25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended December 28, 1997
Commission File Number 1-6560
THE FAIRCHILD CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
34-0728587
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
Incorporation or organization)
45025 Aviation Drive, Suite 400
Dulles, VA 20166
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (703)
478-5800
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 ninety (90) days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Title of Class March 2, 1998
Class A Common Stock, $0.10 Par Value 18,150,227
Class B Common Stock, $0.10 Par Value 2,624,716
AMENDMENT:
The purpose of this amendment is to provide restated financial
information and additional disclosure for (i) Part I, "Financial
Information", and (ii) Part II, Item 6, "Exhibits and Reports on Form 8-K",
as a result of the Company's adoption of a formal plan to discontinue
Fairchild Technologies in February 1998.
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
Page
PART 1. FINANCIAL INFORMATION
Item 1.Condensed Consolidated Balance Sheets as of December 28, 1997
(Unaudited) and June 30, 1997 3
Consolidated Statements of Earnings for the Three and Six Months
ended December 28, 1997 and December 29, 1996 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for the Six Months
ended December 28, 1997 and December 29, 1996 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 13
PART II. OTHER INFORMATION
Item 1. Legal Information 19
Item 4. Submission of Matters to Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
* For purposes of Part 1 and this Form 10-Q, the term "Company" means The
Fairchild Corporation, and its subsidiaries, unless otherwise indicated.
For purposes of Part II, the term "Company" means The Fairchild
Corporation, unless otherwise indicated.
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
<TABLE>
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 28, 1997 (Unaudited)
(In thousands)
ASSETS
<CAPTION>
June 30, December 28,
1997 (*) 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, $4,830 and
$30,687 restricted $ 18,779 $ 38,907
Short-term investments 25,647 8,487
Accounts receivable-trade, less 151,361 160,995
allowances of $6,905 and $7,892
Inventories:
Finished goods 292,441 329,492
Work-in-process 20,357 20,998
Raw materials 10,567 11,476
323,365 361,966
Net current assets of discontinued 18,525 27,778
operations
Prepaid expenses and other current 34,490 53,259
assets
Total Current Assets 572,167 651,392
Property, plant and equipment, net of
accumulated
depreciation of $126,990 and 121,918 126,198
$131,646
Net assets held for sale 26,147 26,447
Net noncurrent assets of discontinued 14,495 12,069
operations
Cost in excess of net assets acquired
(Goodwill), less
accumulated amortization of $36,672 154,129 160,150
and $39,287
Investments and advances, affiliated 55,678 21,829
companies
Prepaid pension assets 59,742 59,282
Deferred loan costs 9,252 11,742
Long-term investments 4,120 6,843
Other assets 35,018 46,784
Total Assets $1,052,666 $1,122,736
*Condensed from audited financial statements
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
<TABLE>
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 28, 1997 (Unaudited) and June 30, 1997
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30, December 28,
1997 (*) 1997
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank notes payable and current
maturities of long-term debt $ 47,322 $ 92,348
Accounts payable 75,522 70,739
Other accrued liabilities 97,318 76,816
Income taxes 5,863 16,163
Total Current Liabilities 226,025 256,066
LONG-TERM LIABILITES:
Long-term debt, less current 416,922 371,610
maturities
Other long-term liabilities 23,622 29,050
Retiree health care liabilities 43,351 42,366
Noncurrent income taxes 42,013 47,388
Minority interest in subsidiaries 68,309 70,327
TOTAL LIABILITIES 820,242 816,807
STOCKHOLDERS' EQUITY:
Class A common stock, 10 cents par
value; authorized
40,000 shares, 23,289 (20,234 in
June) shares issued and
17,047 (13,992 in June) shares 2,023 2,329
outstanding
Class B common stock, 10 cents par
value;.
