<PAGE>
FY94: SECOND QUARTER
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended January 30, 1994
Commission File Number 1-6101
ROHR, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1607455
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
850 LAGOON DRIVE, CHULA VISTA, CALIFORNIA 91910
(Address of principal executive offices)
(619) 691- 4111
(Registrant's Telephone No.)
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 March 11, 1994, there were 18,017,930 shares of the Registrant's common
stock outstanding.
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ROHR, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(in thousands except for share data)
------------------------------------
<TABLE>
<CAPTION>
Jan. 30, July 31,
1994 1993
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Cash and short-term investments $ 28,768 $ 42,186
Accounts receivable 94,126 94,140
Inventories:
Work-in-process 516,483 560,139
Raw materials, purchased parts and supplies 29,051 32,575
Less customers' progress payments and advances (133,380) (152,976)
--------- ----------
Inventories - net 412,154 439,738
Prepaid expenses and other current assets 15,539 16,861
Deferred tax asset 13,723 13,654
--------- -----------
TOTAL CURRENT ASSETS 564,310 606,579
PROPERTY, PLANT AND EQUIPMENT 499,388 496,452
Less accumulated depreciation and amortization (268,539) (257,407)
--------- -----------
Property, plant and equipment - net 230,849 239,045
INVESTMENT IN LEASES 37,735 38,233
DEFERRED TAX ASSET 88,915 89,348
OTHER ASSETS 45,757 44,581
--------- ----------
$ 967,566 $1,017,786
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Trade accounts and other payables $ 155,691 $ 166,916
Salaries, wages and benefits 33,955 38,623
Current portion of long-term debt 16,211 50,719
--------- ----------
TOTAL CURRENT LIABILITIES 205,857 256,258
LONG-TERM DEBT 467,214 480,889
PENSION AND POST-RETIREMENT OBLIGATIONS 69,246 63,040
OTHER OBLIGATIONS 35,020 35,356
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value per share, 10 million
shares authorized, none issued - -
Common stock, $1 par value per share, authorized
50,000,000 shares; issued and outstanding
18,017,930 and 17,995,866 shares respectively 18,018 17,996
Additional paid-in capital 102,541 102,312
Retained earnings 82,976 75,241
Minimum pension liability adjustment (13,306) (13,306)
--------- ----------
TOTAL SHAREHOLDERS' EQUITY 190,229 182,243
--------- ----------
$ 967,566 $1,017,786
========= ==========
</TABLE>
<PAGE>
ROHR, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
-----------------------------------------------
(in thousands except for per share data)
----------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
Jan. 30, Jan. 31, Jan. 30, Jan. 31,
1994 1993 1994 1993
-------- ---------- ---------- ----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Sales $241,217 $342,105 $484,823 $ 626,004
Costs and Expenses 220,637 337,979 439,719 594,568
General & Administrative Period
Expense 5,986 11,660 13,446 22,467
-------- -------- -------- ---------
Operating Income (Loss) 14,594 (7,534) 31,658 8,969
Interest Income 208 133 520 405
Interest Expense 12,050 12,207 24,201 23,175
-------- -------- -------- ---------
Income (Loss) before Taxes and
Cumulative
Effect of Accounting Changes 2,752 (19,608) 7,977 (13,801)
Taxes (Benefit) on Income (Loss) 1,080 (7,510) 242 (5,286)
-------- -------- -------- ---------
Income (Loss) before Cumulative
Effect of Accounting changes 1,672 (12,098) 7,735 (8,515)
Cumulative Effect through July 31,
1992 of accounting changes, net
of taxes (223,950)
-------- -------- -------- ---------
Net Income (Loss) $ 1,672 $(12,098) $ 7,735 $(232,465)
======== ======== ======== =========
Net Income (Loss) per Average
Share of Common Stock:
Before accounting changes $ 0.09 $ (0.68) $ 0.43 $ (0.48)
Effect of accounting changes (12.52)
-------- -------- -------- ---------
Net Income (Loss) $ 0.09 $ (0.68) $ 0.43 $ (13.00)
======== ======== ======== =========
Cash Dividends per Share
of Common Stock - - - -
Total Common Stock and
Common Stock Equivalents 18,117 17,897 18,028 17,884
</TABLE>
<PAGE>
ROHR, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
-------------------------------------------------
(in thousands)
--------------
<TABLE>
<CAPTION>
Six Months Ended
---------------------
Jan. 30, Jan 31,
1994 1993
--------- ----------
