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1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended July 31, 1997 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
(Telephone No.)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $1 par value New York Stock Exchange
Pacific Stock Exchange
The Stock Exchange, London
7% Convertible Subordinated New York Stock Exchange
Debentures due 2012 Pacific Stock Exchange
The Stock Exchange, London
7-3/4% Convertible Subordinated Notes due 2004 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed all reports 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
At September 5, 1997, the aggregate market value of the voting stock held by
nonaffiliates of the registrant, based on market quotations as of that date, was
approximately $682,076,515.
As of September 5, 1997, there were 25,366,613 shares of the Registrant's common
stock outstanding.
Documents Incorporated by Reference:
Portions of the following documents are incorporated into this report by
reference:
1. Part II Registrant's Annual Report to Shareholders for fiscal year
ended July 31, 1997.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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The Company presently has ten directors. The members of the Board of
Directors, with information furnished to the Company by them as of October 10,
1997, are as follows:
Directors with Terms Expiring in 1997
DIANE C. CREEL
Ms. Creel, age 48, has served as the Chief Executive Officer
and President of Earth Tech, an international consulting
engineering firm headquartered in Long Beach, California,
since January 1993. Prior thereto, she served as Chief
Operating Officer of Earth Tech since 1987. Before joining
Earth Tech, Ms. Creel was director of business development and
communications for CH2M Hill from 1978-1984. Prior to that,
Ms. Creel was manager of communications for Caudill Rowlett
Scott, Houston, Texas from 1976 to 1978, and director of
public relations for LBC&W, Architects-Engineers-Planners,
Columbia, South Carolina from 1971 to 1976. Ms. Creel
currently serves on the Board of Directors of Allegheny
Teledyne, Inc.; the Corporations and Trusts which comprises
the Fixed Income Fund of the American Funds Group; Glendale
Federal Bank and Golden State Bancorp Inc. Ms. Creel became a
Director of the Company on April 4, 1997. She serves on the
Board of Advisors of the Enterpreneurial Studies Center at the
Anderson Graduate School of Management, UCLA. She is also a
member of the Air Force Small and Women-Owned Business Council
and the Harvard Environmental Health Council.
VINCENT N. MARAFINO
Mr. Marafino, age 67, retired as Executive Vice President of
Lockheed Martin Corporation on January 1, 1996, a position he
assumed in March 1995 upon the completion of the merger of
Lockheed Corporation and Martin Marietta Corporation. Prior to
the merger, he served as Vice Chairman of the Board and Chief
Financial and Administrative Officer for Lockheed Corporation,
having been elected to those positions in August 1988. Mr.
Marafino became Lockheed's Chief Financial Officer in 1977 and
was elected to its Board of Directors in 1980. He is a member
of the Board of Lockheed Martin Corporation. Mr. Marafino
became a
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director of the Company in December 1995. He is also
a director of Airport Group International, Inc., and Holy
Cross Health System.
ROBERT M. PRICE
Mr. Price, age 67, is currently serving as an Executive-In-
Residence at the Fuqua School of Business, Duke University in
Durham, N.C., since May 1991. From May, 1996 until January
1997, he served as interim Chief Executive Officer and
Chairman of the Board of International Multifoods. He has been
a business consultant to a number of major American
corporations since May 1990, when he retired as Chairman of
Ceridian (formerly Control Data Corporation), Minneapolis,
Minnesota. He was named President and Chief Operating Officer
of Control Data Corporation in 1980 and Chairman and Chief
Executive Officer in 1986. He is also a director of Public
Service Co. of New Mexico, Albuquerque, New Mexico; Fourth
Shift Corporation, Minneapolis, Minnesota; Affinity
Technology, Columbia, South Carolina; International
Multifoods, Inc., Minneapolis, Minnesota; and Tupperware
Corp., Orlando, Florida. Additionally, he is a Chairman of the
National Center for Social Entrepreneurs and a member of Duke
University's Fuqua School of Business Board of Visitors. He
became a director of the Company in June 1991.
Directors with Terms Expiring in 1999
SAM F. IACOBELLIS
Mr. Iacobellis, age 68, was the Executive Vice President and
Deputy Chairman for Major Programs at Rockwell International,
a diversified high-tech, global corporation engaged in the
research, development and manufacture of a wide range of
products for commercial and government markets, from June 1993
to March 1995, when he retired. Prior to that and since July
1989, he served as Executive Vice President and Co-Chief
Operating Officer of that company. Before that, he was
President--Aerospace Operations. He joined North American
Aviation, a predecessor of Rockwell, in 1952. Mr. Iacobellis
was also co-founder and Chairman of the Board of the Warner
Center Bank in Woodland Hills, California, from its inception
in 1981 until 1990 when it was merged with the City National
Corporation and a former member of the Board of Governors and
Executive Committee of the Aerospace Industries Association.
In 1997, he was elected the 1998 President of the American
Institute of Aeronautics of Astronautics (AIAA). He is
currently a member of the Board of Directors of the AIAA, the
U.S. Space Foundation, the Los Angeles Area Chamber of
Commerce, the California Chamber of Commerce, the UCLA Board
of Visitors, the California State University Foundation, and
the California Business Roundtable.
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ROBERT H. RAU
Mr. Rau, age 61, was elected President and Chief Executive
Officer of the Company in April 1993. Prior to joining the
Company, Mr. Rau was an Executive Vice President of Parker
Hannifin Corporation and, for the ten years prior to 1993, had
served as President of the Parker Bertea Aerospace segment of
Parker Hannifin. Parker Bertea designs and produces a broad
line of hydraulic, fuel and pneumatic systems and components
for commercial, military and general aviation aircraft. He
joined Parker Hannifin in 1969 and held positions in finance,
program management and general management. Mr. Rau has
extensive experience in the aerospace industry. Mr. Rau is a
member of the Board of Directors of Primex Technologies, Inc.
In addition, Mr. Rau is a member of the Board of Governors of
the Aerospace Industries Association and a past Chairman of
the General Aviation Manufacturers Association. He became a
director of the Company in April 1993.
WILLIAM P. SOMMERS
Dr. Sommers, age 64, has served as the President and Chief
Executive Officer of SRI International since January 1994. SRI
International is a leading contract research firm. Prior
thereto, Dr. Sommers was an Executive Vice President of
Iameter, Inc., since November 1992. Iameter, Inc., is a
medical information and education company. From 1963 until he
retired in 1992, he was with Booz Allen & Hamilton, Inc.
There, he served as a Senior Vice President, director and
member of the Office of the Chairman and in other senior
management positions. Dr. Sommers has extensive experience as
a management consultant to numerous technology-based
manufacturing and service firms. He is also a director of SRI
International and Litton Industries, Inc.; a member of the
Board of Trustees of the Zurich Kemper Mutual Funds; a
director of Therapeutic Discovery Corp.; a former trustee of
the Criminal Justice Legal Foundation; and a former member of
the National Advisory Council of the University of Michigan,
College of Engineering. He became a director of the Company in
September 1992.