authorized 20,000 shares, 2,625
(2,632 in June) shares
issued and outstanding 263 263
Paid-in capital 71,015 124,575
Retained earnings 209,949 230,841
Cumulative translation adjustment 939 (633)
Net unrealized holding gain (loss) on (46) 273
available-for-sale securities
Treasury Stock, at cost, 6,242 shares (51,719) (51,719)
of Class A Common Stock
TOTAL STOCKHOLDERS' EQUITY 232,424 305,929
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,052,666 $1,122,736
*Condensed from audited financial statements
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
<TABLE>
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED STATEMENTS OF EARNINGS (Unaudited)
For The Three (3) and Six (6) Months Ended December 29, 1996 and December
28, 1997
(In thousands, except per share data)
<CAPTION>
For the Three Months Ended
12/29/96 12/28/97 12/29/96 12/28/97
<S> <C> <C> <C> <C>
REVENUE:
Net sales $152,461 $208,616 $290,705 $402,978
Other income (expense), net 536 49 779 4,604
152,997 208,665 291,484 407,582
COSTS AND EXPENSES:
Cost of goods sold 115,676 151,794 216,828 299,827
Selling, general &
administrative 32,475 42,211 63,796 78,871
Research and development 22 48 45 97
Amortization of goodwill 1,108 1,387 2,220 2,606
149,281 195,440 282,889 381,401
OPERATING INCOME 3,716 13,225 8,595 26,181
Interest expense 11,469 15,683 26,129 28,658
Interest income (1,566) (524) (3,754) (914)
Net interest expense 9,903 15,159 22,375 27,744
Investment income (loss), net 1,836 (7,077) 1,461 (5,180)
Equity in earnings (loss) of
affiliates 398 429 2,709 2,121
Minority interest (776) (742) (1,561) (1,875)
Loss from continuing (4,729) (9,324) (11,171) (6,497)
operations before taxes
Income tax benefit (3,430) (4,719) (6,509) (3,121)
Loss from continuing (1,299) (4,605) (4,662) (3,376)
operations
Earnings from discontinued
operations, net (1,678) (1,945) (2,933) (2,682)
Gain on disposal of
discontinued operations, net - 29,974 - 29,974
Extraordinary items, net - (3,024) - (3,024)
NET EARNINGS (LOSS) $ (2,977) $20,400 $(7,595)$20,892
Earnings Per Share:
Loss from continuing
operations $ (0.08) $(0.27) $(0.28)$ (0.20)
Earnings from discontinued
operations, net (0.10) (0.11) (0.18) (0.16)
Gain on disposal of
discontinued operations, net - 1.75 - 1.78
Extraordinary items, net
- (0.18) - (0.18)
Net earnings (loss) $ (0.18) $ 1.19 $(0.46) $ 1.24
Weighted average shares 16,551 17,088 16,489 16,864
outstanding
The accompanying notes to summarized financial information are an integral
part of these statements.
</TABLE>
<TABLE>
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For The Six (6) Months Ended December 28, 1997 and December 29, 1996
(In thousands)
<CAPTION>
For the Six Months Ended
12/29/96 12/28/97
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (7,595) $ 20,892
Depreciation and amortization 10,075 11,632
Accretion of discount on long-term 2,235 1,686
liabilities
Net gain on the sale of discontinued -- (29,974)
operations
Extraordinary items, net of cash -- 3,024
payments
Distributed earnings of affiliates, 1,906 344
net
Minority interest 1,561 1,875
Changes in assets and liabilities (59,895) (96,975)
Non-cash changes and working capital (2,137) (4,349)
changes of discontinued operations
Net cash used for operating (53,850) (91,845)
activities
Cash flows from investing activities:
Purchase of property, plant and (4,781) (15,964)
equipment
Net proceeds received from (used for) (2,361) 5,786
investments
Acquisition of subsidiaries, net of -- (11,774)
cash acquired
Net proceeds from the sale of 173,719 84,733
discontinued operations
Changes in net assets held for sale (936) (324)
Other, net 21 179
Investing activities of discontinued (452) (3,119)
operations
Net cash provided by investing 165,210 59,517
activities
Cash flows from financing activities:
Proceeds from issuance of debt 40,473 143,712
Debt repayments and repurchase of (93,495) (145,130)
debentures, net
Issuance of Class A common stock 859 53,921
Financing activities of discontinued (745) --
operations
Net cash provided by (used for) (52,908) 52,503
financing activities
Effect of exchange rate changes on 222 (688)
cash
Net increase in cash and cash 58,674 19,487
equivalents
Cash and cash equivalents, beginning 39,649 19,420
of the year
Cash and cash equivalents, end of the
period $98,323 $38,907
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except per share data)
1. FINANCIAL STATMENTS
The consolidated balance sheet as of December 28, 1997 and the
consolidated statements of earnings and cash flows for the three and six
months ended December 29, 1996 and December 28, 1997 have been prepared by
the Company, without audit. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at December
28, 1997, and for all periods presented, have been made. The balance sheet
at June 30, 1997 was condensed from the audited financial statements as of
that date.
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 and notes thereto included in the Company's June 30, 1997 Form
10-K and Banner Aerospace, Inc.'s March 31, 1997 Form 10-K. The results of
operations for the period ended December 28, 1997 are not necessarily
indicative of the operating results for the full year. Certain amounts in
prior years' quarterly financial statements have been reclassified to
conform to the current presentation.
2. BUSINESS COMBINATIONS
The Company's acquisitions described in this section have been
accounted for using the purchase method. The respective purchase price is
assigned to the net assets acquired based on the fair value of such assets
and liabilities at the respective acquisition dates.
In December 1997, the Company acquired AS+C GmbH, Aviation Supply +
Consulting ("AS&C") in a business combination accounted for as a purchase.
The total cost of the acquisition was $13,245, which exceeded the fair
value of the net assets of AS&C by approximately $7,350, which is
preliminarily being allocated as goodwill and amortized using the straight-
line method over 40 years. The Company purchased AS&C with cash borrowed.
AS&C is an aerospace parts, logistics, and distribution company primarily
servicing the European OEM market.