(Restated)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 7,735 $(232,465)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Cumulative effect of accounting changes, net of
taxes - 223,950
Depreciation and amortization 11,693 12,648
Changes due to (increase) decrease in operating
assets:
Accounts receivable 6,998 (34,527)
Net inventories 27,584 9,954
Prepaid expenses and other assets 1,322 8,106
Changes due to increase (decrease) in operating
liabilities:
Trade accounts and other payables (11,817) (13,848)
Taxes on income and deferred taxes 364 (9,717)
Other 1,049 328
-------- ---------
Net cash provided by (used in) operating activities 44,928 (35,571)
-------- ---------
INVESTING ACTIVITIES:
Proceeds from sale-leaseback transactions - 52,247
Purchase of property, plant and equipment (2,949) (18,878)
Other (390) (2,522)
-------- ---------
Net cash provided by (used in) investing activities (3,339) 30,847
-------- ---------
FINANCING ACTIVITIES:
Issuance of 9.33% senior notes - 62,000
Annual principal payment on 9.35% senior notes (12,500) (12,500)
Repayment of medium-term notes (35,000) (10,000)
Net short-term borrowings - 5,000
Long-term borrowings under revolving credit
agreement 81,000 80,000
Repayment of borrowings under revolving
credit agreement (81,000) (50,000)
Repayment of other long-term borrowings (649) (18,712)
Net repayment of receivable and equivalents (45,000)
Cash collateral for receivables sales program (6,984) -
Stock contributions to employee benefit plans - 741
Other 126 11
-------- ---------
Net cash provided by (used in) financing activities (55,007) 11,540
-------- ---------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS (13,418) 6,816
CASH AND SHORT-TERM INVESTMENTS,
BEGINNING OF PERIOD 42,186 21,122
-------- ---------
CASH AND SHORT-TERM INVESTMENTS,
END OF PERIOD $ 28,768 $ 27,938
======== =========
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized $ 21,353 $ 20,422
Cash paid (refunded) for income taxes (178) 4,392
</TABLE>
<PAGE>
ROHR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
The consolidated balance sheet as of January 30, 1994, and statements of
earnings and cash flows for the six-month periods ended January 30, 1994,
and January 31, 1993, reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the results of operations for the interim
periods. Financial results for interim periods are not necessarily
indicative of results to be expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These consolidated financial
statements should be read in conjunction with the financial statements
included in the July 31, 1993 Form 10-K.
Financial results for the first six months of fiscal year 1993 have been
restated for changes in the application of accounting principles adopted on
a retroactive basis in the third quarter of fiscal year 1993.
Contingencies
As previously reported, the Company filed a notice of breach of contract
with the government on the C-5 spare pylon contract and the U.S. Air Force
filed a termination notice for alleged default. In fiscal 1992, the Company
commenced the appeal process to convert the termination to one for
convenience of the government. The Company is now finalizing a
comprehensive settlement with the U.S. Air Force concerning this matter and
other contract claims. In prior periods, the Company recorded special
provisions for this matter and such other contract claims which it believes
will be adequate.
Also as previously reported, investigative agencies of the United States
Defense Department and the United States Attorney for the Central District
of California subpoenaed various documents of the Company (relating
principally to the Company's performance on its F-14 and C-5 contracts) and
began interviewing various of the Company's employees. The Company
cooperated fully in the investigation and is nearing completion of its
settlement discussions with the U.S. Attorney's office in Los Angeles. The
Company recorded special provisions for this matter in prior periods which
it believes will be adequate. In connection with this matter, the
<PAGE>
Company is also engaged in discussions with government officials who have
the discretion to temporarily suspend or to debar the Company from entering
into government contracts in the future. The discussions are designed to
demonstrate that the Company is a presently-responsible contractor and that
it should be entitled to continue to be eligible to receive additional
governmental contracts.
