeline projects for the Ultratec division were delayed until the
third quarter of 1994. Operating income declined to $16 million from $27
million a year ago in part reflecting lower sales volumes and a decline in
gross profit percentage caused by adverse exchange rate movements. Revenues
for the six months ended December 31, 1993, were $221 million compared to $235
million in the comparable prior-year period. Operating income was $38 million,
$16 million below the comparable prior-year period.
Revenues in the telecommunications business segment for the three months ended
December 31, 1993, were $109 million, a 13% increase in constant currency terms
over the prior-year quarter. Although sales growth was strong, particularly in
Latin America and Asia, new orders declined, primarily in the People's Republic
of China. Operating income was $23 million, $3 million above the prior-year
period. Gross profit percentage remained essentially unchanged compared with
the comparable prior-year period. Revenues for the six months ended December
31, 1993, were $225 million compared to $219 million in the comparable
prior-year period. Operating income remained unchanged at approximately $50
million and gross profit percentage declined slightly.
The core business' selling, distribution and administrative expense as a
percentage of revenues was 32% for the quarters ended December 31, 1993, and
1992. For the six-month period ended December 31, 1993, such expenses
represented 31% of revenues, which is consistent with the comparable period in
the prior year.
Other expense, net, for the second quarter of 1994 was $2 million compared to
$5 million in the year-ago period. For the six-month period ended December 31,
1993, other expense, net was $5 million compared to $9 million in the
comparable prior-year period, in part reflecting reduced foreign currency
exchange losses.
Orders exceeded shipments in the industrial segment, were approximately equal
to shipments in the electronics segment and were lower than shipments in the
telecommunications segment. Overall, orders were below shipments for the core
business in the three months ended December 31, 1993.
8
<PAGE> 11
RAYNET OPERATIONS
Raynet Corporation recorded revenues of $9 million for the three- and six-month
periods ended December 31, 1993, compared with $3 and $4 million, respectively,
in the comparable prior year periods. Raynet's pretax loss for the quarter
was $30 million, compared with a $22 million loss in the previous year's second
quarter. For the six months ended December 31, 1993, Raynet's pretax loss
increased to $59 million from $46 million in the comparable period of the prior
year.
Raynet's second quarter revenues include deliveries to NYNEX and Bezeq of
Israel. Product was also shipped to the Deutsche Bundespost Telekom (DBP) in
Germany, Korea Telecom, and France Telecom with revenue recognition deferred
until formal customer acceptance. The sales value of product shipped to
Germany, Korea, and France, but not recognized as revenue, was approximately
$15 million at December 31, 1993. The majority of these contract revenues are
expected to be recognized in the second half of this fiscal year as the systems
covered by contracts are turned up in the field.
Research and development expense increased to $11 million for the quarter ended
December 31, 1993, from $9 million in the comparable year-ago quarter. For the
six-month period ended December 31, 1993, research and development expense was
$22 million compared to $18 million in the prior-year period. Selling,
distribution and administrative expense increased to $10 million for the
quarter ended December 31, 1993, from $8 million in the second quarter of the
prior year. For the six-month period, selling, distribution, and
administrative expense increased to $19 million from $17 million in the
year-ago period. The increase is due primarily to restructuring charges.
OUTLOOK
The company is cautious about the remainder of 1994 due to continued
sluggishness in the economies of Europe and Japan, and slow growth in many
of the company's markets in the United States. Overall, the company believes
that there will be modest sales growth in 1994.
On February 10, 1994, the company announced its expectation that the 1994 loss
from Raynet will be somewhat more than the loss incurred in 1993. The projected
higher loss is attributed to delays in revenue recognition for the DBP OPAL
'93 project in Germany, restructuring charges, and slower than anticipated
business development in other markets. This is expected to result in both
higher U.S. losses and a significantly higher estimated annual effective tax
rate than previously anticipated. Accordingly, the third quarter's results are
expected to include an incremental tax provision to raise the company's
estimated annual effective tax rate.
Recent alliances of telecommunications, cable television, and media businesses
have created considerable uncertainty regarding communications technologies to
be deployed in the United States and other regions of the world, as well as the
timing of these deployments. The decisions regarding these technologies and
the timing of deployment may have a material effect on Raynet's and Raychem's
future revenues and profitability.
9
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
CONSOLIDATED
Debt exceeded cash by $187 million at December 31, 1993, compared to $142
million at June 30, 1993. The $45 million increase in debt net of cash
reflects increased cash needs at Raynet and capital expenditures in the core
business partially offset by cash flow from core business operations.
At December 31, 1993, the company had $84 million in cash and cash equivalents,
$315 million in committed credit facilities (of which $4 million was utilized)
and approximately $158 million in various uncommitted credit facilities (of
which $40 million was utilized).
The combination of cash and cash equivalents, available lines of credit, and
future cash flows from operations are expected to be sufficient to satisfy
substantially all of the company's needs for working capital, normal capital
expenditures, and anticipated dividends. The cash requirements for Raynet will
be determined as the business develops, and alternative methods of financing
may be considered.