In February 1997, the Company completed a transaction (the "Simmonds
Acquisition") pursuant to which the Company acquired common shares and
convertible debt representing an 84.2% interest, on a fully diluted basis,
of Simmonds S.A. ("Simmonds"). The Company initiated a tender offer to
purchase the remaining shares and convertible debt held by the public. By
June 30, 1997, the Company had purchased, or placed sufficient cash in
escrow to purchase, all the remaining shares and convertible debt of
Simmonds. The total purchase price of Simmonds, including the assumption of
debt, was approximately $62,000, which the Company funded with available
cash and borrowings. The Company recorded approximately $13,750 in
goodwill as a result of this acquisition, which will be amortized using the
straight-line method over 40 years. Simmonds is one of Europe's leading
manufacturers and distributors of aerospace and automotive fasteners.
In January 1997, Banner Aerospace, Inc. ("Banner"), a majority-owned
subsidiary of the Company, acquired PB Herndon Company ("PB Herndon") in a
business combination accounted for as a purchase. The total cost of the
acquisition was $16,000, including the assumption of $1,300 in debt, which
exceeded the fair value of the net assets of PB Herndon by approximately
$3,500, which is being amortized using the straight-line method over 40
years. The Company purchased PB Herndon with available cash. PB Herndon is
a distributor of specialty fastener lines and similar aerospace related
components.
On June 30, 1997, the Company sold all the patents of Fairchild
Scandinavian Bellyloading Company ("SBC") to Teleflex Incorporated
("Teleflex") for $5,000, and immediately thereafter sold all the stock of
SBC to a wholly owned subsidiary of Teleflex for $2,000. The Company may
also receive additional proceeds of up to $7,000 based on future net sales
of SBC's patented products and services.
3. DISCONTINUED OPERATIONS
On November 20, 1997, Shared Technologies Fairchild Inc. ("STFI"), a
corporation in which the Company owned approximately 42% of the outstanding
common stock, entered into a merger agreement with Intermedia
Communications Inc. ("Intermedia") pursuant to which holders of STFI common
stock will receive $15.00 per share in cash (the "STFI Merger"). The
Company was paid approximately $85,000 in cash (before tax and selling
expenses) in exchange for preferred stock of STFI owned by the Company, and
expects to receive an additional $93,000 in cash (before tax and selling
expenses) in the first three months of 1998 in exchange for the 6,225,000
shares of common stock of STFI owned by the Company. In the quarter ended
December 28, 1997, the Company recorded a $29,974 gain, net of tax, on
disposal of discontinued operations, from the proceeds received for the
preferred stock of STFI. The results of STFI have been accounted for as
discontinued operations.
Earnings from discontinued operations includes the Company's equity in
earnings of $622 and $1,095 from the STFI investments during the six months
ended December 28, 1997 and December 29, 1996, respectively.
See Note 11 for the discontinuance of Fairchild Technologies.
4. EQUITY SECURITIES
On December 19, 1997, the Company completed a secondary offering of
public securities. The offering consisted of an issuance of 3,000,000
shares of the Company's Class A Common Stock at $20.00 per share (the
"Offering").
The Company had 17,047,167 shares of Class A common stock and
2,624,716 shares of Class B common stock outstanding at December 28, 1997.
Class A common stock is traded on both the New York and Pacific Stock
Exchanges. There is no public market for the Class B common stock. Shares
of Class A common stock are entitled to one vote per share and cannot be
exchanged for shares of Class B common stock. Shares of Class B common
stock are entitled to ten votes per share and can be exchanged, at any
time, for shares of Class A common stock on a share-for-share basis. For
the six months ended December 28, 1997, 47,084 shares of Class A Common
Stock were issued as a result of the exercise of stock options, and
shareholders converted 7,800 shares of Class B common stock into Class A
common stock.
5. CREDIT AGREEMENT
On December 19, 1997, immediately following the Offering, the Company
restructured its FHC and RHI Credit Agreements by entering into a new
credit facility to provide the Company with a $300,000 senior secured
credit facility (the "Facility") consisting of (i) a $75,000 revolving loan
with a letter of credit sub-facility of $30,000 and a $10,000 swing loan
sub-facility, and (ii) a $225,000 term loan. Advances made under the
Facility will generally bear interest at a rate of, at the Company's
option, either (i) 2% over the Citibank N.A. base rate, or (ii) 3% over the
Eurodollar Rate ("LIBOR") for the first nine months following closing, and
is subject to change based upon the Company's financial performance
thereafter. The Facility is subject to a non-use commitment fee of 1/2% of
the aggregate unused availability for the first nine months post-closing
and is subject to change based upon the Company's financial performance
thereafter. Outstanding letters of credit are subject to fees equivalent
to the LIBOR margin rate. A borrowing base is calculated monthly to
determine the amounts available under the Facility. The borrowing base is
determined monthly based upon (i) the EBITDA of the Company's Aerospace
Fastener business, as adjusted, and (ii) specified percentages of various
marketable securities and cash equivalents. The Facility will mature on
June 18, 2004. The term loan is subject to mandatory prepayment
requirements and optional prepayments. The revolving loan is subject to
mandatory prepayment requirements and optional commitment reductions. On
December 28, 1997, the Company was in compliance with all the covenants
under its credit agreements.
