<PAGE>
FY96: FIRST 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 OCTOBER 29, 1995
COMMISSION FILE NUMBER 1-6101
ROHR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-1607455
(State of other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
</TABLE>
850 LAGOON DRIVE, CHULA VISTA, CALIFORNIA 91910-2098
(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 NOVEMBER 27, 1995 THERE WERE 18,110,259 SHARES OF THE REGISTRANT'S COMMON
STOCK OUTSTANDING.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROHR, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(in thousands except for share data)
------------------------------------
<TABLE>
<CAPTION>
OCT. 29, JULY 31,
1995 1995
----------- ---------
<S> <C> <C>
ASSETS (UNAUDITED)
- ------
Cash and cash equivalents $ 48,865 $ 84,584
Accounts receivable 87,108 72,152
Inventories:
Work-in-process 464,632 429,578
Raw materials, purchased parts and supplies 24,081 23,367
Less customers' progress payments and advances (54,463) (62,670)
----------- ---------
Inventories - net 434,250 390,275
Deferred tax asset 6,493 6,493
Prepaid expenses and other current assets 11,225 13,685
----------- ---------
TOTAL CURRENT ASSETS 587,941 567,189
Property, plant and equipment - net 213,938 217,051
INVESTMENT IN LEASES 34,648 34,657
DEFERRED TAX ASSET 105,061 105,020
OTHER ASSETS 53,217 52,623
----------- ---------
$994,805 $976,540
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Accounts payable and other liabilities $174,448 $157,872
Taxes on income 506 451
Current portion of long-term debt 14,094 14,119
----------- ---------
TOTAL CURRENT LIABILITIES 189,048 172,442
LONG-TERM DEBT 540,118 540,658
PENSION AND POST-RETIREMENT OBLIGATIONS - LONG-TERM 71,191 69,386
OTHER OBLIGATIONS 17,497 18,123
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
18,109,952 and 18,068,076 shares, respectively 18,110 18,068
Additional paid-in capital 103,383 102,887
Retained earnings 93,876 93,394
Minimum pension liability adjustment (38,418) (38,418)
----------- ---------
TOTAL SHAREHOLDERS' EQUITY 176,951 175,931
----------- ---------
$994,805 $976,540
=========== =========
</TABLE>
2
<PAGE>
ROHR, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
-----------------------------------------------
(in thousands except for per share data)
----------------------------------------
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
-------------------
OCT. 29, OCT. 30,
1995 1994
-------- --------
<S> <C> <C>
Sales $150,400 $192,156
Costs and Expenses 131,533 170,243
General & Administrative Expenses 6,728 6,560
-------- --------
Operating Income 12,139 15,353
Interest Income 1,052 1,115
Interest Expense 12,386 14,177
-------- --------
Income from Continuing Operations
Before Taxes on Income 805 2,291
Taxes on Income 323 921
-------- --------
Income from Continuing Operations 482 1,370
Income from Discontinued Operations - Net of Taxes - 497
-------- --------
Net Income $ 482 $ 1,867
======== ========
Net Income per Average
Share of Common Stock:
Income from Continuing Operations $ 0.03 $ 0.08
Income from Discontinued Operations - 0.02
-------- --------
Net Income $ 0.03 $ 0.10
======== ========
Cash Dividends per Share
of Common Stock - -
Total Common Stock and
Common Stock Equivalents 18,682 18,138
</TABLE>
3
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ROHR, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
-------------------------------------------------
(in thousands)
--------------
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
--------------------
OCT. 29, OCT. 30,
1995 1994
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 482 $ 1,867
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,326 5,186
Changes due to (increase) decrease in operating assets:
Accounts receivable (16,956) 3,269
Inventories - net (43,975) (25,790)
Prepaid expenses and other assets 2,426 4,142
Changes due to increase (decrease) in operating
liabilities:
Accounts payable and other liabilities 16,576 2,820
Pension and post-retirement obligations 1,806 (33,256)
Taxes on income and deferred taxes 14 1,108
Other (145) 2,713
-------- --------
Net cash used in operating activities (34,446) (37,941)
-------- --------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (2,486) (1,539)
Net advances on discontinued operations - (4,269)
Other (820) 692
-------- --------
Net cash used in investing activities (3,306) (5,116)
-------- --------
FINANCING ACTIVITIES:
Repayment of long-term borrowings (396) (648)
Cash collateral for receivable sales program 2,000 19,195
Reduction in sales of receivable sales program - (20,000)
Other 429 779
-------- --------
Net cash provided by (used in) financing activities 2,033 (674)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (35,719) (43,731)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 84,584 115,996
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 48,865 $ 72,265
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized $ 13,885 $ 14,656
Cash paid (refunded) for income taxes 262 (187)
</TABLE>
4
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ROHR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
The consolidated balance sheet as of October 29, 1995, and statements of
earnings and cash flows for the first quarters ended October 29, 1995, and
October 30, 1994, 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 Form 10-K
for the year ended July 31, 1995.