In June 1987, the U.S. District Court of Los Angeles, in U.S. et al, vs.
Stringfellow, granted partial summary judgment against the Company and 14
other defendants on the issue of liability under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"). This
suit alleges that the defendants are jointly and severally liable for all
damage in connection with the Stringfellow hazardous waste disposal site in
Riverside County, California. In June 1989, a federal jury and a special
master appointed by the federal court found the State of California also
liable for the cleanup costs. On November 30, 1993, the special master
released his "Findings of Fact, Conclusion of Law and Reporting
Recommendations of the Special Master Regarding the State Share Fact Finding
Hearing". In it, he allocates liability between the State of California and
other parties. As this hearing did not involve the valuation of future
tasks and responsibilities, the order did not specify dollar amounts of
liability. The order, phrased in percentages of liability, recommended
allocating liability on the CERCLA claims as follows: 65% to the State of
California and 10% to the Stringfellow entities, leaving 25% to the
generator/counterclaimants (including the Company) and other users of the
site (or a maximum of up to 28% depending on the allocation of any
Stringfellow entity orphan share). On the state law claims, the special
master recommended a 95% share for the State of California, and 5% for the
Stringfellow entities, leaving 0% for the generator/counterclaimants. This
special master's finding is subject to a final decision and appeal. The
Company is the second largest generator of wastes by volume disposed at the
site, although it and certain other generators have argued the final
allocation of cleanup costs among generators should not be determined solely
by volume. The largest volume generator of wastes disposed at the
Stringfellow site has indicated it is significantly dependent on insurance
to fund its share of any cleanup costs, and that it is in litigation with
certain of its insurers. The Company and the other generators of wastes
disposed at the Stringfellow site, which include numerous companies with
assets and equity significantly greater than the Company, are jointly and
severally liable for the share of cleanup costs for which the generators, as
a group, may ultimately be responsible. The Company intends to continue to
vigorously defend this matter and believes, based upon currently available
information, that the ultimate resolution will not have a material adverse
effect on the financial position or results of operations of the Company.
<PAGE>
The Company has claims against its comprehensive general liability insurers
for reimbursement of its cleanup costs at the site. These claims are the
subject of separate litigation, although the insurers nevertheless are
paying substantially all of the Company's costs of defense in the CERCLA and
State actions against the generators of wastes disposed at the site.
Certain of these insurance policies have pollution exclusion clauses which
are being argued as a defense and the insurers are alleging various other
defenses to coverage. The Company has entered settlements with some of the
insurance carriers and is engaged in settlement discussions with certain
others. The Company intends to continue to vigorously defend this matter
and believes, based upon currently available information, that the ultimate
resolution will not have a material adverse effect on the financial
position, liquidity, or results of operations of the Company.
The Company is also involved in several other proceedings and investigations
related to environmental protection matters. It is difficult to estimate
the ultimate level of environmental expenditures that will be required in
connection with these matters due to a number of uncertainties, including
the complexity of the related laws and their interpretation, alternative
cleanup technologies and methods, insurance and other recoveries, and in
some cases, the extent and uncertainties of the Company's involvement.
However, the Company has heard of very preliminary estimates of cleanup
costs for the Rio Bravo, Chatham Brothers and Casmalia waste disposal sites
as approximately $7 million, $30 million and $70 million, respectively, and
the Company's share (based on estimated, respective volumes of discharges
into such sites by all generators, all of which cannot now be known with
certainty) could range upward from $450,000 for the Rio Bravo site, $0 for
the Chatham Brothers site (based on the Company's belief that it never used
that site), and $1,750,000 for the Casmalia site. The Company does not yet
know about the ability of all of the other waste generators using the
Casmalia and Rio Bravo sites to fund their allocable share, and the Company
could be found jointly or severally liable with all waste generators using
such sites. The Company has made claims against its insurance carriers for
certain of these items, and has received claims acknowledgment letters
reserving the rights of such carriers. The insurers have alleged or may
allege various defenses to coverage, although no litigation has been
commenced. Based upon presently available information, the Company believes
that capital expenditures and costs of remedial actions in relation to these
other matters will not have a material adverse effect on the financial
position or results of operations of the Company.