The Company recognized an extraordinary loss of $3,024, net of tax, to
write-off the remaining deferred loan fees associated with early
extinguishment of FHC and RHI Credit Agreements.
In August 1997, the Company entered into a delayed-start swap interest
rate lock hedge agreement (the "FHC Hedge Agreement") to reduce its
exposure to increases in interest rates on variable rate debt. In December
1997, the Company amended the FHC Hedge Agreement. Beginning on February
17, 1998, the FHC Hedge Agreement will provide interest rate protection on
$100,000 of variable rate debt for ten years, with interest being
calculated based on a fixed LIBOR rate of 6.715%. On January 14, 1998, the
FHC Hedge Agreement was further amended to provide interest rate protection
with interest being calculated based on a fixed LIBOR rate of 6.24% from
February 17, 1998 to February 17, 2003. On February 17, 2003, the bank will
have a one-time option to either (i) elect to cancel the ten-year
agreement; or (ii) do nothing and proceed with the transaction, using a
fixed LIBOR rate of 6.715% for the period February 17, 2003 to February 19,
2008. No costs were incurred as a result of these transactions.
On November 25, 1997, Banner amended its credit agreement to increase
its revolving credit facility by $50,000.
6. RESTRICTED CASH
The Company had restricted cash of approximately $4,839 and $30,687 on
June 30, 1997 and December 28, 1997, respectively, all of which is
maintained as collateral for certain debt facilities.
7. SUMMARIZED STATEMENT OF EARNINGS INFORMATION
The following table presents summarized historical financial
information, on a combined 100% basis, of the Company's principal
investments, which are accounted for using the equity method.
<TABLE>
<CAPTION>
Six Months Ended
December 29 December 28,
1996 1997
<S> <C> <C>
Net sales $52,239 $48,841
Gross profit 20,096 18,191
Earnings from continuing operations 5,036 8,132
Net earnings 5,036 8,132
</TABLE>
The Company owns approximately 31.9% of Nacanco Paketleme common stock.
The Company recorded equity earnings of $1,571 and $2,584 from this
investment for the six months ended December 29, 1996 and December 28,
1997, respectively.
8. MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES
On December 28, 1997, the Company had $70,327 of minority interest, of
which $69,700 represents Banner. Minority shareholders hold approximately
36% of Banner's outstanding common stock.
9. EARNINGS PER SHARE
Effective December 28, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128).
This statement replaces the previously reported primary and fully diluted
earnings (loss) per share with basic and diluted earnings (loss) per share.
Unlike primary earnings (loss) per share, basic earnings (loss) per share
excludes any diluted effects of options. Diluted earnings (loss) per share
is very similar to the previously reported fully diluted earnings (loss)
per share. All earnings (loss) per share have been restated to conform to
the requirements of SFAS 128.
The computation of diluted loss per share for the three-month and six-
month periods ended December 28, 1997 and December 29, 1996 excluded the
effect of incremental common shares attributable to the potential exercise
of common stock options outstanding and warrants outstanding, because their
effect was antidilutive. These shares could potentially dilute basic
earnings (loss) per share in the future. The Company entered into an
agreement subsequent to December 28, 1997, which, upon consummation, would
increase the number of outstanding shares (see Note 11).
10. CONTINGENCIES
Government Claims
The Corporate Administrative Contracting Officer (the "ACO"), based
upon the advice of the United States Defense Contract Audit Agency, has
made a determination that Fairchild Industries, Inc. ("FII"), a former
subsidiary of the Company, did not comply with Federal Acquisition
Regulations and Cost Accounting Standards in accounting for (i) the 1985
reversion to FII of certain assets of terminated defined benefit pension
plans, and (ii) pension costs upon the closing of segments of FII's
business. The ACO has directed FII to prepare cost impact proposals
relating to such plan terminations and segment closings and, following
receipt of such cost impact proposals, may seek adjustments to contract
prices. The ACO alleges that substantial amounts will be due if such
adjustments are made, however, an estimate of the possible loss or range of
loss from the ACO's assertion cannot be made. The Company believes it has
properly accounted for the asset reversions in accordance with applicable
accounting standards. The Company has held discussions with the government
to attempt to resolve these pension accounting issues.
Environmental Matters
The Company's operations are subject to stringent Government imposed
environmental laws and regulations concerning, among other things, the
discharge of materials into the environment and the generation, handling,
storage, transportation and disposal of waste and hazardous materials. To
date, such laws and regulations have not had a material effect on the
financial condition, results of operations, or net cash flows of the
Company, although the Company has expended, and can be expected to expend
in the future, significant amounts for investigation of environmental
conditions and installation of environmental control facilities,
remediation of environmental conditions and other similar matters,
particularly in the Aerospace Fasteners segment.
In connection with its plans to dispose of certain real estate, the
Company must investigate environmental conditions and may be required to
take certain corrective action prior or pursuant to any such disposition.
In addition, management has identified several areas of potential
contamination at or from other facilities owned, or previously owned, by
the Company, that may require the Company either to take corrective action
or to contribute to a clean-up. The Company is also a defendant in certain
lawsuits and proceedings seeking to require the Company to pay for
investigation or remediation of environmental matters and has been alleged
to be a potentially responsible party at various "Superfund" sites.