JAMES R. WILSON
Mr. Wilson, age 56, is the Chairman of the Board, President
and Chief Executive officer of Thiokol Corporation, having
assumed the position of Chairman in October 1995 and the
position of President and Chief Executive Officer in October
1993. Mr. Wilson joined Thiokol in July 1989 as Vice President
and Chief Financial Officer and was named Executive Vice
President in October 1992. Thiokol is the leading producer of
solid propellant rocket motors in the United States and
supplies the U.S. space shuttle program. Thiokol also produces
a broad range of high performance fasteners used in commercial
aircraft and various industrial applications. Thiokol also
owns 49 percent of Howmet Corporation, a manufacturer of high
performance cast components for aircraft and industrial gas
turbine engines. Prior to joining Thiokol in 1989, Mr. Wilson
served as Chief Financial Officer for Circuit City Stores
(1987-1988), and as Executive Vice President and Chief
Financial Officer for Fairchild Industries, Inc., (1982-1987).
Earlier, he held various financial management positions at
Textron Inc. He is also a
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director of Cooper Industries, Inc., First Security
Corporation, a director of Howmet Corporation, and a trustee
of the College of Wooster, Wooster, Ohio. Mr. Wilson became a
director of the Company in October 1994.
Directors with Terms Expiring in 1998
WALLACE BARNES
Mr. Barnes, age 71, has served as the non-executive Chairman
of the Board of Directors of the Company since December 3,
1994. He served as the non-executive Chairman of the Board of
Directors of Barnes Group Inc. from April 1991 until July
1995. Prior thereto, he was the Chairman of Barnes Group Inc.
from March 1977 to April 1991, when he retired; was Chief
Executive Officer from 1977 to 1991; and served as President
of that company from 1964 to 1977. Barnes Group Inc.,
headquartered in Bristol, Connecticut, is a publicly-traded,
multinational company with three groups involved in automotive
maintenance and repair parts, precision springs and custom
metal parts, and aerospace components for gas turbine engines.
He is also a director of Rogers Corp.; Tradewind Turbines
Corporation; DeMaria Electro Optics Systems, Inc., Bloomfield,
Connecticut; and former Chairman of the Connecticut Business
and Industry Association, the Greater Hartford Chamber of
Commerce, and the University of Hartford. He became a director
of the Company in February 1989.
EUGENE E. COVERT
Professor Covert, age 71, became Professor Emeritus of the
Massachusetts Institute of Technology upon his retirement on
July 1, 1996. Prior to that, he had been a Professor in the
Department of Aeronautics and Astronautics of the
Massachusetts Institute of Technology, Cambridge,
Massachusetts, since 1968. From 1985 until 1990, he served as
Department Head. Professor Covert is also a consultant to a
number of major corporations as well as to agencies of the
United States and foreign governments. He is a retired
director of Allied-Signal Corp. and Physical Sciences, Inc.,
and an Honorary Fellow of the American Institute of
Aeronautics and Astronautics. He has been a director of Rohr
since December 1986.
D. LARRY MOORE
Dr. Moore, age 61, retired in July 1997 as President and
Chief Operating Officer of Honeywell, Inc., a provider of
electronic automation and control systems located in
Minneapolis, Minnesota, where he had served since 1993. From
December 1990 until assuming his current position, he served
as Executive Vice President and Chief Operating Officer of
that company. Dr. Moore has been employed by Honeywell, Inc.,
since 1986, having also served as President of its Space and
Aviation Business. Dr. Moore became a director of Rohr in
December 1991. He is also a director of Honeywell, Inc., the
Geon Co., Reynolds Metals, the Aerospace Industries
Association, and the National Association of Manufacturers.
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COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has formed the following standing committees of its
members to assist it in the discharge of its responsibilities: Audit and Ethics
Committee, Customer Support Committee, Compensation and Benefits Committee,
Finance Committee, Nomination and Board Affairs Committee, and the Technology
Committee. Memberships in the various committees are assigned by action of the
full Board of Directors.
The full Board of Directors met 14 times during fiscal 1997. Each Director
attended more than 75 percent of the aggregate of all Board of Directors'
meetings and meetings of standing committees of the Board of which he was a
member.
The function of each committee, its membership as of October 10, 1997, and
the number of meetings held by it or its predecessor committee during fiscal
1997 are shown below:
Audit and Ethics Committee: Finance Committee:
V. N. Marafino, Chair J. R. Wilson, Chair
E. E. Covert D. C. Creel
D. L. Moore V. N. Marifino
J. R. Wilson E. L. Moore
Ex-officio: W. Barnes, R. H. Rau W. P. Sommers
Ex-officio: W. Barnes, R. H. Rau
Compensation and Benefits Committee: Nomination and Board Affairs Committee:
R. M. Price, Chair W. P. Sommers, Chair
S. F. Iacobellis E. E. Covert
V. N. Marafino D. C. Creel
D. L. Moore V. M. Marafino
J. R. Wilson R. M. Price
Ex-officio: W. Barnes Ex-officio: W. Barnes, R. H. Rau
Customer Support Committee: Technology Committee:
S. F. Iacobellis, Chair E. E. Covert, Chair
E. E. Covert D. C. Creel
D. C. Creel S. F. Iacobellis
J. R. Wilson R. M. Price
Ex-officio: W. Barnes, R. H. Rau W. P. Sommers
Ex-officio: W. Barnes, R. H. Rau
THE AUDIT AND ETHICS COMMITTEE has two designated functions. In its audit
function, the Committee reviews the Company's public financial statements to
confirm with management and the Company's firm of public accountants that they
comply with generally accepted accounting principles and with the Securities and
Exchange Commission requirements and also that they present fairly the Company's
financial position and the results of its operations. The Committee also
provides oversight concerning the Company's management controls, it being the
intent that such controls be of sufficient quality to provide reasonable
assurances that the Company is complying with Company policies as well as all
prevailing governmental legislation. In its ethics function, the Committee
focuses on the ethical quality of the Company's management by supporting the
establishment of an atmosphere within the Company which will encourage employees
to follow the policy of complying with all laws governing Company operations and
conducting its affairs in keeping with the highest legal and ethical standards.
The voting membership of the Committee currently consists entirely of directors
who are not officers or employees of the Company. During fiscal 1997, the
Committee met five times.
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THE COMPENSATION AND BENEFITS COMMITTEE establishes an executive compensation
program designed to attract, motivate and retain individuals of exceptional
ability to provide leadership in achieving quality in all aspects of the
Company's business. The Committee is responsible for determining the annual base
salary, short-term and long-term incentive compensation (including stock
awards), and other compensation of the executive officers of the Company. In
addition, the Committee reviews plans for executive management succession. The
Committee also reviews or approves the adoption and amendment of employee
benefit plans, unless the financial effect of such actions will exceed certain
guidelines, in which case the full Board of Directors takes such action. The
Committee also appoints the members of the management employee benefits
committee for funded plans and oversees various activities. The membership of
the Committee currently consists entirely of directors who are not officers or
employees of the Company. During fiscal 1997, the Committee met three times.
THE CUSTOMER SUPPORT COMMITTEE exercises the Board of Directors'
responsibility in reviewing and approving certain business proposals and
commitments, under the guidelines of the Board of Directors, which previously
required the consent of the Board. The voting membership of the Committee
currently consists entirely of directors who are not officers or employees of
the Company. During fiscal 1997, the Committee met six times.
THE FINANCE COMMITTEE reviews, makes recommendations, and reports to the Board
of Directors concerning the quality of the financing plans of the Company and
their adequacy and soundness in providing for the Company's capital
requirements. Currently, the Committee consists of four directors who are
neither officers nor employees of the Company. During fiscal 1997, the
Committee met five times.