In 1990, the Division of Enforcement of the Securities and Exchange
Commission (the "SEC") began conducting an informal inquiry regarding
various Company production programs, program and contract estimates at
completion and related accounting practices. Following the filing of a
registration statement with the SEC, the Company received on August 17,
1993, and shortly
<PAGE>
thereafter responded to, a request for documents from the SEC Division of
Enforcement concerning its decision to change its accounting practices
relating to long-term programs and contracts, and its previous practice of
capitalizing pre-certification and certain general and administrative costs.
There have been no further comments from the staff since that date.
The Internal Revenue Service ("IRS") has completed the audit of the
Company's tax returns through fiscal year 1983 and these years are closed.
The IRS recently completed the examination phase of its audit of the
Company's tax returns for fiscal years 1984 and 1985. On July 21, 1993, the
IRS issued a Revenue Agent's Report ("RAR") challenging the Company's
adoption in 1984 of the completed contract method of accounting ("CCMA"),
the Company's tax deduction for funding liabilities related to a Voluntary
Employee Benefit Association ("VEBA"), and certain other matters. The RAR's
proposed adjustments assert total additional tax liability of approximately
$36.6 million for 1984 and 1985 (of which the Company has paid $4.7 million
for certain agreed matters other than CCMA and VEBA related issues) plus
associated interest of approximately $50 million at July 31, 1993 (of which
the Company has paid $6.1 million for interest on the agreed matters).
Issues similar to some of those raised in the RAR, including the CCMA issue,
could relate to Company fiscal years subsequent to 1985. The Company
intends to vigorously protest the proposed adjustments and filed an appeal
with the Appellate Division of the IRS on November 12, 1993. Based upon all
of the information available to it, the Company believes that the resolution
of the issues raised in the RAR will not have a material adverse effect on
the financial position or results of operations of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Material developments in the Company's liquidity and capital resources since
July 31, 1993, are presented below. Also presented is management's analysis
of operating results for the three month and six-month periods ended January
30, 1994 and January 31, 1993. These discussions should be read in
conjunction with the financial statements and management's discussion and
analysis thereof included in the Company's July 31, 1993 Form 10-K.
Liquidity and Capital Resources
In recent periods, the Company has downsized its workforce, substantially
reduced overhead and capital expenditures, closed one plant, is in the
process of closing a second facility and has implemented other cost cutting
efforts.
<PAGE>
For the first six months of fiscal year 1994, net cash provided by operating
activities totaled $44.9 million compared with a use of cash of $35.6
million for the same period of the prior year. Net cash provided by
operating activities in the second quarter of fiscal 1994 totaled $27.4
million compared with net cash provided by operating activities of $17.5
million in the first quarter of fiscal 1994. During the first six months of
fiscal year 1994, net cash from operating activities was augmented by
several large payments to the Company for non-recurring engineering and
tooling efforts as well as accelerated payments for delivered production
hardware. Net cash provided by operations is subject to significant
variations from period to period.
The Company's total financings (balance sheet debt plus off-balance sheet
financings) aggregated $587 million at January 30, 1994, down $56.9 million
from July 31, 1993. Total indebtedness as reflected on the Company's
balance sheet decreased by $48.2 million from $531.6 million on July 31,
1993 to $483.4 million on January 30, 1994. During the first six months of
fiscal year 1994, the Company repaid its $35 million medium term note and
made the annual $12.5 million principal payment on its 9.35% senior notes.