Management of the Company believes that it has recorded adequate reserves
in its financial statements to complete such investigation and take any
necessary corrective actions or make any necessary contributions. No
amounts have been recorded as due from third parties, including insurers,
or set off against, any liability of the Company, unless such parties are
contractually obligated to contribute and are not disputing such liability.
As of December 28, 1997, the consolidated total recorded liabilities
of the Company for environmental matters approximated $7,500, which
represented the estimated probable exposures for these matters. It is
reasonably possible that the Company's total exposure for these matters
could be approximately $12,300 on an undiscounted basis.
Other Matters
The Company is involved in various other claims and lawsuits
incidental to its business, some of which involve substantial amounts. The
Company, either on its own or through its insurance carriers, is contesting
these matters. In the opinion of management, the ultimate resolution of
the legal proceedings, including those aforementioned, will not have a
material adverse effect on the financial condition, or future results of
operations or net cash flows of the Company.
11. SUBSEQUENT EVENTS
On January 13, 1998, certain subsidiaries (the "Selling
Subsidiaries"), of Banner Aerospace, Inc. ("Banner", a majority-owned
subsidiary of the Registrant), completed the disposition of substantially
all of the assets and certain liabilities of the Selling Subsidiaries to
two wholly-owned subsidiaries of AlliedSignal Inc. (the "Buyers"), in
exchange for unregistered shares of AlliedSignal Inc. common stock with an
aggregate value equal to $369,000 (the "Banner Hardware Group
Disposition"). The purchase price received by the Selling Subsidiaries was
based on the consolidated net worth as reflected on an estimated closing
date balance sheet for the assets (and liabilities) conveyed by the Selling
Subsidiaries to the Buyers. Such estimated closing date balance sheet is
subject to review by the parties, and the purchase price will be adjusted
(up or down) based on the net worth as reflected on the final closing date
balance sheet. The assets transferred to the Buyers consists primarily of
Banner's hardware group, which includes the distribution of bearings, nuts,
bolts, screws, rivets and other type of fasteners, and its PacAero unit.
Approximately $196,000 of the common stock received from the Buyers was
used to repay outstanding term loans of Banner's subsidiaries and related
fees. Banner effected the Banner Hardware Group Disposition to concentrate
its efforts on the rotables and jet engine businesses and because the
Banner Hardware Group Disposition presented a unique opportunity to realize
a significant return on the disposition of the hardware group.
On February 3, 1998, with the proceeds of the Offering, term loan
borrowings under the Facility, and the after tax proceeds the Company has
already received from the STFI Merger (collectively, the "Refinancing"),
the Company refinanced substantially all of its existing indebtedness
(other than indebtedness of Banner), consisting of (i) $63,000 to redeem
the 11 7/8% Senior Debentures due 1999; (ii) $117,600 to redeem the 12%
Intermediate Debentures due 2001; (iii) $35,856 to redeem the 13 1/8%
Subordinated Debentures due 2006; (iv) $25,063 to redeem the 13% Junior
Subordinated Debentures due 2007; and (v) accrued interest of $10,562.
On March 2, 1998, the Company consummated the acquisition of Edwards
and Lock Management Corporation, doing business as Special-T Fasteners
("Special-T"), in a business combination to be accounted for as a purchase.
The purchase price for the acquisition was $46,500, of which $23,500 was
paid in shares of Class A Common Stock of the Company and the remainder was
paid in cash. The purchase price is subject to certain post-closing
adjustments. Special-T is a distributor of aerospace fasteners. Special-T
distributes precision fasteners worldwide, utilized primarily in the
aerospace industry, to both government and commercial manufacturers.
For the Company's fiscal years 1995, 1996, and 1997, and for the first
six months of fiscal 1998, Fairchild Technologies ("Technologies") had
operating losses of approximately $1.5 million, $1.5 million, $3.6 million,
and $5 million, respectively. In addition, as a result of the downturn in
the Asian markets, Technologies has experienced delivery deferrals,
reduction in new orders, lower margins and increased price competition.
In response, in February, 1998, the Company adopted a formal plan to
enhance the opportunities for disposition of Technologies, while improving
the ability of Technologies to operate more efficiently. The plan includes
a reduction in production capacity and headcount at Technologies, and the
pursuit of potential vertical and horizontal integration with peers and
competitors of the two divisions that constitute Technologies, or the
inclusion of those divisions in the Spin-Off. If the Company elects to
include Technologies in the Spin-Off, the Company believes that it would be
required to contribute substantial additional resources to allow
Technologies the liquidity necessary to sustain and grow both the Fairchild
Technologies' operating divisions.