THE NOMINATION AND BOARD AFFAIRS COMMITTEE, in order to focus on the need for
quality leadership of the Company, reviews the composition of the Board of
Directors and potential nominees to ensure appropriately broad-based business-
oriented membership for the Board of Directors, consisting of persons who are
knowledgeable, experienced and strategic-minded. The Committee also reviews and
recommends to the Board other matters concerning the administration of the Board
including the Board retirement policy, the retention of consultants as
appropriate to assist the Committee in its responsibilities, and the appointment
of Committee assignments and the Committee chairs following review with
management. The Committee consists entirely of directors who are neither
officers nor employees of the Company. During fiscal 1997, the Committee met
three times.
THE TECHNOLOGY COMMITTEE reviews corporate-wide technology matters, monitors
the implementation of new technology by the Company, and reviews the Company's
performance in the field to ensure conformance with the Company's plans for
growth, customer support, and maintenance of quality. The Committee also reviews
the application of technology to enhance the Company's ability to meet and
exceed customer requirements. The Committee currently consists entirely of
directors who are not officers or employees of the Company. During fiscal 1997,
the Committee met twice.
Any shareholder desiring to make recommendations for potential candidates for
consideration by the Nomination and Board Affairs Committee must send timely
notice in writing to the Secretary of the Company. To be timely, such notice
shall be delivered or mailed and received at the principal executive offices of
the Company not less than sixty (60) days nor more than ninety (90) days prior
to the Annual Meeting of Shareholders. Such notice shall set forth: (i) as to
each person whom the shareholder proposes to nominate for election or re-
election as a director, all information relating to such person that is required
to be disclosed in solicitations of proxies for election of directors pursuant
to the Securities Exchange Act of 1934, as amended, (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); and (ii) as to the shareholder giving the
notice (a) the name and address as they appear on the Company's books of such
shareholder, and (b) the class and number of shares of the Company which are
beneficially owned by such shareholder.
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ITEM 11. EXECUTIVE COMPENSATION
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DIRECTORS' BENEFICIAL OWNERSHIP AND COMPENSATION
The beneficial ownership of the directors and nominees in the stock of the
Company is shown under the caption "BENEFICIAL OWNERSHIP OF SHARES."
Cash Compensation
Mr. Barnes, as the non-Executive Chairman of the Board of Directors, receives
annual cash compensation of $75,000 (less the fair market value of 250 shares of
the Company's common stock granted yearly pursuant to the Company's 1991 Stock
Compensation Plan for Non-Employee Directors) for service as the non-employee
Chairman of the Board of Directors, plus $1,000 for each meeting of the full
Board of Directors and $750 for each meeting of the Board committees that he
attends. In addition, he receives $1,000 for each day of service not falling on
the day of a meeting of the Board or any committee of the Board.
Other directors who are not employees of the Company receive annual cash
compensation of $25,000 (less the fair market value of 250 shares of the
Company's common stock granted yearly pursuant to the Company's 1991 Stock
Compensation Plan for Non-Employee Directors) for service on the Board of
Directors, including any committees of the Board on which they serve, plus
$1,000 for each meeting of the full Board of Directors and $750 ($1,000 in the
case of the Committee Chairperson) for each meeting of a Board committee that
they attend.
The Company reimburses directors for their expenses incurred in connection
with attending Board and Board committee meetings.
Directors' Retirement Plan
The Company has a Directors' Retirement Plan which provides benefits following
retirement to any director who is not an employee of the Company at the time of
his or her retirement from the Board of Directors. Benefits under the Plan
commence as of the first day of the month following the earlier occurrence of
(i) a director achieving 72 years of age, or at such earlier time as a director
elects not to become a candidate to succeed himself as a director, or (ii) the
termination from service as a director (except for termination for cause)
following a "change in control" of the Company (as that term is defined in the
Plan), provided, among other things, such director was a director on the date of
such "change in control." The Company's Bylaws currently provide that non-
employee directors, upon reaching the age of 72 years, shall retire from the
Board of Directors at the next following annual meeting of shareholders. The
annual benefit to a retired director under the Plan is equal to the annual
retainer (including the value of the award of shares made under the 1991 Stock
Compensation Plan for Non-Employee Directors) being paid to directors upon the
date of retirement and is payable for a period equal to the number of years and
fractional years of service as a Company director. The Plan also provides
retirement benefits to a surviving spouse of a director equal to the then-unpaid
amount of benefits the director would have received had he been retired and
survived.
Non-Employee Director Stock Option Plan
Under the 1988 Non-Employee Director Stock Option Plan, which was approved by
shareholders, an option to purchase 1,000 shares of common stock of the Company
is automatically granted, on the first business day following each annual
meeting at which directors are elected, to each director of the Company who is
not an employee of the Company at the time. The option exercise price is equal
to the fair market value of the stock on the date the option is granted. Each
option granted under the Plan becomes exercisable six months after its date of
grant and expires ten years after its date of grant, provided, however, that
each option that is not already
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exercisable shall become immediately exercisable (i) if the optionee ceases to
be a director because of his or her death or total and permanent disability, or
(ii) if a "change in control," as such term is defined in the Plan, shall
occur. Pursuant to the Plan, on December 9, 1996, Messrs. Barnes, Covert,
Iacobellis, Marafino, Moore, Price, Sommers and Wilson each received an option
for 1,000 shares of common stock at an option price of $17.375 per share, for a
total grant of eight options covering an aggregate of 8,000 shares of common
stock during fiscal 1997. Mr. Rau, the Company's President and Chief Executive
Officer, as an employee, is ineligible to participate in the Plan.
Stock Compensation Plan for Non-Employee Directors
Under the Company's 1991 Stock Compensation Plan for Non-Employee Directors,
the Company annually awards to each non-employee director, in partial
consideration for the services rendered by such director during the Company's
prior fiscal year, 250 shares of the Company's common stock, subject to certain
adjustments. The plan provides for a pro-rated award if the director has not
served for the full preceding fiscal year.
On August 28, 1997, awards with respect to the 1997 fiscal year were
determined. Messrs. Barnes, Covert, Iacobellis, Marafino, Moore, Price, Sommers
and Wilson received awards of 250 shares each and Ms. Creel received an award of
81 shares, for a total grant to all eligible directors of 2,081 shares. On the
award date, the Company's common stock closed at $27.00. The value of these
shares reduces the amount of the annual cash retainer paid to Directors on a
dollar-for-dollar basis. Mr. Rau, the Company's President and Chief Executive
Officer, as an employee, is ineligible to participate in the Plan.
COMPENSATION AND BENEFITS COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee (the "Committee") is responsible for
determining the annual base salary, short-term and long-term incentive
compensation (including stock awards), and other compensation of the executive
officers. Each member of the Committee is a non-employee director. This report
describes the applicable policies of the Committee in establishing the principal
components of executive compensation for all executives of the Company,
including the Named Executive Officers in the Summary Compensation Table during
fiscal 1997.
Goals in Determining Executive Compensation; Philosophy of Compensation
The Company's integrated executive compensation program is intended to
accomplish the following goals:
1. Pay competitively to attract, retain and motivate capable executives.
2. Tie individual total compensation to the achievement of specific,
measurable goals related to the success of the Company and to the
performance of the individual and the executive team.
3. Align the financial interests of the executives with shareholder value.
The Committee believes the Company's compensation plans for executives should
be a basic element in the continuing growth of shareholder value. The purpose of
executive compensation is to improve Company performance and competitiveness by
creating and sustaining executive motivation. Pay plans must be designed to
forge links between long-term executive rewards and shareholder value creation.