CORE BUSINESS
Net cash provided by operating activities increased to $55 million for the
first half of 1994 from $48 million for the corresponding period of 1993. This
increase resulted from decreased income tax payments, reduced spending on
restructuring and divestitures, and proceeds from the termination of the
interest rate swap agreement. Inventory, as measured by the number of days of
inventory on hand, improved to 114 days for the second quarter compared to 121
days for the year-ago period. Receivables, as measured by the number of
billing days outstanding, increased slightly to 61 days at December 31, 1993,
compared to 60 days at December 31, 1992.
Capital expenditures of $46 million increased $14 million in the first half of
1994 compared to the prior-year period, mainly due to higher spending for a new
PolySwitch manufacturing plant in Japan, increased PolySwitch capacity in Menlo
Park, and for new manufacturing equipment at the company's telecommunications
facility in North Carolina. The company received $4 million from the sale of a
building in the United States.
RAYNET
Net cash used in operating activities at Raynet increased to $69 million for
the six months ended December 31, 1993, as compared to $26 million in the
corresponding prior-year period. The higher cash outflow for the six-month
period was primarily due to inventory builds in anticipation of future
shipments, greater loss from operations, and higher receivables from increased
sales. Cash flow in the year-ago period benefited from the collection of
an $12 million development contract receivable from DBP.
10
<PAGE> 13
RAYCHEM CORPORATION
Condensed Consolidating Statements of Operations
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31 (UNAUDITED)
-------------------------------------------------------------
CORE BUSINESS RAYNET CONSOLIDATED
---------------- --------------- ----------------
1993 1992 1993 1992 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 345,288 $ 348,799 $ 8,547 $ 3,159 $ 353,835 $ 351,958
Cost of goods sold 171,651 167,971 16,333 7,093 187,984 175,064
Research and development expense 24,118 22,683 11,188 8,980 35,306 31,663
Selling, distribution and
administrative expense 109,868 111,526 9,990 8,428 119,858 119,954
Interest expense, net 2,597 3,141 748 735 3,345 3,876
Other expense, net 2,357 4,843 254 237 2,611 5,080
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes 34,697 38,635 (29,966) (22,314) 4,731 16,321
Provision for income taxes 3,073 13,010 2 47 3,075 13,057
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ 31,624 $ 25,625 $ (29,968) $ (22,361) $ 1,656 $ 3,264
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31 (UNAUDITED)
------------------------------------------------------------
CORE BUSINESS RAYNET CONSOLIDATED
--------------- ---------------- ---------------
1993 1992 1993 1992 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 699,964 $ 696,772 $ 9,303 $ 3,825 $ 709,267 $ 700,597
Cost of goods sold 345,969 341,062 25,745 12,777 371,714 353,839
Research and development expense 47,212 44,436 21,708 18,302 68,920 62,738
Selling, distribution and
administrative expense 214,677 214,301 19,403 16,772 234,080 231,073
Interest expense, net 4,558 6,473 1,490 1,448 6,048 7,921
Other expense, net 5,127 9,359 330 526 5,457 9,885
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes and
changes in accounting principles 82,421 81,141 (59,373) (46,000) 23,048 35,141
Provision for income taxes 14,948 28,022 33 91 14,981 28,113
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before changes in
accounting principles 67,473 53,119 (59,406) (46,091) 8,067 7,028
Cumulative effect of changes in
accounting principles, net of
$0 income taxes - 1,700 - - - 1,700
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ 67,473 $ 54,819 $ (59,406) $ (46,091) $ 8,067 $ 8,728
========== ========== ========== ========== ========== ==========
</TABLE>
11
<PAGE> 14
RAYCHEM CORPORATION
Condensed Consolidating Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
Core Business Raynet Consolidated*
---------------------- --------------------- ---------------------
(Unaudited) (Unaudited) (Unaudited)
12/31/93 6/30/93 12/31/93 6/30/93 12/31/93 6/30/93
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 77,232 $ 116,115 $ 6,457 $ 17,831 $ 83,689 $ 133,946
Accounts receivable, net 245,353 237,492 20,916 7,852 266,269 245,344
Inventories 212,430 215,301 32,598 10,611 245,028 225,912
Other current assets 103,652 107,377 4,086 2,840 107,738 110,217
---------- ----------- --------- ----------- ----------- ----------
Total current assets 638,667 676,285 64,057 39,134 702,724 715,419
---------- ----------- --------- ----------- ----------- ----------
Net property, plant and equipment 478,188 474,544 27,936 27,269 506,124 501,813
Investment in Raynet 40,194 36,264 - - - -
Other assets 100,388 101,811 14,328 13,227 114,716 115,038
---------- ----------- --------- ----------- ----------- ----------
Total assets $1,257,437 $ 1,288,904 $ 106,321 $ 79,630 $ 1,323,564 $1,332,270
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 16,769 $ 38,557 $ 3,160 $ - $ 19,929 $ 38,557
Intercompany accounts
payable (receivable) (17,262) (11,372) 17,262 11,372 - -
Accounts payable 39,012 56,170 25,067 10,131 64,079 66,301
Other current liabilities 174,438 187,875 20,638 21,863 195,076 209,738
---------- ----------- --------- ----------- ----------- ----------
Total current liabilities 212,957 271,230 66,127 43,366 279,084 314,596
---------- ----------- --------- ----------- ----------- ----------
Long-term debt 246,977 233,853 - - 246,977 233,853
Other long-term liabilities 95,610 91,879 - - 95,610 91,879
Minority interest 4,225 2,438 - - 4,225 2,438
Stockholders' equity 697,668 689,504 40,194 36,264 697,668 689,504
---------- ----------- --------- ----------- ----------- ----------
Total liabilities and
stockholders' equity $1,257,437 $ 1,288,904 $ 106,321 $ 79,630 $ 1,323,564 $1,332,270
========== =========== ========= =========== =========== ==========
</TABLE>
* Consolidated balances reflecteliminations of intercompany transactions.
