FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 0-20227
Tracor, Inc.
(Exact name of registrant as specified in its charter)
Delaware 74-2618088
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 Tracor Lane,
Austin, Texas 78725-2000
(Address of principal executive offices)
(Zip Code)
512/926-2800
(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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date.
Common stock 24,617,180 shares
Exhibit Index on Page 13
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
TRACOR
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
(Unaudited) (Audited)
ASSETS (in thousands, except share data)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 58,504 $ 59,478
Accounts receivable 174,343 141,657
Inventories 11,498 4,695
Assets held for sale 16,963 -
Prepaid expenses and other 12,236 7,988
Deferred income taxes 24,669 15,916
-------- --------
Total current assets 298,213 229,734
Property, plant, and equipment, net 111,265 85,760
Goodwill, net 164,202 99,813
Other intangibles, net 15,565 18,385
Prepaid pension costs 18,631 23,107
Deferred charges and other assets 14,718 10,657
-------- --------
Total assets $622,594 $467,456
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $124,567 $ 89,870
Current portion of long-term debt 22,922 10,735
-------- --------
Total current liabilities 147,489 100,605
Long-term debt, less current portion 278,170 180,440
Deferred revenue 19,276 23,752
Other long-term liabilities 26,007 25,694
Shareholders' equity:
Preferred stock, par value $.01 a share: 1,000,000 shares
authorized; no shares issued or outstanding - -
Common stock, par value $.01 a share:
53,000,000 shares authorized; shares issued and
outstanding: 21,617,180 in 1996 and 13,172,754 in 1995,
net of 1,553 shares in treasury in 1996 216 132
Class A common stock, par value $.01
a share: 1,000,000 shares authorized;
978,458 shares issued and outstanding in 1995 - 10
Additional capital paid in 75,561 76,606
Retained earnings 75,875 60,217
-------- --------
Total shareholders' equity 151,652 136,965
-------- --------
Total liabilities and shareholders' equity $622,594 $467,456
======== ========
See notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRACOR CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $267,372 $217,513 $496,419 $428,754
Cost of sales 215,314 175,026 397,307 343,653
-------- -------- -------- --------
Gross profit 52,058 42,487 99,112 85,101
Selling, administrative, and general expenses 30,348 25,680 57,955 51,919
-------- -------- -------- --------
Earnings before interest and income taxes 21,710 16,807 41,157 33,182
Interest expense, net 7,127 4,850 12,810 10,248
-------- -------- -------- --------
Income before income taxes 14,583 11,957 28,347 22,934
Income taxes 6,586 5,154 12,689 9,881
-------- -------- -------- --------
Net income $ 7,997 $ 6,803 $ 15,658 $ 13,053
======== ======== ======== ========
Net income per common and common equivalent share $.34 $.30 $.66 $.60
==== ==== ==== ====
See notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRACOR CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
----------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Operating activities:
Net income $ 15,658 $ 13,053
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property, plant, and equipment 8,533 6,897
Amortization of goodwill 2,602 1,771
Amortization of other intangibles 2,821 2,844
Decrease in prepaid pension costs 4,476 5,568
Decrease in debt issuance costs 1,465 1,014
Decrease in deferred revenue (4,476) (5,568)
Change in operating assets and liabilities:
Decrease in accounts receivable 8,602 11,288
Increase in inventories and prepaid expenses (7,796) (1,346)
Decrease in recoverable income taxes 65 2,027
Increase (decrease) in accounts payable and
accrued expenses (1,159) 3,561
Increase in other, net (553) (878)
-------- --------
Net cash provided by operating activities 30,238 40,231
Investing activities:
Purchases of property, plant, and equipment (6,322) (3,411)
Acquisition of businesses, net of cash acquired (108,287) (12,105)
-------- --------
Net cash used in investing activities (114,609) (15,516)
Financing activities:
Payments of long-term debt (89,894) (5,251)
Proceeds from issuance of long-term debt 180,000 -
Payment of debt issuance costs (5,191) -
Purchase of treasury stock - (32)
Proceeds from stock offering - 17,984
Payment of stock issuance costs (1,518) -
-------- --------
Net cash provided by financing activities 83,397 12,701
-------- --------
Increase (decrease) in cash and cash equivalents (974) 37,416
Cash and cash equivalents at beginning of period 59,478 24,152
-------- --------
Cash and cash equivalents at end of period $ 58,504 $ 61,568
======== ========
See notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
TRACOR
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
Note A -- Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements of Tracor, Inc. (Tracor or the Company) have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring items, considered
necessary for a fair presentation have been included. Operating
results for the quarter and six-month period ended June 30,
1996, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. For further
information, refer to the Company's consolidated financial
statements and notes thereto included in the Company's Annual
Report on Form 10-K as of December 31, 1995.