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In furtherance of these beliefs and to achieve the Company's above-stated
compensation goals, the Committee believes a significant portion of the
executives' compensation should be at risk, based on the financial performance
of the Company. Base salaries of executives are intended to be moderate yet
competitive, with the opportunity to earn the at-risk annual and long-term
incentive payments or awards so as to provide total compensation which is equal
to competitive levels for superior Company performance over a longer period of
time. The financial goals for these incentive compensation plans are reviewed
and approved by the Committee at the beginning of each fiscal year in
conjunction with the Board of Directors' approval of the Company's business
plans.
Factors and Information Generally Considered
The Committee considers the following matters in establishing executive
compensation: (a) Company performance, both in absolute terms and in relation
to similar companies; (b) the performance of each individual executive officer;
(c) periodically, comparative compensation surveys and other material concerning
compensation levels and stock grants at similar companies; (d) historical
compensation levels and stock awards at the Company; (e) the overall competitive
environment for executives and the level of compensation necessary to attract
and retain executive talent; and (f) the input, from time to time, of
professional compensation consultants and management. The Committee assigns no
specific weight to any of the enumerated factors in establishing executive
compensation.
Companies used in comparative analyses for executive compensation purposes are
selected with the assistance of professional compensation consultants. Selection
of such similar companies is based on a variety of factors, including financial
criteria and industry classification. The companies used in comparative analyses
for executive compensation purposes include the companies in the industry line-
of-business index used in the Performance Graph, as well as the following
additional companies, many of which, however, are larger than the Company: Arvin
Industries, B.F. Goodrich, Black & Decker, Borg-Warner Automotive, Coltec
Industries, Cummins Engine, General Dynamics Corporation, General Signal,
Hexcel, Honeywell, Illinois Tool Works, Litton Industries, Precision Castparts,
Raytheon, Sequa, Sundstrand, TRW, and Varllen. The Committee relies on a broad
array of companies for comparative analysis of executive compensation because
the Committee believes that the Company's competitors for executive talent are
more varied than the industry line-of-business index chosen for comparing
shareholder return in the Performance Graph.
Executives' Compensation in Fiscal 1997:
The Company establishes pay grades for the executives, including the Named
Executive Officers in the Summary Compensation Table, providing a base salary
range, annual incentive target and targeted periodic stock options for each pay
grade.
Basic Pay Levels. The base salary ranges were established and are reconsidered
following a periodic review of comparative compensation data, and the actual
salary for executives in each range are established periodically. The salary of
each executive officer of the Company is established by the Committee.
Accountability for the achievement of the Company goals was the most significant
factor in determining base salary levels for executive officers in fiscal 1997.
Incentive, At-Risk Pay. The incentive targets for each executive pay grade are
also established and these targets are expressed as a percentage of base salary,
although in some cases, somewhat higher targets were established on the basis of
the importance of the position to achieving overall Company success. Annual
awards under the Company's Management Incentive Plan are granted directly in
relation to the Company's achievement of specific performance targets
established each year by the Committee. The Committee's practice, extending back
many years, has been to pay incentives under the Management Incentive Plan only
when earned by achievement of such plan objectives.
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At the beginning of fiscal 1997, the Committee believed that the generation of
income, measured by return on net assets, was the top priority for management.
Accordingly, awards under the Management Incentive Plan were structured at the
beginning of the fiscal year on the basis of achieving specified levels of
operating profit before interest and taxes as a percentage of average net
operating assets. Operating profit before interest and taxes in excess of or
below that figure would produce awards in accordance with a progressive scale.
The criteria for earning awards under this plan was achieved in fiscal 1997 and,
consequently, payments were made to the Company's executives. Awards for the
Named Executive Officers are shown under the heading "Executive Compensation
and Other Information," which information indicates that, for this group in the
aggregate, approximately 43 percent of their salary plus their incentive
payments under the Management Incentive Plan was at risk based on financial
performance of the Company.
Stock Options. Each pay grade also had a targeted number of periodic stock
options related to the amount of base salary in order to further align the
interests of the executives with shareholder value. The number of options is
determined so as to be able to allow the executive to earn competitive total
compensation for superior Company performance over a longer period of time. The
vesting period for the exercise of these options is generally in accordance with
competitive practices and is designed to retain the executive and lengthen the
period of time when such options must be earned by continued employment. In
1997, no stock option grants were made in the three highest levels of
executives, except in the case of promotions and newly-hired executives. The
Committee also approved single-year awards to the other executives and salaried
employees.
Compensation of Robert H. Rau, President and Chief Executive Officer
Mr. Rau joined the Company as President and Chief Executive Officer in April
1993. In establishing the compensation levels set forth in his employment
agreement, the Committee considered comparative compensation information,
historical compensation levels for the position he accepted at the Company and
an evaluation of the level of compensation necessary to obtain his services in
light of industry and Company conditions. During fiscal 1997, the Company
improved operating income (before taxes, interest and unusual items); continued
to improve productivity; and began to deliver increased manufacturing and sales.
The at-risk/incentive portion of Mr. Rau's compensation for fiscal 1997, which
was $553,133, was based upon achieving the incentive targets established under
the Management Incentive Plan.
The foregoing report has been approved by all members of the Committee.
The Compensation and Benefits Committee
Robert M. Price, Chair
Sam F. Iacobellis
Vincent N. Marafino
D. Larry Moore
James R. Wilson
October 3, 1997
10
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to, or on behalf of, the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company (determined as of the end of the last fiscal
year) (hereinafter referred to as the "Named Executive Officers") for
fiscal years ended July 31, 1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
- - ---------------------------------------------------------------------------------------------------------------------------------
Number
At-Risk/ Other of Shares
Incentive Annual Restricted Covered
Fiscal Compen- Compen- Stock by
Name and Principal Position Year Salary(1) sation(2) sation Award(s)(3) Options
<S> <C> <C> <C> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------------------------------------
R. H. Rau 1997 $609,837 $553,133 $ 35,904 $ 0 0
- - ---------------------------------------------------------------------------------------------------------------------------------
President and 1996 569,479 436,500 30,880 174,597 0
- - ---------------------------------------------------------------------------------------------------------------------------------
Chief Executive Officer 1995 538,212 132,300 22,907 157,541 213,000
- - ---------------------------------------------------------------------------------------------------------------------------------
L. A. Chapman 1997 $259,907 $190,080 $ 15,833 $ 0 0
- - ---------------------------------------------------------------------------------------------------------------------------------
Senior Vice President and 1996 240,522 93,120 116,538(4) 111,745 0
- - ---------------------------------------------------------------------------------------------------------------------------------
Chief Financial Officer 1995 248,499 47,040 43,329 74,419 48,000
- - ---------------------------------------------------------------------------------------------------------------------------------
J. R. Johnson 1997 $237,494 $171,763 $ 3,221 $ 0 0
- - ---------------------------------------------------------------------------------------------------------------------------------
Senior Vice President, 1996 227,349 175,373 12,120 0 0
- - ---------------------------------------------------------------------------------------------------------------------------------
Programs, Technology Resources and Quality Assurance 1995 253,574 44,296 2,706 71,339 48,000
- - ---------------------------------------------------------------------------------------------------------------------------------
G. A. Wetzler 1997 $234,994 $171,763 $ 3,097 $ 0 0
- - ---------------------------------------------------------------------------------------------------------------------------------
Senior Vice President, 1996 214,144 115,702 8,585 59,504 0
- - ---------------------------------------------------------------------------------------------------------------------------------
Operations 1995 233,573 66,797 2,599 41,155 48,000
- - ---------------------------------------------------------------------------------------------------------------------------------
D. R. Watson 1997 $234,167 $171,763 $ 2,857 $ 0 0
- - ---------------------------------------------------------------------------------------------------------------------------------
Senior Vice President, 1996 213,431 82,644 7,999 99,165 0
- - ---------------------------------------------------------------------------------------------------------------------------------
Customer Support and Business Development 1995 191,316 83,496 1,168 12,569 48,000
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Under the Pretax Savings Plan for Salaried Employees of the Company (Amended
and Restated, 1994), a tax-qualified 401(k) plan which is available to all
salaried and certain bargaining unit employees, the Company matches 75
percent of the first 4 percent of employee contributions. Company matching
contributions under this Plan for participants on the executive and officer
payrolls had been suspended for three years but were restarted effective
January 1, 1995. Company contributions and the earnings thereon normally
vest at the rate of 20 percent per year until the fifth anniversary of a
participant's participation in the plan; after the fifth anniversary, all
subsequent and future contributions and earnings vest immediately. The
maximum amount any person can contribute in calendar year 1996 is limited by
federal tax rules. The amounts contributed by each of the Named Executive
Officers with respect to fiscal 1997 were: Mr. Rau, $9,500; Mr. Chapman,
$13,029; Mr. Johnson, $9,500; Mr. Wetzler, $10,090; and Mr. Watson, $10,398.