12
<PAGE> 15
RAYCHEM CORPORATION
Condensed Consolidating Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31 (UNAUDITED)
-----------------------------------------------------------
CORE BUSINESS RAYNET CONSOLIDATED
--------------- -------------- ---------------
1993 1992 1993 1992 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating activities $ 55,139 $ 48,030 $ (69,317) $ (26,267) $ (14,178) $ 21,763
-------- -------- --------- --------- --------- --------
Cash flows from investing activities:
Investment in property, plant and equipment (45,895) (31,452) (5,393) (4,082) (51,288) (35,534)
Disposition of property, plant and equipment 7,735 2,197 - - 7,735 2,197
-------- -------- --------- --------- --------- --------
Net cash used in investing activities (38,160) (29,255) (5,393) (4,082) (43,553) (33,337)
-------- -------- --------- --------- --------- --------
Cash flows from financing activities:
Proceeds from (payment of) debt (1,378) 4,398 - - (1,378) 4,398
Proceeds from (payment of) intercompany loans (48,962) (29,715) 48,962 29,715 - -
Common Stock issued under employee benefit
plans 17,639 20,703 - - 17,639 20,703
Repayments of stockholder notes receivable 160 2,437 - - 160 2,437
Cash dividends (6,767) (6,495) - - (6,767) (6,495)
-------- -------- --------- --------- --------- --------
Net cash provided by (used in) financing activities (39,308) (8,672) 48,962 29,715 9,654 21,043
-------- -------- --------- --------- --------- --------
Effect of exchange rate changes on cash and cash
equivalents (2,131) (3,844) (49) 41 (2,180) (3,803)
-------- -------- --------- --------- --------- --------
Increase (decrease) in cash and cash equivalents $(24,460) $ 6,259 $ (25,797) $ (593) $ (50,257) $ 5,666
======== ======= ========= ========= ========= ========
</TABLE>
13
<PAGE> 16
RAYCHEM CORPORATION
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
A tentative ruling has been entered in the company's favor for $9 million in
its action against the company's insurers arising out of the settlement of a
class action securities suit on December 16, 1991. The matter is subject to
further judicial proceedings before final judgment is rendered by the United
States District Court. The company disclosed information about this lawsuit in
its annual report on Form 10-K for the year ended June 30, 1993.
On December 23, 1993, the company and Thomas and Betts Corporation settled all
claims and counterclaims in the company's lawsuit for patent infringement filed
in the United States District Court, Northern District of California on August
25, 1992. The settlement is subject to court approval and entry of consent
judgment. The company disclosed information about this lawsuit in its annual
report on Form 10-K for the year ended June 30, 1993.
On November 30, 1993, the company filed a complaint in the United States
District Court, Northern District of California, against PSI
Telecommunications, Inc. for patent infringement. On January 21, 1994, PSI
Telecommunications, Inc. answered the complaint and filed a counterclaim
against the company for declaratory judgment that the patent is invalid and not
infringed, and amended its complaint and counterclaim on February 4, 1994. No
monetary damages have been alleged. The company believes the counterclaim is
without merit.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 27, 1993, the company held its Annual Meeting of the Stockholders.
In addition to electing directors and ratifying the designation of independent
accountants for 1994, the stockholders approved (by a vote of 26,197,487 in
favor, 4,433,590 opposed and 211,823 abstentions) amendments to the company's
Amended and Restated 1984 Employee Stock Purchase Plan and 1985 Supplemental
Employee Stock Purchase Plan to increase by 700,000 shares the aggregate number
of shares issuable under the two plans.
The stockholders approved (by a vote of 19,361,928 in favor, 11,013,126 opposed
and 218,866 abstentions) an amendment to the 1990 Incentive Plan to increase by
1,700,000 shares the aggregate number of shares issuable under the plan. The
stockholders also approved (by a vote of 32,414,117 in favor, 1,638,434 opposed
and 268,636 abstentions) an amendment to the Directors Stock Option Plan to
eliminate the cumulative limit on the number of options granted under the plan.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits
None.
(b) Reports on Form 8-K
None.
14
<PAGE> 17
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.
RAYCHEM CORPORATION
(Registrant)
Date: February 11, 1994 /s/ RAYMOND J. SIMS
Raymond J. Sims
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ DEIDRA D. BARSOTTI
Deidra D. Barsotti
Vice President and
Corporate Controller
(Principal Accounting Officer)
15