Note B -- Income Taxes
The effective income tax rate for the quarter and six-month
period ended June 30, 1996, is based on the expected annual rate
for federal, state, and foreign income taxes.
Note C -- Income Per Common and Common Equivalent Share
Primary and fully diluted net income per share amounts for the
quarter and the six-month period ended June 30, 1996 are
computed in accordance with the treasury stock method using the
weighted average common shares outstanding and equivalents
assuming the exercise of all outstanding warrants and options
for common shares. The weighted average common and common
equivalent shares used in this calculation were 23,591,000 for
the quarter and 24,229,000 for the six-month period ended June
30, 1996. For the quarter and six-month period ended June 30,
1996, the primary and fully diluted net income per share
calculations yielded the same amount.
Note D -- Acquisitions
AEL Acquisition
On February 22, 1996, Tracor purchased all of the approximately
4.1 million common shares of AEL Industries, Inc. (AEL). AEL
designs and manufactures sophisticated countermeasures,
simulation, and radar-warning receiver systems; installs and
integrates electronic avionics equipment in military and
commercial aircraft; and provides state-of-the-art antenna,
microwave, and integrated circuit components.
The purchase price, including acquisition expenses, was
approximately $103 million. AEL's long-term indebtedness prior
to the acquisition totaled approximately $20 million, of which
approximately $10 million was retired and approximately $10
million was assumed by Tracor. The financing for the
transaction and related expenses was obtained through an
increase of the Company's existing bank term credit facility and
from cash on hand.
The acquisition has been accounted for using the purchase
method, and, accordingly, the purchase price ($103 million) and
the liabilities assumed ($59 million) have been allocated to the
assets acquired ($102 million) based on a preliminary estimate
of their respective fair values at the date of acquisition.
This preliminary estimate is subject to change based on
finalization of certain fair value determinations. Such fair
value determinations are not expected to have a material effect
on the consolidated financial position or results of operations
of Tracor. The resulting excess of the purchase price over the
preliminary estimate of the fair value of the net assets
acquired ($60 million) is being amortized over 30 years.
Subsequent to June 30, 1996, Tracor completed the sale of an AEL
division and has closed, or is in the process of closing, the
sale of three AEL properties, resulting in proceeds of
approximately $18 million. Approximately $10 million of
long-term debt related to these properties will be retired with
the proceeds. These assets are recorded as assets held for sale
at June 30, 1996.
AEL's results of operations have been included in the Company's
consolidated statements of income from February 22, 1996, the
date of acquisition, through June 30, 1996. The following net
sales, net income, and net income per share are presented on a
pro forma basis, assuming the acquisition had occurred on
January 1, 1995 (in thousands, except per share data):
Six-Month
Period Ended
June 30.
--------------------
1996 1995
---- ----
Net sales $513,272 $491,303
Net income 10,173 13,378
Net income per share fully diluted .43 .61
The pro forma results are not necessarily indicative of the
actual results of operations that would have occurred had the
acquisition of AEL occurred on January 1, 1995, nor of future
results.