The Company's liquidity has improved over the last year, primarily as a
result of cash flow generated from operating activities. However, as a
result of its credit rating and the financial community's concerns about the
aerospace industry, the Company has generally been unable to utilize
uncommitted and certain other credit facilities which historically have been
available to it. On January 30, 1994, the Company had $50 million of
borrowings under its $150 million committed revolving credit facility, no
change from borrowings of $50 million on July 31, 1993. The commitment
under this facility is scheduled to decrease annually by $50 million in
April of each year from 1994 through 1996. The Company's revolving credit
agreement and its senior note agreements require it to issue at least $100
million of subordinated debt on or prior to August 1, 1994. The Company
recently retained an investment bank to advise and assist with respect to
increasing the Company's liquidity and improving the Company's capital
structure through a public and/or private offering of debt. In addition,
the Company is engaged in negotiations with its bank lending group to revise
and extend its revolving credit facility.
The Company's existing debt level reflects the substantial investments made
by the Company in the late 1980's and early 1990's to design and begin
production on several major long-term programs. Except for the MD-90, the
Company has substantially completed the large investments required by these
programs and most are now well into production. The industry is expected to
introduce relatively few new programs in the next several years and,
accordingly, the Company believes that its financing requirements for new
programs have been reduced as compared to prior periods.
<PAGE>
Two letters of credit which secure certain of the Company's obligations will
expire in April and July, 1994. The Company is seeking the renewal of both
letters of credit which are expected to aggregate approximately $25 million.
If the Company does not obtain renewals or substitute letters of credit, it
will be required to use some portion of the existing availability under its
bank revolving credit facility.
The Company is a party to a $60 million accounts receivable facility under
which it sells receivables from specified customers on an on-going basis.
As a result of the slow-down in the aerospace industry, the amount of
outstanding receivables from these customers has fallen below levels which
existed at the start of the facility. As a result, the Company has
deposited cash collateral from time to time as required to support the
facility and has withdrawn such cash when it is no longer required to be
deposited. At January 30, 1994, the Company had $7 million of cash
collateral on deposit.
The Company is also a party to certain equipment leases and has granted the
lessors a security interest in selected customer receivables to secure $10
million of obligations. If the parties who lease this equipment to the
Company do not assign approximately one-half of their beneficial interests
in the leased equipment to other parties by January 1995, the equipment
lessors may require the Company to prepay up to $10 million of its equipment
lease obligations.
At July 31, 1993, the underfunded status (excess of projected benefit
obligations over plan assets) of the Company's defined benefit plans had
increased to $65.6 million. This underfunded status resulted from a
combination of factors including benefit increases, increased levels of
early retirements, less than the actuarially assumed returns on plan assets
and a reduction in the discount rate used to calculate the present value of
future liabilities. Considering current interest rate levels, the Company
anticipates reducing its discount rate to 7.5 percent for its fiscal year
1994 valuation from the 8.5 percent used for its prior year valuation. The
Company's actuary has advised that such reduction is estimated to increase
the Company's accrued pension benefit obligation and thus its unfunded
pension liability by approximately $55 million. In addition, the Company has
continued to experience a higher level of early retirements than actuarially
anticipated which is also expected to significantly increase the accrued
pension benefit obligation and thus the underfunded status of the Company's
defined benefit plans by approximately $20 million. Annually, the Company is
required to adjust the liability on its financial statements for any
increases or decreases in the underfunded status of its defined benefit
plans. Due to the reduction in discount rate and increased early retirements
described above, such increased liability for the pension plans is estimated
to aggregate $75 million beyond that previously recognized. The recognition
of this increased liability is also expected to increase the Company's
deferred tax asset
<PAGE>
account an estimated $30 million, and to result in a charge to shareholders'
equity estimated to be $45 million. The evaluation of these items and the
recognition of the financial impact is expected to be completed by the end
of the third quarter of fiscal 1994.