CONTINGENCIES
During November 1994 through January 1995, inspection of commercial aircraft
revealed a cracked spar cap on two wing pylons. The Company has warranted these
applications to its customer. Investigation indicates that the wing pylon spar
caps, which were sourced, assembled, and supplied by a major subcontractor to
the Company, did not receive a required process step. Analysis and testing show
that there are no airworthiness or safety of flight concerns with continued
aircraft operations. Subsequent fleetwide inspections have revealed no other
cracks; however, a replacement program is being implemented. The spar caps will
require replacement on approximately 120 aircraft over a period of several
years. The wing pylon is warranted to Rohr by its subcontractor and the Company
believes that the cost of removing and replacing the spar cap components for the
wing pylon, which is expected to approximate $315,000 per aircraft, will be
primarily the responsibility of the subcontractor. To date, the subcontractor
has borne their costs to furnish materials but has paid only a portion of the
cost incurred by the Company. The Company believes that it will recover a
substantial portion of its own costs under the terms of its subcontractor's
contractual warranty and that the resolution of this matter will not have a
material adverse effect on the Company's financial condition.
In addition, the Company acquired materials directly from the spar cap materials
supplier, a small company with limited financial resources. Some of these
materials were not processed to specifications before use in various aircraft
applications. The Company has warranted these applications. With respect to
these other applications, no failures have been noted to date and the Company
and its customers are investigating whether any replacement or repair will be
required.
5
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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, Conclusions of Law and
Reporting Recommendations of the Special Master Regarding the State Share Fact
Finding Hearing." In it, he allocated 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 percent to the State of California and 10
percent to the Stringfellow entities, leaving 25 percent to the
generator/counterclaimants (including the Company) and other users of the site
(or a maximum of up to 28 percent depending on the allocation of any
Stringfellow entity orphan share). On the state law claims, the special master
recommended a 95 percent share for the State of California, and 5 percent for
the Stringfellow entities, leaving 0 percent for the generator/counterclaimants.
This special master's finding is subject to a final decision and appeal. 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 found to be
responsible. Notwithstanding, CERCLA liability is sometimes allocated among
hazardous waste generators who used a waste disposal site based on the volume of
hazardous waste they disposed at the site. The Company is the second largest
generator of waste 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 intends to continue to vigorously defend itself in the Stringfellow
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's analysis of operating results for the first quarters ended October
29, 1995 and October 30, 1994 is presented below. Material developments in the
Company's liquidity and capital resources since July 31, 1995, are also
presented. These discussions should be read in
6
<PAGE>
conjunction with the financial statements and management's discussion and
analysis thereof included in the Company's Form 10-K for the fiscal year ended
July 31, 1995.
RESULTS OF OPERATIONS
First Quarter Fiscal Year 1996 Compared to First Quarter Fiscal Year 1995
Sales for the first quarter of fiscal 1996 were $150.4 million down from $192.2
million in the first quarter of fiscal 1995. The sales decline is primarily due
to delivery rate reductions on several commercial programs, reflecting reduced
deliveries of commercial aircraft throughout the industry. In addition,
government sales declined due to the near completion of the Company's primary
military and space programs. Both the C-130 and the Titan Space programs are
scheduled to make final deliveries in fiscal 1996.