Westmark Acquisition
On June 13, 1996, Tracor concluded the acquisition of
substantially all assets of Westmark Systems, Inc. (Westmark),
which primarily consisted of Tracor stock and warrants and
certain other real estate holdings. Westmark, the former parent
company of Tracor, held all of Tracor's Class A stock (978,458
shares), a Series B warrant to purchase 5,249,428 shares of
Tracor common stock with an exercise price of $4.42 per share
and a Series C warrant to purchase 5,455,000 shares of Tracor
common stock with an exercise price of $7.36 per share. Under
the agreement, which was approved by the shareholders of both
companies on June 13, 1996, Tracor exchanged 8,267,435 shares of
common stock for the assets. Westmark liquidated concurrently
with the closing by distributing the Tracor shares to its
shareholders. The agreement provided for a distribution of the
Tracor shares through underwritten secondary offerings of a
maximum of one-half of the shares during the first two years
after the closing. Accordingly, approximately 3.6 million
shares were sold in a public offering concluded on July 11,
1996. See Note F.
Note E -- Long-term Debt
Concurrent with the AEL acquisition, Tracor amended and restated
its existing credit agreement (Amended Credit Agreement)
increasing the total credit available thereunder from $135
million to $270 million. The Amended Credit Agreement consists
of a $180 million term loan facility, a $40 million revolving
loan facility, and a $50 million letters of credit facility.
Substantially all assets of Tracor and certain domestic, wholly
owned subsidiaries are pledged or mortgaged under the Amended
Credit Agreement, and all borrowings are guaranteed by such
subsidiaries.
The term loans are comprised of an $80 million A Term Loan, a
$50 million B Term Loan, and a $50 million C Term Loan. The A
Term Loan facility is evidenced by promissory notes maturing
October 31, 1999, and requiring quarterly principle payments of
approximately $5.3 million. The B Term Loan facility is
evidenced by promissory notes maturing October 31, 2000,
requiring quarterly payments of $133,333 through and including
October 31, 1999, and quarterly payments of $12 million from
January 31, 2000, through October 31, 2000. The C Term Loan
facility is evidenced by promissory notes maturing April 30,
2001, requiring quarterly payments of $131,578 through October
31, 2000, and two payments of $23,750,000 on January 31 and
April 30, 2001. The revolving loans facility is evidenced by
promissory notes maturing December 31, 2000. The letters of
credit facility provides for the issuance of letters of credit
with expiration dates generally 18 months or less from the date
of issuance (automatically renewable unless a default exists at
the expiration date) but in any event not later than December
31, 2000.
The Company made scheduled payments of $5.3 million on the A
Term Loan facility, $133,333 on the B Term Loan facility and
$131,578 on the C Term Loan facility during the second quarter
of 1996. No borrowings were made from the Company's revolving
loan facility during the quarter.
Certain mandatory prepayments are also required, including the
prepayment of amounts equal to 100% of the net proceeds from any
asset sales, subject to certain exceptions, and 50% of annual
excess cash flow. Such mandatory repayments are to be applied
to equally and ratably prepay the A, B, and C Term Loans based
on the relative principal amounts outstanding.
Term loans under the A Term Loan facility and the revolving
loans bear interest at Tracor's option at either the lender's
base rate plus 1 1/2% or the eurodollar rate plus 2 1/2%. Loans
under the B Term Loan facility bear interest at Tracor's option
at either the lender's base rate plus 2% or the eurodollar rate
plus 3%. Loans under the C Term Loan facility bear interest at
Tracor's option at either the lender's base rate plus 2 1/4% or
the eurodollar rate plus 3 1/4%. Interest on base rate loans is
payable quarterly, and interest on eurodollar loans is payable
at the end of the applicable interest period or every three
months in the case of interest periods in excess of three
months. A commitment fee of .5% per annum is charged on the
unused revolving loans and letters of credit facility and is
payable quarterly in arrears. Each letter of credit bears a
total fee of 2 3/8% per annum plus customary administrative
charges. At June 30, 1996, the Company had outstanding letters
of credit totaling $38.2 million relating to commitments for
performance on certain contracts with foreign customers and as
collateral on certain insurance policies.