The amounts contributed by each Named Executive Officer are included in the
salaries disclosed.
(2) Under the Company's Management Incentive Plan (Restated, 1982) (the
"MIP"), at-risk/incentive payments are provided for officers and other
high-level executives having a direct impact on the success of the Company.
The MIP is administered by the Compensation and Benefits Committee of the
Board of Directors which reviews and considers individual awards recommended
by management and establishes the annual financial performance objectives
under the MIP. For fiscal years 1994 and 1995, the Company adopted an
incentive formula designed to reward top leadership for achieving targeted
cash generation from operations, asset management and net income. Payments
under this formula were based on the amount of cash generated from operating
activities as a percentage of average net assets employed, adjusted
11
<PAGE>
to consider net income earned by the Company. For fiscal year 1996, the
Company adopted an incentive formula, return on net assets, designed to
achieve the best return with the least investment. The incentive formula is
designed to encourage high operating profit and low investment in identified
items of working capital and plant, property and equipment. Return on net
assets is determined by dividing operating profit (before interest and
taxes) by net operating assets (i.e., inventory, receivable and net
property, plant and equipment--less trade payables). For fiscal 1997,
the Company adopted an incentive formula, the Board of Directors approved
the three formulas and a management committee recommendation of who would
participate in the plan and such participants' level of participation by
assigning a specific number of participation units to each participant. In
fiscal 1995, 1996 and 1997, certain of the Named Executive Officers elected
to have a portion of their at-risk/incentive awards paid in the form of
restricted stock. In such case, only the portion of their at-risk/incentive
award paid in cash is shown in this column, with the balance shown in the
column in the above table for restricted stock awards. Notwithstanding any
incentive payments earned under the formula, the Board of Directors may, at
its sole discretion, elect not to make any payments if it determines that
such payments would be inappropriate.
(3) In fiscal 1995, the Compensation and Benefits Committee of the Board of
Directors, in order to increase the linkage between the interests of
executives and shareholders, decided to pay merit increases for senior
officers in restricted stock in lieu of cash. After computing the amount of
the merit increases, that value was divided by $14.38, the closing price of
Rohr common stock on June 30, 1995, to arrive at the number of shares of
restricted stock. The restricted stock will vest one-third each year
starting with the first anniversary of the date of grant and will be fully
vested in three years. The restricted stock is subject to acceleration of
such schedule upon a change in control of the Company. Dividends, if any,
are payable on restricted stock prior to the lapsing of the restrictions.
The number of shares of restricted stock awarded to the Named Executive
Officers during fiscal 1995, with respect to the merit payments, was as
follows: Mr. Rau, 0 shares; Mr. Chapman, 1,237 shares; Mr. Johnson, 1,250
shares; Mr. Wetzler, 1,429 shares; and Mr. Watson, 874 shares.
In fiscal 1995, the Compensation and Benefits Committee established a
program pursuant to which an individual can elect to receive up to 50
percent of his or her at-risk/incentive compensation in either restricted
stock or stock options in lieu of cash; and in fiscal 1996 and 1997, that
amount was increased from 50 percent to 100 percent. In fiscal 1995 and
1996, several of the Named Executive Officers elected to receive part of
their at-risk/incentive compensation in restricted stock. Individuals making
this election receive an amount of restricted stock equal to 120 percent of
the value of that portion of the at-risk/incentive compensation diverted to
restricted stock. The restricted stock vests one-third per year starting
with the first anniversary of the date of grant and will be fully vested in
three years. The restricted stock is subject to acceleration of such
schedule upon a change in control of the Company. Dividends, if any, are
payable on restricted stock prior to the lapsing of the restrictions. None
of the Named Executive Officers elected to receive restricted stock under
this program with respect to fiscal 1997.
No other Named Executive Officer purchased or was awarded restricted stock
during fiscal 1997 (other than as disclosed above). At the end of the
fiscal year, the number and the value of unreleased restricted stock
held by Mr. Rau were 55,896 shares at a value of $1,285,864; by Mr. Chapman,
15,667 shares at a value of $364,091; by Mr. Johnson, 4,996 shares at a
value of $116,255; by Mr. Wetzler, 7,928 shares at a value of $184,290; and
by Mr. Watson, 11,074 shares at a value of $256,608, based on the fair
market value of $23.75 at July 31, 1997.
(4) This amount includes a relocation payment of $75,000 in accordance with Mr.
Chapman's employment agreement.
12
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL 1997 YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options at Fiscal 1997 Year-End Options at Fiscal 1997 Year-End($)
Name Exercisable/Unexercisable Exercisable/Unexercisable (2)
----- ------------------------- -----------------------------
<S> <C> <C>
R. H. Rau.......................................... 242,000/71,000 $2,747,750/630,125
President and Chief Executive Officer
L. A. Chapman...................................... 62,000/36,000 $745,250/449,500
Senior Vice President and Chief
Financial Officer
J. R. Johnson...................................... 100,592/20,000 $941,345/196,000
Senior Vice President, Programs, Technical
Resources and Quality Assurance
G. A. Wetzler...................................... 90,585/24,000 $843,578/250,000
Senior Vice President, Operations
D. R. Watson....................................... 97,412/24,000 $875,783/250,000
Senior Vice President, Customer Support and
Business Development
</TABLE>
__________
(1) No Named Executive Officer exercised any options during fiscal 1997.
(2) The potential net value of unexercised in-the-money options is based on a
closing price of $23.75 per share on July 31, 1997.
RETIREMENT BENEFITS
Qualified Retirement Plans
Under the Company's Frozen Salaried Retirement Plan (the "QRP" or
"Qualified Retirement Plan"), certain benefits are available to eligible
employees of the Company and its subsidiaries. The monthly benefits for normal
retirement of persons having sufficient credited service to qualify under the
QRP are 1-1/2 percent (2 percent for service accrued prior to January 1, 1987)
of an employee's average monthly "compensation," which as to the named
executive officers comprises "salary" and "at-risk/incentive compensation"
paid and shown on the Summary Compensation Table (with certain adjustments)
during the highest five consecutive of the employee's final ten years of
employment with the Company (but earned prior to January 1, 1995), multiplied by
the number of years of service (up to a maximum of 35 years), and reduced by the
maximum offset of federal Social Security benefits permitted by law. Under the
QRP, participants may, under certain conditions, provide a portion of their
benefits to their surviving spouses after their death. Benefits will also be
provided for early retirement, and vested benefits are provided for employees
who terminate after at least five years of credited service. Benefits under the
QRP were frozen as of December 31, 1994, which means that no further years of
credited service may be earned after that date nor may compensation increases
thereafter be considered in calculating the benefits under the QRP.