In connection with the adoption of such plan, the Company will take an
after-tax reserve of approximately $22 million in discontinued operations
in the third fiscal quarter ending March 29, 1998, of which $14 million
(net of income tax benefit of $4 million) relates to an estimated loss on
the disposal of certain assets of Technologies, and $8 million relates to a
provision for expected operating losses over the next twelve months at
Technologies. While the Company believes that $22 million is a sufficient
charge for the expected losses in connection with the disposition of
Technologies, there can be no assurance that the reserve is adequate.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Fairchild Corporation (the "Company") was incorporated in October
1969, under the laws of the State of Delaware. On November 15, 1990, the
Company changed its name from Banner Industries, Inc. to The Fairchild
Corporation. RHI Holdings, Inc. ("RHI") is a direct subsidiary of the
Company. RHI is the 100% owner of Fairchild Holding Corp. ("FHC") and the
majority owner of Banner Aerospace, Inc. ("Banner"). The Company's
principal operations are conducted through RHI and FHC. The Company holds a
significant equity interest in Nacanco Paketleme ("Nacanco"), and, during
the period covered by this report, held a significant equity interest in
Shared Technologies Fairchild Inc. ("STFI"). (See Note 11 to Financial
Statements, Subsequent Events, as to the disposition of the Company's
interest in STFI.)
The following discussion and analysis provide information which
management believes is relevant to assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the consolidated financial
statements and notes thereto.
CAUTIONARY STATEMENT
Certain statements in the financial discussion and analysis by
management contain forward-looking information that involves risk and
uncertainty, including current trend information, projections for
deliveries, backlog, and other trend projections. Actual future results
may differ materially depending on a variety of factors, including product
demand; performance issues with key suppliers; customer satisfaction and
qualification issues; labor disputes; governmental export and import
policies; worldwide political stability and economic growth; legal
proceedings; business combinations; investment risks; and acts of nature.
RECENT DEVELOPMENTS
The Company has effected a series of transactions designed to: (i)
reduce its total indebtedness and annual interest expense; (ii) increase
the number of publicly held shares of Class A Common Stock; and (iii)
increase the Company's operating and financial flexibility.
On November 20, 1997, STFI, a corporation of which the Company owns
approximately 42% of the outstanding common stock, entered into a merger
agreement with Intermedia Communications, Inc. ("Intermedia") pursuant to
which holders of STFI common stock will receive $15.00 per share in cash.
The Company was paid approximately $85 million in cash (before tax and
selling expenses) in exchange for preferred stock of STFI owned by the
Company, and expects to receive an additional $93 million in cash (before
tax and selling expenses) in the first three months of 1998 in exchange for
the 6,225,000 shares of common stock of STFI owned by the Company. The
Intermedia transaction replaces an earlier merger agreement with the Tel-
Save Holdings, Inc. under which the Company would have received
consideration primarily in common stock of Tel-Save Holdings, Inc.
Consummation of the STFI Merger is subject to certain conditions.
On December 19, 1997, the Company completed a secondary offering of
public securities. The offering consisted of an issuance of 3,000,000
shares of the Company's Class A Common Stock at $20.00 per share (the
"Offering").
On December 19, 1997, immediately following the Offering, the Company
restructured its FHC and RHI Credit Agreements by entering into a new six-
and-a-half-year credit facility to provide the Company with a $300 million
senior secured credit facility (the "Facility") consisting of (i) a $75
million revolving loan with a letter of credit sub-facility of $30 million
and a $10 million swing loan sub-facility, and (ii) a $225 million term
loan.
On January 13, 1998, certain subsidiaries of Banner (the "Selling
Subsidiaries") completed the disposition of substantially all of the assets
and certain liabilities of the Selling Subsidiaries to two wholly-owned
subsidiaries of AlliedSignal Inc. (the "Buyers"), in exchange for
unregistered shares of AlliedSignal Inc. common stock with an aggregate
value equal to $369 million (the "Banner Hardware Group Disposition"). The
purchase price received by the Selling Subsidiaries was based on the
consolidated net worth as reflected on an estimated closing date balance
sheet for the assets (and liabilities) conveyed by the Selling Subsidiaries
to the Buyers. Such estimated closing date balance sheet is subject to
review by the parties, and the purchase price will be adjusted (up or down)
based on the net worth as reflected on the final Closing Date Balance
Sheet. The assets transferred to the Buyers consists primarily of Banner's
hardware group, which includes the distribution of bearings, nuts, bolts,
screws, rivets and other type of fasteners, and its PacAero Unit.
Approximately $196 million of the common stock received from the Buyers was
used to repay outstanding term loans of Banner's subsidiaries and related
fees. Banner effected the Banner Hardware Group Disposition to concentrate
its efforts on the rotables and jet engine businesses and because the
Banner Hardware Group Disposition presented a unique opportunity to realize
a significant return on the disposition of the hardware group.
On March 2, 1998, the Company consummated the acquisition of Special-
T, from the stockholders of Special-T, pursuant to an agreement and plan of
merger dated as of January 28, 1998 as amended on February 20, 1998 and
March 2, 1998. The purchase price for the acquisition was $46.5 million, of
which $23.5 million was paid in shares of Class A Common Stock of the
Company and the remainder was paid in cash. The purchase price is subject
to certain post-closing adjustments. Special-T is a distributor of
aerospace fasteners.