The Amended Credit Agreement contains covenants which, among
other things, impose limitations and restrictions on the
incurrence of additional indebtedness, capital expenditures,
future mergers and acquisitions, sales of assets, payment of
dividends (limited to 30% of net income for the prior year), and
changes in control, as defined. In addition, Tracor is required
to satisfy certain financial covenants and tests relating to,
among other matters, interest coverage, working capital,
leverage, and net worth.
Note F -- Subsequent Event
On July 11, 1996, Tracor concluded a public offering of
6,567,272 shares of its common stock at a price of $17.50 per
share. Of the shares sold, the Company sold 3,000,000 shares
and certain former shareholders of Westmark sold 3,567,272
shares. The net proceeds to the Company from the primary shares
sold in the offering, approximately $48.4 million, will be used
to retire a portion of its indebtedness under the Amended Credit
Agreement or to complete an acquisition.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Business Environment
Approximately 88% of the products, systems, and services of
Tracor, Inc. and its subsidiaries (Tracor or the Company) are
sold to the U.S. government through direct contracts, primarily
with agencies of the U.S. Department of Defense (DOD), or
through subcontracts with other U.S. government contractors.
Beginning in the mid-1980s, the defense industry in general was
negatively impacted by the perceived reduction of threats from
the former Soviet Union and eastern European countries and, more
recently, by competing demands upon the federal budget. While
this has resulted in a U.S. defense budget that has decreased in
real dollars, adjusted for inflation, over the last decade, it
recently began to stabilize. For the first time in many years,
the total U.S. defense budget increased in 1996, excluding
inflation. A major portion of the Company's DOD sales are
funded by the operations and maintenance segment of the defense
budget in areas which are among today's top DOD priorities.
This segment has declined less than other segments of the budget
as readiness priorities have emerged. It is now the largest
segment of the defense budget and is projected to comprise about
one-third of the defense budget over the next decade. The
procurement portion of the budget is expected to experience a
modest increase over this same time frame. Tracor's ability to
benefit from this upturn is enhanced by its acquisition of AEL.
The contraction of the defense budget in recent years and the
attendant excess capacity and increase in competition for
contracts among defense companies have resulted in a significant
consolidation in the industry. Principally through several
acquisitions, the Company has substantially increased its
revenue base and reduced combined overhead costs through staff
reductions, facilities consolidations, process improvements, and
the elimination of certain other duplicative costs. These
efficiencies and increased revenue base have enhanced Tracor's
cost competitiveness in bidding on new contracts and recompetes
of existing contracts. Management is continuing to pursue its
acquisition strategy and believes the continuing consolidation
within the defense industry will result in opportunities to
pursue additional selected acquisitions, both large and small,
which should allow the Company to continue to expand its revenue
base and further improve its cost-competitive position.
While the long-term impact of changes in the defense budget and
the industry consolidation cannot be predicted with certainty,
management believes the Company is well positioned to continue
to leverage its strengths and successes in the U.S. defense and
intelligence marketplaces and increase its ongoing
diversification efforts into foreign defense markets, nondefense
U.S. government markets, and selected commercial markets.
Financial Condition
Working capital was $150.7 million at June 30, 1996, up from
$129.1 million at December 31, 1995, primarily due to the
acquisition of AEL. The ratio of current assets to current
liabilities was 2.0 at June 30, 1996, compared to 2.3 at
December 31, 1995. Cash provided by operating activities during
1996 decreased compared to 1995 due to accelerated contract
deliveries and billings in the prior year and current year
increases in program and spare parts inventories, payments to
subcontractors, and funding of insurance programs. Increased
cash collections from AEL were partially offset by payments
associated with consolidating operations with existing Tracor
locations and payment of normal operating costs. Cash from
operating activities in 1995 also included a tax refund related
to the preacquisition period of an acquired company. Normal
capital expenditures of $6.3 million and scheduled long-term
debt payments of $8.2 million were incurred during the six-month
period. The proceeds of the Amended Credit Agreement and cash
on hand were used to finance the acquisition of AEL, to retire
approximately $10 million of debt assumed in the acquisition,
and to pay approximately $5 million of financing costs. Cash on
hand was also used to complete two small acquisitions with an
aggregate purchase price of $6.3 million and to pay $1.5 million
of stock issuance costs associated with a public offering of
Tracor common stock completed on July 11, 1996.