Cash Balance Retirement Plan
Effective January 1, 1995, the Company established a "Cash Balance Retirement
Plan" which is a defined benefit retirement plan that provides participants
with an individual account balance. Participants earn a percentage of pay
credited to their account which varies on a point system. Points are determined
each year using a combination of age and service. The amount credited plus
interest is paid in a lump sum or an annuity, at the participant's choice, when
leaving the Company or upon the participant's retirement. This plan partially
replaces the frozen Salaried Retirement Plan discussed above.
13
<PAGE>
Key features of the Cash Balance Retirement Plan include the following:
(i) accounts for eligible employees will be credited with from 1.5 percent to 4
percent of pay annually based on age and service points; (ii) interest will be
credited based on the greater of 5 percent or the return on a five-year Treasury
bill; (iii) longer-service employees will earn extra credits for up to ten years
through a transition provision under this plan; these transition credits range
from 3.5 percent to 7 percent of pay annually; (iv) credits will be allocated
quarterly; (v) no allocations will be made to employees for service over 35
years; and (vi) the benefit is portable; i.e., employees can take their vested
accrued benefit with them if they leave the Company before retirement.
The amount credited to the accounts of the Named Executive Officers through
June 30, 1997, is, for Mr. Rau, $32,213; Mr. Chapman, $9,921; Mr. Johnson,
$38,217; Mr. Wetzler, $34,803; and for Mr. Watson, $11,223. Amounts credited
under the Cash Balance Retirement Plan for executives reduce the benefit payable
under the unfunded Supplemental Retirement Plan discussed below.
Supplemental Retirement Plan
In addition to the QRP and the Cash Balance Retirement Plan for all eligible
employees, the Company maintains a Supplemental Retirement Plan (the "SRP")
for officers and other key executive employees. Under the SRP, the Company will
supplement the benefits payable from the QRP and the Cash Balance Retirement
Plan, if necessary, by an amount sufficient to raise total benefits up to the
level prescribed by the SRP. The combined monthly benefit level prescribed by
the SRP for normal retirement ordinarily is 2 percent of an employee's average
monthly "compensation" during the highest five consecutive of the preceding
ten years, multiplied by the number of years of service (up to a maximum of 35
years), and reduced by the maximum offset of federal Social Security benefits
permitted by law. (The term "compensation" is the same as defined in the
Qualified Retirement Plan, except that it also includes the effect of any
bonuses whether in the form of stock or cash and whether or not deferred by the
recipient. In certain cases approved by the Board of Directors, a higher
percentage than 2 percent can be provided, but only if the monthly benefit does
not exceed 60 percent of compensation, reduced by federal Social Security
benefits.) Benefits are also provided for disability retirement and for early
retirement, based on years of credited service at the time of such disability or
early retirement. No amounts have been "set aside" for any person under the
SRP since the plan is unfunded and benefits are determinable and payable only
upon such person's retirement pursuant to the formula described above. However,
the Company has accrued on its books an actuarially computed amount relative to
the Company's obligations under the SRP.
The following table illustrates the estimated annual pension benefits which
would be provided at age 65 under the QRP and the Company's unfunded SRP, after
applicable deductions for benefits under the Cash Balance Retirement Plan and
Social Security benefits, to salaried employees having specified average annual
remuneration and years of service. The compensation levels were frozen as of
December 31, 1994. For the Named Executive Officers, the years of credited
service as of July 31, 1997, (which is equal to the number of years of credited
service as of December 31, 1994, when the QRP was frozen) are: Mr. Rau, 2 years;
Mr. Chapman, 1 year; Mr. Johnson, 15 years; Mr. Wetzler, 16 years; and Mr.
Watson, 7 years. The number of credited years of service under the SRP as of
July 31, 1997, for the Named Executive Officers are: Mr. Chapman, 4 years; Mr.
Johnson, 18 years; Mr. Wetzler, 18 years; and Mr. Watson, 10 years. Mr. Rau's
retirement benefits are disclosed under "Chief Executive Officer Retirement
Benefits."
14
<PAGE>
Approximate Annual Benefit for Years of Service Indicated
<TABLE>
<CAPTION>
Average Annual
Compensation
for Highest
Consecutive
Five Years
During Last
Ten Years
Before
Retirement 15 Years 20 Years 25 Years 30 Years 35 Years
- - ------------------------ ------------------ ------------------ ------------------ ------------------ ------------------
QRP SRP QRP SRP QRP SRP QRP SRP QRP SRP
------- -------- ------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$100,000................. $15,318 $ 2,748 $22,818 $ 5,248 $30,318 $ 7,748 $37,818 $ 10,248 $45,318 $ 12,748
$150,000................. 26,568 6,498 37,818 10,248 49,068 13,998 60,318 17,748 71,568 21,498
$200,000................. 26,568 21,498 37,818 30,248 49,068 38,998 60,318 47,748 71,568 56,498
$250,000................. 26,568 36,498 37,818 50,248 49,068 63,998 60,318 77,748 71,568 91,498
$300,000................. 26,568 51,498 37,818 70,248 49,068 88,998 60,318 107,748 71,568 126,498
$400,000................. 26,568 81,498 37,818 110,248 49,068 138,998 60,318 167,748 71,568 196,498
$500,000................. 26,568 111,498 37,818 150,248 49,068 188,998 60,318 227,748 71,568 266,498
$600,000................. 26,568 141,498 37,818 190,248 49,068 238,998 60,318 287,748 71,568 336,498
$800,000................. 26,568 201,498 37,818 270,248 49,068 338,998 60,318 407,748 71,568 476,498
$1,000,000............... 26,568 261,498 37,818 350,248 49,068 438,998 60,318 527,748 71,568 616,498
</TABLE>
Chief Executive Officer Retirement Benefits
Mr. Rau's employment agreement (see "Employment Contracts") provides for
retirement benefits at age 62 as follows: $464,000 per year to be increased by
approximately $2,890 for each month that Mr. Rau's retirement is delayed past
the age of 62. This amount is to be reduced by the pension he receives from his
former employer or other pension benefits payable from the Company, except
payments made pursuant to the Company's 401(k) Plan or similar plan of his
former employer. The retirement benefit will be payable to Mr. Rau, his spouse,
or his estate for at least ten years following his date of retirement and shall
continue beyond such ten years until the death of both Mr. Rau and his surviving
spouse. In addition, the Company has purchased an insurance contract to
guarantee the payment of Mr. Rau's benefits.
15
<PAGE>
PERFORMANCE GRAPH
Regulations of the Securities and Exchange Commission require that this report
include a line graph comparing the cumulative total shareholder return on the
Company's common stock with the cumulative total return of (1) the Standard &
Poor's 500 Stock Index (S&P 500) and (2) an industry line-of-business index. The
Board of Directors and the Compensation and Benefits Committee have approved the
use of Standard & Poor's Aerospace and Defense Index for the line-of-business
index, which consists of the following companies: Boeing Co., General Dynamics
Corp., Lockheed Martin Corp., and Northrop Grumman Corp.