The Company's principal financing agreements have covenants pertaining to
indebtedness (which includes the liability arising from the underfunded
status of the defined benefit plans) and shareholders' equity. The
anticipated reduction in the discount rate coupled with the higher level of
early retirements will require the Company to revise these covenants to
remain in compliance. The Company has notified its senior lenders of the
combined impact of these issues. The Company is negotiating agreements with
its senior note holders and a new revolving credit agreement with banks
which will accommodate the revised covenants.
The Company's required minimum annual contribution to its defined benefit
plan, which is directly impacted by the plans' funded status, has increased
from $15.3 million for calendar year 1992 to $19.0 million for calendar year
1993 with substantial additional increases expected in future years. An
increased level of contributions is expected to continue until the funded
levels of the plans improve.
On January 21, 1994, the Company announced that it had signed letters of
intent to sell its corporate jet product line and certain assets of a wholly
owned subsidiary, Rohr Aero Services Inc. The revenue generated from these
operations has approximated $35 million in each of the last two fiscal
years. In preparation for the sale of the assets of Rohr Aero Services
Inc., the Company adjusted carrying values of assets downward by $0.7
million. In the aggregate, a net gain is anticipated on disposal of these
assets. The Company is in the process of selling its Auburn, Washington
plant (which was closed in fiscal year 1993) and is seeking to sell its
Hagerstown, Maryland manufacturing facility which is excess to projected
capacity needs. The Company intends to use the proceeds from these sales to
reduce its existing borrowing against the bank revolving credit facility.
The Company's net inventory decreased to $412.2 million at January 30, 1994
from $439.7 million at July 31, 1993. Excess-over-average and production
inventory declined reflecting the increased maturity of newer programs, the
reduced sales volume and the efforts of management to control inventory
levels. These reductions were partially offset by an increase in
pre-production inventory, primarily in the MD-90, A340 and V2500 programs.
<PAGE>
Capital expenditures for property, plant and equipment totaled $2.9 million
for the first six months of fiscal year 1994, down from $18.9 million in the
first six months of fiscal year 1993. Capital expenditures in the first six
months of fiscal year 1993 were higher than in the first six months of
fiscal year 1994, due in large part to expenditures for new office and
manufacturing facilities. In addition, the Company has substantially
curtailed its previously planned capital expenditures for the balance of
fiscal year 1994 in line with other cost cutting efforts. The Company
believes that the amount it plans to spend on capital expenditures over the
next several years will be sufficient to meet the Company's production
requirements.
The Company's firm backlog, which includes the sales price of all
undelivered units covered by customers' orders for which the Company has
production authorization, was approximately $1.3 billion at January 30, 1994
compared to $1.4 billion at July 31, 1993. Approximately $0.4 billion of
the $1.3 billion backlog is expected to be delivered in the remainder of
fiscal year 1994. (Sales during any period include sales which were not
part of backlog at the end of the prior period.) Customer orders in firm
backlog are subject to rescheduling and/or termination for customer
convenience; however, in certain cases the Company is entitled to an
adjustment in contract amounts. The Company has an additional $2.7 billion
in anticipated backlog, which represents the sales price of units which the
Company expects that its customers will order under existing contracts and
the Company will deliver within seven years.
Results of Operations
First Six-Months Fiscal 1994 Compared to First Six-Months Fiscal 1993
---------------------------------------------------------------------
Total sales for the first six months of fiscal year 1994 were $484.8
million, down $141.2 million from the first six months of fiscal year 1993.
Commercial sales during the first six months of fiscal year 1994 were down
compared to the same period of fiscal year 1993 due primarily to reductions
in deliveries. Government sales for the comparative period declined due
primarily to a reduction in the delivery rate on the Titan program.
Commercial sales aggregated 88 percent and government sales 12 percent of
the Company's total sales in the first six-months of fiscal year 1994.