On February 3, 1998, with the proceeds of the Offering, term loan
borrowings under the Facility, and the after tax proceeds the Company has
already received from the STFI Merger (collectively, the "Refinancing"),
the Company refinanced substantially all of its existing indebtedness
(other than indebtedness of Banner), consisting of (i) $63.0 million to
redeem the 11 7/8% Senior Debentures due 1999; (ii) $117.6 million to
redeem the 12% Intermediate Debentures due 2001; (iii) $35.9 million to
redeem the 13 1/8% Subordinated Debentures due 2006; (iv) $25.1 million to
redeem the 13% Junior Subordinated Debentures due 2007; and (vi) accrued
interest of $10.6 million.
On November 28, 1997, the Company acquired AS+C GmbH, Aviation Supply
+ Consulting ("AS&C") in a business combination accounted for as a
purchase. The total cost of the acquisition was $13,245, which exceeded the
fair value of the net assets of AS&C by approximately $7,350, which is
preliminarily being allocated as goodwill and amortized using the straight-
line method over 40 years. The Company purchased AS&C with cash borrowed.
AS&C is an aerospace parts, logistics, and distribution company primarily
servicing the European OEM market.
RESULTS OF OPERATIONS
The Company currently reports in two principal business segments:
Aerospace Fasteners and Aerospace Distribution. The results of Gas Springs
and SBC (for the prior year period) are included in the Corporate and Other
classification. The following table illustrates the historical sales and
operating income of the Company's operations for the three months and six
ended December 28, 1997 and December 29, 1996, respectively.
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended Six Months Ended
December December December 29, December 29,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Sales by Segment:
Aerospace Fasteners $ 56,494 $ 91,014 $ 111,541 $167,861
Aerospace Distribution 96,985 119,614 181,092 242,528
Corporate and Other 2,839 1,362 4,647 2,724
Eliminations (a) (3,857) (3,374) (6,575) (10,135)
Total Sales $152,461 $208,616 $ 290,705 $ 402,978
Operating Income by
Segment:
Aerospace Fasteners $ 2,156 $ 6,382 $ 4,264 $ 8,892
Aerospace Distribution 6,072 7,714 12,053 17,085
Corporate and Other (4,512) (871) (7,722) 204
Total Operating Income $ 3,716 $ 13,225 $ 8,595 $ 26,181
(a) Represents intersegment sales from the Aerospace Fasteners segment to
the Aerospace Distribution segment.
</TABLE>
CONSOLIDATED RESULTS
Net sales of $208.6 million in the second quarter of Fiscal 1998
improved significantly by $56.2 million, or 37%, compared to sales of
$152.5 million in the second quarter of Fiscal 1997. Net Sales of $403.0
million in the Fiscal 1998 six-month period improved by $112.3 million, or
39%, compared to sales of $290.7 million in the first six months of Fiscal
1997. Sales growth was stimulated by the resurgent commercial aerospace
industry, together with the effects that recent acquisitions contributed in
the current periods.
Gross Margin as a percentage of sales was 24.1% and 27.2% in the
second quarter of Fiscal 1997 and 1998, respectively, and 25.4% and 25.6%
in the six-month period of Fiscal 1997 and 1998, respectively. The
increased margin in the Fiscal 1998 periods is attributable to improving
efficiencies associated with increased production performances contributed
by an improving skills base in the work force, and a reduction in the
payment of overtime within the Aerospace Fasteners segment, and a change in
product mix and decreased price competition in the Aerospace Distribution
segment.
Selling, General & Administrative expense as a percentage of sales was
21.3% and 20.2% in the second quarter of Fiscal 1997 and 1998,
respectively, and 21.9% and 19.6% in the six-month period of Fiscal 1997
and 1998, respectively. The improvement in the Fiscal 1998 periods is
attributable primarily to administrative efficiencies relative to
increasing sales.
Other income increased $3.8 million in the current six-month period,
compared to the prior year six-month period, due primarily to the sale of
air rights over a portion of the property the Company owns and is
developing in Farmingdale, New York.
Operating income of $13.2 million in the second quarter of Fiscal 1998
increased $9.5 million, compared to operating income of $3.7 million in the
second quarter of Fiscal 1997. Operating income of $26.2 million in the
six months period ended December 28, 1997, improved by $17.6 million,
compared to the six month period ended December 29, 1996. The increase in
operating income was due to the improved results provided by the Company's
aerospace operations.
Investment income (loss), net, decreased by $8.9 million in the second
quarter and $6.6 million in the first six months of Fiscal 1998, due to
recognizing unrealized losses on the fair market adjustments of trading
securities in the Fiscal 1998 periods while recording unrealized gains from
trading securities in the Fiscal 1997 periods. The Company's portfolio of
trading securities is small, varied, and subject to fluctuations in market
value. Trading securities are marked to market value in the statement of
earnings.
Equity in earnings of affiliates increased slightly in the second
quarter and six months of Fiscal 1998, compared to the first quarter of
Fiscal 1997, due to improved earnings by Nacanco.