No borrowings were made from the Company's $40 million revolving
loan facility during the quarter. At June 30, 1996, the Company
had outstanding letters of credit of approximately $38.2 million
leaving $11.8 million available under its $50 million letter of
credit facility. If the $50 million letter of credit facility
should become fully utilized, $20 million of the revolving loan
facility, to the extent then available, can be used for issuance
of additional letters of credit. Existing letters of credit
secure performance commitments on certain international
contracts and serve as collateral for certain insurance
policies.
At June 30, 1996, the Company had firm backlog, which includes
funded and unfunded contractual commitments, of $953 million as
compared to $924 million at December 31, 1995. Approximately
79% of firm backlog represents contracts with agencies of the
U.S. government or its prime contractors, and about 78% is
expected to be earned within one year. In addition, the
Company's backlog of unexercised contract options on U.S.
government contracts was $992 million at June 30, 1996.
The Company's operations typically do not require large capital
expenditures, and there were no material capital commitments at
June 30, 1996.
Except for available amounts under the Amended Credit
Agreement's revolving loan and letter of credit facilities, the
Company's present debt position somewhat limits its ability to
obtain substantial additional debt for operational purposes in
the near future. However, management believes existing cash,
funds generated by continuing operations, and the Amended Credit
Agreement will provide sufficient resources to allow the Company
to meet its obligations, fund capital requirements, and continue
to pursue its business strategy. Management also believes it
can obtain the necessary resources to pursue further
acquisitions in the ongoing U.S. defense industry consolidation.
Results of Operations
Quarter and Six-Month Period Ended June 30, 1996, Versus Quarter
and Six-Month Period Ended June 30, 1995
The results of operations for the quarter and six-month period
ended June 30, 1996, include the operating results of AEL since the
date of acquisition, February 22, 1996. AEL's results are not
included in the comparative prior periods of 1995.
Sales increased 23% for the quarter and 16% for the six-month
period. AEL operations comprised 11% of the increase for the
quarter and 8% of the increase for the six-month period. The
remaining increases in sales for the quarter and the six-month
period were due to additional sales of electronic
countermeasures dispenser systems, sales of mine detection and neutralization
systems, increased deliveries of shipboard imagery workstations, and
increased sales on intelligence information systems.
Operating profits increased 29% for the quarter and 24% for the
six-month period; 10% and 6% of the increases, respectively,
were due to AEL operations. Improved profits on electronic
countermeasures dispenser systems, shipboard imagery workstations and
intelligence information systems comprise the remainder of the increases.
Interest expense increased 47% for the quarter and 25% for the
six-month period. The increases are due to the additional
senior term debt borrowed in conjunction with the acquisition of
AEL and increased amortization of debt issuance costs. The
increase in interest expense for the six-month period is less
than the increase for the quarter, primarily due to higher
investment interest income during the first quarter of 1996.
The effective tax rate increased from 43% to 45% due to an
increase in combined federal and state income tax rates.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Corporation was held on June 13,
1996. A brief description of the matters voted upon at the meeting and
the number of votes cast for, against or withheld, abstentions, and broker
non-votes is hereafter displayed.