Operating income increased to $31.7 million for the first half of fiscal
year 1994 up from $9.0 million for the same period of fiscal year 1993. A
significant contributor was reduced general and administrative expenses
which declined $9.1 million from $22.5 million for the first six months of
fiscal 1993 to $13.4 million in the first six months of fiscal 1994. The
decline was primarily the result of work force reductions and other ongoing
cost cutting efforts. Fiscal 1994
<PAGE>
results were adversely impacted by a reduction in sales volume on several
programs. Fiscal 1993 results were impacted by losses on tooling and design
efforts and cost problems related to certain programs, a loss on the 727 Re-
engine program, and $5 million for additional provisions related to various
litigation uncertainties. Operating income in the first half of fiscal year
1994 was also impacted by a less favorable follow-on contract on the Titan
program.
Net interest expense was $23.7 million for the first six months of fiscal
year 1994 compared to $22.8 million for the same period last year. While
total financings have declined, interest rates paid by the Company have
increased primarily due to the replacement of certain variable rate
financings with long-term fixed rate financing.
Earnings for the first six months of fiscal year 1994 were a positive $7.7
million or 43 cents per share compared to a loss of $8.5 million or 48 cents
per share (before the cumulative effect of the accounting change) for the
same period last year. The Omnibus Budget Reconciliation Act, adopted in
August 1993, increased federal tax rates, thus causing the deferred tax
asset shown on the balance sheet to increase and taxes on income to decrease
for the first six-months of fiscal year 1994. This resulted in a one time
increase in net income of $2.8 million and earnings per share of 16 cents.
The first six-months of fiscal year 1993 were additionally impacted by a
loss of $223.9 million, net of taxes or $12.52 per share due to the
cumulative effect for the changes in the application of accounting
principles through July 31, 1992, adopted on a retroactive basis in the
third quarter of fiscal year 1993.
Additional Items
----------------
The Company is still experiencing softness in orders by airlines for spare
components, causing revisions to the spare delivery forecast in the near
term on certain programs.
The Company has notified its customer on the V2500 program that it has
exercised its contractual right to terminate the contract in 1995 so the
Company will not be required to accept orders under the current contract
terms after mid year 1995. The Company is discussing possible alternative
contractual arrangements with its customer under which it would continue
with the program. In addition, anticipated spares deliveries for the V2500
program have been revised downward in the near term and the Company now
expects to incur the total loss previously booked on this program.
<PAGE>
The Company, and its actuary, are evaluating the extent to which the
downsizing of personnel may necessitate the expensing of unamortized pension
benefit past service costs related to the termination of employees. This
evaluation and the recognition of its financial impact is expected to be
complete by the end of the third quarter of fiscal 1994.
Second Quarter Fiscal Year 1994 Compared to Second Quarter Fiscal Year 1993
---------------------------------------------------------------------------
Commercial sales during the second quarter of fiscal 1994 were down compared
to the same period of fiscal year 1993 due primarily to delivery rate
reductions. Government sales for the comparative period declined due
primarily to a reduction in the delivery rate on the Titan program.
Commercial sales aggregated 87 percent and government sales 13 percent of
the Company's total sales in the second quarter of fiscal year 1994.
Operating income and net interest expense were impacted by the factors
discussed in the previous section.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on Saturday, December 4,
1993 at the offices of the Company in Chula Vista, California. Of the
18,017,930 shares eligible to vote at the meeting, 14,792,566 were
represented. Messrs. Wallace W. Booth, James J. Kerley, Robert H. Rau and
William P. Sommers were elected as Directors for the three-year terms
expiring at the Annual Meeting in 1996, each receiving in excess of 14.1
million affirmative votes. Directors whose terms of office as Directors
continued after the meeting included Messrs. Wallace Barnes, Eugene E.
Covert, Wayne M. Hoffman, D. Larry Moore, Robert M. Price and Jack D.Steele.
As set forth in the proxy, prior to the annual meeting of shareholders, the
Board of Directors decreased the authorized number of Directors of the
Company from 12 to 10 effective with the adjournment sine die of the 1993
---- ---
Annual Meeting of Shareholders.
The shareholders also approved the selection of Deloitte & Touche as the
Company's independent auditors for fiscal 1994. The selection of Deloitte &
Touche was approved, receiving 14,528,093 affirmative votes, 88,528 negative
votes and 175,935 abstentions.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits:
11.1 Calculation of Primary Net Income Per Share of Common Stock
11.2 Calculation of Fully Diluted Net Income Per Share of Common
Stock
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during this period.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROHR, INC.