The Company's operating income for the first quarter of fiscal 1996 was $12.1
million, an operating margin of 8.1%. Operating income for the same period of
the prior fiscal year was $15.4 million, an operating margin of 8.0%. Operating
income decreased from the first quarter of fiscal 1995 primarily due to the
decline in sales.
Net interest expense was $11.3 million for the first quarter of fiscal 1996
compared to $13.1 million for the first quarter of fiscal 1995. Interest expense
declined due to reduction in debt.
Net income for the first quarter of fiscal 1996 was $0.5 million or 3 cents per
share. This compares to net income from continuing operations of $1.4 million or
8 cents per share for the first quarter of fiscal 1995. Total net income for the
first quarter of the prior year, which included $0.5 million of income or 2
cents per share from discontinued operations, was $1.9 million or 10 cents per
share. In the fourth quarter of fiscal 1994, the Company sold and commenced the
transfer of its business jet line of business. The purchase agreement required
the Company, to manufacture and deliver certain components and transfer program
engineering and tooling which was substantially completed in fiscal 1995.
As a result of the slow-down in the commercial aerospace industry and reductions
in the Company's military and space programs, many of the Company's facilities
are operating below capacity. The Company is in the process of reviewing its
long range site strategy and assessing the facilities and equipment necessary to
meet its future needs. If management concludes that any facilities or equipment
are in excess of the Company's projected needs, and that their book value will
not be recovered from future activities, then an impairment write down will be
recorded to reduce the assets to their estimated fair value.
7
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LIQUIDITY AND CAPITAL RESOURCES
At October 29, 1995, the Company had $48.9 million of cash and cash equivalents.
In addition, the Company had a $82.8 million revolving credit agreement with no
amounts outstanding. The total amount available under the credit agreement is
reduced by a $16.9 million letter of credit. The credit agreement will be
reduced by $8.3 million every six months until it matures in April 1997. Over
the next several years, the Company expects to increase its investment in
program inventory in connection with increased deliveries and anticipated new
business opportunities. The Company believes that its financial resources are
adequate to meet its requirements during this period.
Net cash used in operating activities for the first quarter of fiscal year 1996
was $34.4 million compared to $37.9 million for the first quarter of the prior
fiscal year. Contributing to the use of cash in the first quarter of fiscal 1996
was an increase in inventory (reflecting customers' rescheduling of existing
orders and the Company's preparation for a scheduled increase in deliveries
during the second and third quarters) and an increase in accounts receivable
(caused in part by a relatively high percentage of deliveries occurring in the
last weeks of the quarter). 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 $606.4 million at October 29, 1995, compared to $605.6
million at July 31, 1995.
The Company has a $40.0 million receivables sales program. Under this off-
balance sheet financing program, the Company sells receivables from specified
customers on an on-going basis. Due to the slowdown in the aerospace industry,
the amount of outstanding receivables from these customers has fallen below
levels required to support the total program. As a result, the Company has
elected to deposit cash collateral as necessary to support the program and
withdraws such cash when it is no longer required to be deposited. At October
29, 1995, $11.5 million of cash collateral was on deposit.
The Company is also a party to certain equipment leases, treated as off-balance
sheet financings, totaling $23.7 million at October 29, 1995.
Accounts receivable increased from $72.1 million at July 31, 1995, to $87.1
million at October 29, 1995. This increase is caused in part by a relatively
high percentage of deliveries occurring in the last weeks of the quarter.
The Company's net inventory increased from $390.3 million at July 31, 1995,
to $434.3 million at October 29, 1995. This increase is due primarily to
higher levels of production inventory
8
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reflecting customers rescheduling of existing orders and the Company's
preparation for a scheduled increase in deliveries during the second and third
quarters.
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 $1.0 billion at October 29, 1995, and at July
31, 1995. Approximately $0.6 billion of the $1.0 billion backlog is expected to
be delivered in the remainder of fiscal 1996. (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
equitable adjustment in contract amounts. The Company has an additional $2.8
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.
9
<PAGE>
PART II. OTHER INFORMATION
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
*27. Financial Data Schedule. (Filed with EDGAR filing only.)
(b) Reports on Form 8-K
There were no reports on Form 8-K during this period.