1. Election of Directors
<TABLE>
Director Votes Votes Broker
Name For Withheld Non-votes
<S><C> <C> <C> <C>
W. Conway 9,170,181 295,087 3,751,577
J. Davidson 9,170,681 294,587 3,751,577
A. Grillo 9,170,681 294,587 3,751,577
B. Marbut 9,170,181 295,087 3,751,577
J. Skaggs 9,170,681 294,587 3,751,577
T. Stafford 9,170,181 295,087 3,751,577
</TABLE>
2. Election of Class A Director
<TABLE>
Director Votes Votes Broker
Name For Withheld Non-votes
<S> <C> <C> <C> <C>
E. Mason 978,458 0 0
</TABLE>
3. Approval of the acquisition agreement with Westmark Systems, Inc. and
issuance Tracor common stock in exchange for the assets of Westmark
<TABLE>
Votes Broker
For Against Abstained Non-votes
<S><C> <C> <C> <C>
7,193,534 214,012 26,829 6,760,928
</TABLE>
4. Amendment and restatement of the Certificate of Incorporation of
Tracor to eliminate the provisions relating to Class A Common Stock
<TABLE>
Votes Broker
For Against Abstained Non-votes
<S><C> <C> <C> <C>
7,106,377 303,687 24,311 6,760,928
</TABLE>
5. Amendment of the bylaws of Tracor to classify the Board of Directors
into three classes of directors with staggered three-year terms
<TABLE>
Votes Broker
For Against Abstained Non-votes
<S><C> <C> <C> <C>
4,429,064 2,987,245 18,067 6,760,927
</TABLE>
6. Amendment of the 1995 Stock Plan for Employees of Tracor, Inc. and
Subsidiaries to allow for a grant of restricted shares and options to
directors
<TABLE>
Votes Broker
For Against Abstained Non-votes
<S><C> <C> <C> <C>
5,775,533 1,625,366 33,377 6,761,027
</TABLE>
7. Ratification of the selection by the Board of Directors of
Ernst & Young LLP as independent auditors for 1996
<TABLE>
Votes Broker
For Against Abstained Non-votes
<S><C> <C> <C> <C>
10,329,541 8,411 11,918 3,845,433
</TABLE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits.
11. Statement regarding computation of income per common and
common equivalent share.
27. Financial Data Schedule
<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.
Tracor, Inc.
Date: August 14, 1996 By: /s/ Robert K. Floyd
-------------------
Robert K. Floyd
Vice President and
Chief Financial Officer
<TABLE>
<CAPTION>
TRACOR
COMPUTATION OF INCOME PER COMMON AND COMMON EQUIVALENT SHARE
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
Primary: 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 7,997 $ 6,803 $15,658 $13,053
Pro forma adjustments, net of income taxes:
Interest expense - 483 424 1,032
Investment income - - - -
------- ------- ------- -------
Pro forma net income $ 7,997 $ 7,286 $16,082 $14,085
======= ======= ======= =======
Weighted average common shares outstanding 15,675 13,151 14,920 12,413
Weighted average common share equivalents:
Assumed exercise of warrants 9,890 12,471 10,969 12,677
Assumed exercise of options 1,730 1,083 1,608 999
Assumed purchase of common shares for
treasury (3,704) (2,815) (3,268) (2,575)
------- ------- ------- -------
Net weighted average additional shares issuable 7,916 10,739 9,309 11,101
------- ------- ------- -------
Common and common equivalent shares 23,591 23,890 24,229 23,514
======= ======= ======= =======
Income per common and common equivalent share $.34 $.30 $.66 $.60
==== ==== ==== ====
Fully diluted:
Net income $ 7,997 $ 6,803 $15,658 $13,053
Pro forma adjustments, net of income taxes:
Interest expense - 478 360 938
Investment income - - - -
------- ------- ------- -------
Pro forma net income $ 7,997 $ 7,281 $16,018 $13,991
======= ======= ======= =======
Weighted average common shares outstanding 15,675 13,151 14,920 12,413
Weighted average common share equivalents:
Assumed exercise of warrants 9,890 12,471 10,969 12,677
Assumed exercise of options 1,730 1,083 1,608 999
Assumed purchase of common shares for
treasury (3,704) (2,815) (3,268) (2,575)
------- ------- ------- -------
Net weighted average additional shares issuable 7,916 10,739 9,309 11,101
------- ------- ------- -------
Common and common equivalent shares 23,591 23,890 24,229 23,514
======= ======= ======= =======
Income per common and common equivalent share $.34 $.30 $.66 $.60
==== ==== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
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