March 15, 1994 By: /s/ A. L. MAJORS
-------------------------
A. L. Majors
Vice President and Controller
(Chief Accounting Officer)
<PAGE>
ROHR, INC. AND SUBSIDIARIES
---------------------------
CALCULATION OF PRIMARY NET INCOME PER SHARE
-------------------------------------------
OF COMMON STOCK - UNAUDITED
---------------------------
(in thousands except for share data)
------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
Jan. 30, Jan. 31, Jan. 30, Jan. 31,
1994 1993 1994 1993
--------- ---------- --------- ----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Income (loss) before cumulative
effect of
accounting changes $ 1,672 $(12,098) $ 7,735 $ (8,515)
Cumulative effect of accounting
changes, net of taxes (223,950)
------- -------- ------- ---------
Net income (loss) applicable to
primary earnings per common share $ 1,672 $(12,098) $ 7,735 $(232,465)
======= ======== ======= =========
Common stock and common stock
equivalents:
Average shares of common
stock outstanding during
the period 18,018 17,897 18,011 17,883
Net effect of common stock
equivalents (principally
stock options and rights) 99 17 1
------- -------- ------- ---------
Total common stock and common
stock equivalents 18,117 17,897 18,028 17,884
======= ======== ======= =========
Net income (loss) per average
share of common stock:
Before accounting changes $ 0.09 $ (0.68) $ 0.43 $ (0.48)
Effect of accounting changes - (12.52)
------- -------- ------- ---------
Primary net income (loss) per
common share $ 0.09 $ (0.68) $ 0.43 $ (13.00)
======= ======== ======= =========
</TABLE>
EXHIBIT 11.1
<PAGE>
ROHR, INC. AND SUBSIDIARIES
---------------------------
CALCULATION OF FULLY DILUTED NET INCOME PER SHARE
-------------------------------------------------
OF COMMON STOCK - UNAUDITED
---------------------------
(in thousands except for share data)
------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
Jan. 30, Jan. 31, Jan. 30, Jan. 31,
1994 1993 1994 1993
-------- ---------- --------- ----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Net income (loss) before
cumulative effect of
accounting changes applicable
to primary earnings per
common share $ 1,672 $(12,098) $ 7,735 $ (8,515)
Add back interest and issue
expense on convertible
debentures, net of tax
adjustment 1,234 1,228 2,459 2,484
------- -------- ------- ---------
Adjusted net income before
cumulative effect of accounting
changes applicable to common
stock on a fully diluted basis 2,906 (10,870) 10,194 (6,031)
Cumulative effect of accounting
changes, net of taxes (223,950)
------- -------- ------- ---------
Net income (loss) applicable to
fully diluted earnings per share $ 2,906 $(10,870) $10,194 $(229,981)
======= ======== ======= =========
Average number of shares
outstanding on a fully diluted
basis:
Shares used in primary earnings
per share 18,117 17,897 18,028 17,884
Unexercised options 1
Shares on conversion of
debentures 2,674 2,674 2,674 2,674
------- -------- ------- ---------
Average number of shares
outstanding on a fully diluted
basis 20,791 20,571 20,702 20,559
======= ======== ======= =========
Fully diluted net income (loss)
per common share before
cumulative effect of
accounting changes $ 0.14 $ (0.53) $ 0.49 $ (0.30)
Loss from cumulative effect of
accounting changes, net of
taxes (10.89)
------- -------- ------- ---------
Fully diluted net income (loss)
per common share $ 0.14 $ (0.53) $ 0.49 $ (11.19)
======= ======== ======= =========
</TABLE>
Note:
The assumed conversion of the Company's convertible debentures were anti-
dilutive or did not have a materially dilutive impact on earnings per share,
hence only primary earnings per share is presented in the Company's
Consolidated Financial Statements.
EXHIBIT 11.2