(c) Exhibits required by Item 601 of Regulation S-K:
See subparagraph (a) above.
(d) Financial Statements required by Regulation S-X:
See subparagraphs (a) and (b) above.
___________________________
*Exhibits filed with this report.
10
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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.
December 1, 1995 By: /s/ L. A. CHAPMAN
-----------------------
L. A. Chapman
Senior Vice President and Chief Financial
Officer
December 1, 1995 By: /s/ A. L. MAJORS
-----------------------
A. L. Majors
Vice President and Controller
(Chief Accounting Officer)
11
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ROHR, INC. AND SUBSIDIARIES
---------------------------
CALCULATION OF PRIMARY NET INCOME PER SHARE
-------------------------------------------
OF COMMON STOCK
---------------
(in thousands except for share data)
------------------------------------
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
-------------------
OCT. 29, OCT. 30,
1995 1994
-------- --------
<S> <C> <C>
Net income from continuing operations $ 482 $ 1,370
Income from discontinued operations -
net of taxes - 497
-------- --------
Net income applicable to primary
earnings per common share $ 482 $ 1,867
======== ========
Common stock and common stock
equivalents:
Average shares of common stock
outstanding during the period 18,093 18,051
Net effect of common stock equivalents
(principally stock options and rights) 589 87
-------- --------
Total common stock and common stock
equivalents 18,682 18,138
======== ========
Net income per average share of common stock:
Net income from continuing operations $ 0.03 $ 0.08
Income from discontinued operations -
net of taxes - 0.02
-------- --------
Primary net income per share $ 0.03 $ 0.10
======== ========
</TABLE>
EXHIBIT 11.1
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ROHR, INC. AND SUBSIDIARIES
---------------------------
CALCULATION OF FULLY DILUTED NET INCOME PER SHARE
-------------------------------------------------
OF COMMON STOCK - UNAUDITED
---------------------------
(in thousands except for share data)
------------------------------------
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
-------------------
OCT. 29, OCT. 30,
1995 1994
-------- --------
<S> <C> <C>
Net income from continuing operations
applicable to primary earnings per
common share $ 482 $ 1,370
Add back interest and issue expense on
convertible debentures and notes - net of tax adjustment 1,888 1,911
-------- --------
Adjusted income from continuing
operations applicable to common
stock on a fully diluted basis 2,370 3,281
Income from discontinued operations -
net of taxes - 497
-------- --------
Net income applicable to fully diluted
earnings per share $ 2,370 $ 3,778
======== ========
Average number of shares outstanding on
a fully diluted basis:
Shares used in calculating primary earnings per share 18,682 18,138
Shares issuable on conversion of debentures and notes 8,225 8,230
-------- --------
Average number of shares outstanding on
a fully diluted basis 26,907 26,368
======== ========
Fully diluted net income per share from
continuing operations $ 0.09 $ 0.12
Income from discontinued operations -
net of taxes - 0.02
-------- --------
Fully diluted net income per
average common share $ 0.09 $ 0.14
======== ========
</TABLE>
Note:
Fully diluted net income per average common share is not presented in the
Company's Consolidated Statements of Operations as the effect of the assumed
conversion of the Company's convertible debentures and notes was anti-dilutive.
EXHIBIT 11.2
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<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> OCT-29-1995
<CASH> 48,865
<SECURITIES> 0
<RECEIVABLES> 87,108
<ALLOWANCES> 0
<INVENTORY> 434,250
<CURRENT-ASSETS> 587,941
<PP&E> 524,318
<DEPRECIATION> (310,380)
<TOTAL-ASSETS> 994,805
<CURRENT-LIABILITIES> 189,048
<BONDS> 540,118
<COMMON> 18,110
0
0
<OTHER-SE> 158,841
<TOTAL-LIABILITY-AND-EQUITY> 994,805
<SALES> 0
<TOTAL-REVENUES> 150,400
<CGS> 0
<TOTAL-COSTS> 131,533
<OTHER-EXPENSES> 6,728
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,334
<INCOME-PRETAX> 805
<INCOME-TAX> 323
<INCOME-CONTINUING> 482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 482
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