The following graph compares the five-year cumulative total return on the
Company's common stock to the total return of the S&P 500 and to the Standard &
Poor's Aerospace and Defense Index. The table assumes that, in each case, an
investment of $100 was made on August 1, 1992, and all dividends, if any, were
reinvested. (The Company has not paid a cash dividend on its common stock since
1975.) Returns are for fiscal years ended July 31.
LOGO
<TABLE>
<CAPTION>
INDEXED RETURNS*
Years Ending
Base
Period
Company/Index July 92 July 93 July 94 July 95 July 96 July 97
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rohr, Inc. 100 79.31 105.75 135.63 202.30 218.39
S&P 500 Index 100 108.73 114.34 144.19 168.08 255.72
Aerospace/Defense-500 100 127.69 145.99 217.37 282.08 399.70
</TABLE>
----------------------------------------
*Prepared by Standard & Poor's Compustat
Custom Business Unit
The Board of Directors and the Compensation and Benefits Committee recognize
that the market price of the Company's common stock is influenced by many
factors, one of which is the individual performance of the Company. The stock
price performance shown on the graph is not necessarily indicative of future
price performance. The Company will not make nor endorse any predictions as to
the future performance of the Company's common stock.
16
<PAGE>
EMPLOYMENT CONTRACTS
Robert H. Rau. The Company has entered into an employment agreement with Mr.
Rau in connection with his employment as President and Chief Executive Officer
of the Company. That agreement provides that beginning on August 1, 1996, the
term of Mr. Rau's employment is automatically extended for successive yearly
periods unless either Mr. Rau or the Board of Directors terminates the contract
on one year's advance notice. Pursuant to the agreement, Mr. Rau received
100,000 shares of restricted stock at $1.00 per share vesting over six years and
an option to purchase 100,000 shares of the Company's common stock at $8.875 per
share (the then-current market value) vesting at 25 percent per year. He also
received 40,000 shares of the Company's common stock at no additional cost. The
agreement provides a change-of-control provision that he will receive a
severance payment at least equivalent to that provided to other Company
officers. (See "Indemnification and Severance" below.) The provisions for Mr.
Rau's retirement under this agreement are shown at "Retirement Benefits."
Laurence A. Chapman. The Company has entered into an employment agreement with
Mr. Chapman in connection with his employment as Senior Vice President and Chief
Financial Officer of the Company. The agreement provided for specific sums for
fiscal 1994 and 1995, a starting bonus of $114,000, and a relocation payment of
$75,000, all of which has been paid. Pursuant to the agreement, Mr. Chapman
received a restricted stock grant of 20,000 shares of common stock at a price of
$1.00 per share and a non-qualified stock option to purchase 50,000 shares of
common stock at a price of $8.375 per share, the fair market value of the common
stock at the date of grant, which shares and option will vest at the rate of 20
percent per year. Mr. Chapman is also eligible to receive benefits under the
Supplemental Retirement Plan which will credit him with two years of service for
each year employed by the Company for the first 13 years of employment;
thereafter, he will earn a year of credited service for each year employed. Mr.
Chapman's right to a pension under the Supplemental Retirement Plan will vest as
he earns credited service, so that if his employment is terminated for whatever
reason, he will be entitled to a pension based on the years of credited service
earned to the date of such termination.
In order to compensate Mr. Chapman for the loss of his stock options from his
former employer, Westinghouse Electric Company, the Company paid Mr. Chapman
$250,000 on May 1, 1997. This amount was computed based on a formula that
measured the price change in Westinghouse's stock over a given period of time
and/or the value of such stock during that period if Westinghouse should cease
to exist as a result of a merger or sale of all of its assets.
INDEMNIFICATION AND SEVERANCE
Pursuant to Bylaw changes previously adopted by the shareholders, the Company
has entered into Indemnity Agreements, in a form also approved by the
shareholders, with each director, the executive officers named in the Summary
Compensation Table, and other officers and executives providing for
indemnification. The Indemnity Agreements provide that the Company will pay any
amount which an indemnitee is legally obligated to pay because of claims which
may be made against such indemnitee based on any act or omission or neglect or
breach of duty, including any error, misstatement, or misleading statement,
committed, attempted or allegedly committed or attempted by the indemnitee in
his capacity as a director or officer, or any matter claimed against him solely
by reason of his serving as such director or officer. However, no
indemnification is provided in cases involving dishonesty or improper personal
profit, or for a claim for an accounting of profits made in connection with a
violation of Section 16(b) of the Securities Exchange Act of 1934. Furthermore,
indemnification is provided by the Company only after the exhaustion of all
insurance proceeds under the Company's officers' and directors' liability
insurance policy. The payments to be made under the Indemnity Agreements include
the amounts of all claims, liabilities, settlements, and costs, including
defense costs and costs of attachment or similar bonds, except that the Company
is not obligated to pay fines or other fees imposed by law which the Company is
prohibited by law from paying.
17
<PAGE>
The Company also has made severance arrangements with each of the executive
officers named in the Summary Compensation Table and with all of its other
officers providing for a severance payment of two times base pay and a target
award under the Management Incentive Plan to any such officer in the event he is
terminated (other than by death, permanent and total disability, certain
retirements, or terminations which are voluntary or for cause) within two years
following a change in control. For these purposes, a change in control is
defined as a merger, consolidation or liquidation of the Company; the
acquisition of 20 percent of the Company's common stock; the sale, mortgage,
lease or other transfer (other than in the ordinary course of business) of 50
percent of the Company's assets or earning power; the receiving of the benefits
of any loan, advance, guarantee, pledge, other financial assistance or tax
credit or advantage provided by the Company to any person or group which owns 15
percent or more of the common stock of the Company on conditions not less
favorable to the Company than the Company would be able to obtain in arm's-
length negotiations; or if a majority of the Board of Directors is nominated and
elected by other than the current Board and its nominees and successors.
Insurance benefits are also provided until the earliest to occur of such officer
obtaining new employment or reaching age 65.
The Company also has approved modifications to preserve the benefits to all of
its officers and directors previously granted under its stock incentive, stock
option, restricted stock, retirement, and health care plans, in the event of a
change of control (generally as defined above). These provisions allow any
holder of stock options (including an officer) who is so terminated other than
voluntarily or for cause after a change in control to exercise all of his stock
options within a certain period of time after termination of his employment;
fully vest any terminated officer in his benefit, if any, as calculated under
the Supplemental Retirement Plan (and allow the retirement of any terminated
director, under the Directors' Retirement Plan); lift the restrictions and waive
the Company's repurchase options under the restricted stock plans for any
terminated holder of such stock (including any terminated officer) other than
voluntarily or for cause; and obligate the Company to indemnify any terminated
officer from the federal excise tax effects of the foregoing under Section 67 of
the Internal Revenue Code. In addition, if the change of control involves the
acquisition of 40 percent or more of the Company's common stock, then the
restrictions will lift for all holders of restricted stock (including the
officers of the Company) and the stock options of all holders (including
officers) will vest.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10 percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Officers, directors and greater-than-10-percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on its review of the copies
of such forms received by it, or written representations from certain reporting
persons regarding such forms, the Company believes that, during fiscal 1997, all
filing requirements applicable to its officers, directors, and greater-than-10-
percent beneficial owners were complied with.
18
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- - ------------------------------------------------------------------------
BENEFICIAL OWNERSHIP OF SHARES*
The Company's common stock is listed for trading on the New York and Pacific
Stock Exchanges, under the symbol "RHR", and on The Stock Exchange, London.
The following table sets forth, as of October 10, 1997, the persons believed
by the Company to be the beneficial owners of more than 5 percent of the
Company's common stock:
<TABLE>
<CAPTION>
Amount Percent
Name and Address of Title of Beneficially of
Beneficial Owner Class Owned Class
------------------ -------- ------------ -------
<S> <C> <C> <C>
U. S. Trust Company Common Stock 2,866,955 11.18
of Califorina, N.A.
515 South Flower Street
Suite 2700
Los Angeles, CA 90071
J. P. Morgan Common Stock 2,596,579 10.13
60 Wall Street
New York, NY 10015
Mellon Bank Corporation Common Stock 2,213,163 8.63
10th Market Street
Wilmington, DE 19801
FMR Corp Common Stock 1,485,900 5.80
82 Devonshire Street
Boston, MA 02109
</TABLE>
* Owners of the Company's coomon stock also own, on a one-for-one basis, rights
(the "Rights") to purchase from the Company one one-hundreths (1/100) of a
share of a Series C Preferred Stock per Right, exercisable upon the
occurrence of certain events. The price and terms of the Rights, which could
entitle the holder to purchase common stock of the Company, or of an
Acquiring Person, are defined in the Amended and Restated Rights Agreement
between the Company and The First National Bank of Chicago dated as of April
6, 1990, as amended.
On October 10, 1997, the Executive Officers and Directors beneficially owned
as a group 998,138 shares of common stock of the Company. The following table
shows the individual holdings. Mr. Rau, who is listed in the table as an
Executive Officer, is also a Director.
19
<PAGE>
BENEFICIAL OWNERSHIP ON OCTOBER 10, 1997
<TABLE>
<CAPTION>
Right to Acquire
Common Ownership TOTAL
--------------------- ------------------------ ---------------------------
Percent of Percent of Percent of
Name Shares(1) Class(2) Shares(1)(3) Class(2) Shares(1)(3) Class(2)
- - ----------------------------------------- --------- ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Directors
Wallace Barnes.......................... 7,450 - 8,000 - 15,450 0.1%
Eugene E. Covert........................ 2,350 - 9,000 - 11,350 -
Diane C. Creel.......................... 81 - 0 - 81 -
Sam F. Iacobellis....................... 5,704 - 3,000 - 8,704 -
Vincent N. Marafino..................... 1,416 - 2,000 - 3,416 -
D. Larry Moore.......................... 1,912 - 6,000 - 7,912 -
Robert M. Price......................... 1,737 - 6,966 - 8,703 -
William P. Sommers...................... 2,223 - 5,000 - 7,223 -
James R. Wilson......................... 3,704 - 3,000 - 6,704 -
Executive Officers -
L. A. Chapman........................... 71,554 0.3% 106,696 0.42% 178,250 0.7%
J. R. Johnson........................... 76,416 0.3% 9,000 0.50% 85,416 0.3%
R. W. Madsen............................ 2,709 - 23,000 0.09% 25,709 0.1%
A. L. Majors............................ 4,905 - 8,000 0.03% 12,905 0.1%
R. H. Rau............................... 97,570 0.4% 317,830 1.24% 415,400 1.6%
D. R. Watson............................ 16,480 0.1% 102,912 0.40% 119,392 0.5%
G. A. Wetzler........................... 34,523 0.1% 57,000 0.22% 91,523 0.4%
------- ------- ------- ------- ------- -------
All of the above as a group
(16 persons).......................... 330,734 1.2% 667,404 2.9% 998,138 3.8%
</TABLE>
(1) All executive officers and directors as a group owned beneficially
approximately 3.6 percent of the equity securities of the Company. Shares
shown as beneficially owned are those as to which the named persons possess
sole voting and investment power. However, under the laws of some states,
including California, personal property owned by a married person may be
community property, and under some state community property laws, including
California, either spouse may manage and control such community property.
The Company has no information as to how many of the shares shown in this
table are subject to any community property law. Beneficial ownership of
shares of equity securities has been determined for this purpose in
accordance with Rule 13d-3 of the Securities and Exchange Commission
("SEC"), under which a person is deemed to be the beneficial owner of shares
of common stock if he or she has or shares voting power or investment power
in respect to such shares of common stock or has the right to acquire
ownership within 60 days. Accordingly, the amounts shown on the table do not
purport to represent beneficial ownership for any purpose other than
compliance with SEC reporting requirements.
(2) The shares owned by each person, and by the group, and the percentage of
shares owned (where such percentage exceeds 0.1 percent) has been computed
in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act.
(3) Includes shares which may be acquired upon the exercise of stock options as
follows: Rau, 313,000 shares; Chapman, 98,000 shares; Johnson, 9,000
shares; Wetzler, 57,000 shares; Watson, 102,912 shares; Madsen, 23,000
shares; Majors, 8,000 shares; Barnes, 8,000 shares; Covert, 9,000 shares;
Creel., 0 shares; Iacobellis, 3,000 shares; Marafino, 2,000 shares; Moore,
6,000 shares; Price, 6,000 shares; Sommers, 5,000 shares; Wilson, 3,000
shares; and the group, 652,912 shares. In addition, this amount includes
shares which may be obtainable upon the conversion of the Company's 7 3/4%
Convertible Subordinated Notes due 2004 for Messrs. Price, 966 shares;
Chapman, 8,696 shares; Rau, 4,830 shares; and the group, 14,492 shares.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report (Form 10-K/A) to be
signed on its behalf by the undersigned, thereunto duly authorized.
ROHR, INC.
(Registrant)
By: /s/ R. W. MADSEN
______________________________________
R. W. Madsen
Vice President, General Counsel & Secretary
By: /s/ A. L. MAJORS
______________________________________
A. L. Majors
Vice President and Controller
(Chief Accounting Officer)
Date: October 28, 1997
21
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ W. BARNES
- - ------------------------- Director OCTOBER 28, 1997
W. Barnes
- - ------------------------- Director OCTOBER __, 1997
E. E. Covert
- - ------------------------- Director OCTOBER __, 1997
D. C. Creel
/s/ S. F. IACOBELLIS
- - ------------------------- Director OCTOBER 28, 1997
S. F. Iacobellis
/s/ V. N. MARAFINO Director OCTOBER 28, 1997
- - -------------------------
V. N. Marafino
- - ------------------------- Director OCTOBER __, 1997
D. Larry Moore
/s/ R. M. PRICE
- - ------------------------- Director OCTOBER 28, 1997
R. M. Price
/s/ R. H. RAU
- - ------------------------- Director OCTOBER 28, 1997
R. H. Rau
/s/ W. P. SOMMERS
- - ------------------------- Director OCTOBER 28, 1997
W. P. Sommers
/s/ J. R. WILSON
- - ------------------------- Director OCTOBER 28, 1997
J. R. Wilson
22
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements on Form
S-3 (Nos. 33-53113, 33-12340, 33-13373 and 33-17536); Form S-8 (Nos. 2-75423,
2-83877, 33-14382, 33-29351, 33-32839, 33-56529, and 33-65447); and Form S-16
(Nos. 2-76538 and 2-76656) of Rohr, Inc., of our report dated September 11,
1997, appearing and incorporated by reference in this Annual Report on Form 10-K
of Rohr, Inc., for the year ended July 31, 1997.
Deloitte & Touche L L P
San Diego, California
October 28, 1997