Income taxes included a $3.1 million tax benefit in the first six
months of Fiscal 1998, on pre-tax losses of $6.5 million. The tax benefit
was higher than the statutory rate due primarily to larger losses generated
by domestic operations.
Included in earnings from discontinued operations is the result of
Fairchild Technologies and the Company's equity in earnings of STFI, both
of which were lower in the Fiscal 1998 periods. The discontinued operations
results are affected by the operations of Fairchild Technologies Division
("The Division"), which may fluctuate because of industry cyclicality, the
volume and timing of orders, the timing of new product shipments,
customer's capital spending, and pricing changes by The Division and its
competition. The Division has experienced a reduction of its backlog, and
margin compression during the past six months, which combined with the
existing cost base, may impact future earnings from the Division.
The $30.0 million after-tax gain on disposal of discontinued
operations in the Fiscal 1998 periods, includes the Company's disposition
of its preferred stock positions as a result of the STFI Merger.
The extraordinary loss, net, in the Fiscal 1998 periods includes the
write-off of deferred loan fees associated with the early extinguishment of
the FHC and RHI credit facilities which were replaced as part of the
Refinancing.
Net earnings of $20.9 million in the first six months ended December
28, 1997, improved by $28.5 million compared to the $7.6 million net loss
recorded in the six months ended December 29, 1996. This improvement is
attributable to a $17.6 million increase in operating income; and the $30.0
million gain on the disposition of discontinued operations, offset
partially by a $6.6 million decrease in investment income and the $3.0
million extraordinary loss.
SEGMENT RESULTS:
AEROSPACE FASTENERS SEGMENT
Sales in the Aerospace Fasteners segment increased by $34.5 million in
the second quarter and $56.3 million for the Fiscal 1998 six-month period,
reflecting significant growth in the commercial aerospace industry combined
with the effect of the Simmonds acquisition. New orders have continued to
exceed reported sales, resulting in a backlog of $207 million at December
28, 1997, up from $196 million at June 30, 1997. Excluding sales
contributed by acquisitions, sales increased 22% and 19% for the three and
six months ended December 28, 1997, respectively, compared to the same
periods in the prior year.
Operating income improved by $4.2 million, or 196%, in the second
quarter and $4.6 million, or 109%, in the Fiscal 1998 six-month period,
compared to the Fiscal 1997 periods. Acquisitions and marketing changes
were contributors to this improvement. Excluding the results provided by
acquisitions, operating income increased by 116% in the second quarter and
11% for the six months of Fiscal 1998, compared to the same periods in the
prior year. The Company anticipates that productivity efficiencies will
further improve operating income in the coming months.
AEROSPACE DISTRIBUTION SEGMENT
Aerospace Distribution sales were up $22.6 million, or 23% in the
second quarter and $61.4 million, or 34%, in the first six months of Fiscal
1998, compared to the corresponding periods of the prior year. The
improvement in the Fiscal 1998 periods is due to increased sales to
commercial airlines, original equipment manufacturers, and other
distributors as well as increased sales of turbine parts and engine
management services. In addition, incremental sales provided by PB Herndon
also contributed to the increase.
Operating income was up $1.6 million, or 27%, in the second quarter
and $5.0 million, or 42% for the first six months of Fiscal 1998, compared
to the same period of the prior year, due primarily to the increase in
sales and the related economies of scale. This segment has benefited from
the extended service lives of existing aircraft, growth from acquisitions
and internal growth, which has increased its overall market share.
CORPORATE AND OTHER
The Corporate and Other classification includes the Gas Springs
Division and corporate activities. The results of SBC, which was sold at
Fiscal 1997 year-end, are included in the prior period results. The group
reported a decrease in sales of $1.4 million, in the second quarter and
$1.9 million, or 41%, in the first six months of Fiscal 1998, as compared
to the same periods in Fiscal 1997, due primarily to exclusion of SBC's
results in the current periods. The operating loss decreased by $3.6
million in the second quarter and $7.9 million in the first six months of
Fiscal 1998, compared to the Fiscal 1997 periods, as a result of an
increase in other income and a decline in legal expenses.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $19.5 million from $19.4
million at June 30, 1997 to $38.9 million at December 28, 1997. Cash
received form the STFI Merger and the Offering was partially offset by cash
used for operations of $93.9 million, net capital expenditures, including
acquisitions of $30.9 million. The Company's principal cash requirements
include debt service, capital expenditures, acquisitions, and payment of
other liabilities. Other liabilities that require the use of cash include
post-employment benefits for retirees, environmental investigation and
remediation obligations, and litigation settlements and related costs. The
Company maintains credit agreements with a consortium of banks, which
provide a term loan and revolving credit facilities to the Company, and a
separate revolving credit facility and term loans to Banner. The Company
anticipates that existing capital resources, cash generated from
operations, and cash from borrowings and asset sales will be adequate to
maintain the Company's current level of operations.
With the proceeds of the Offering, borrowings under the Facility and
the after tax proceeds the Company has already received from the STFI
Merger, the Company refinanced substantially all of its existing
indebtedness (other than indebtedness at Banner), consisting of the 11 7/8%
Senior Debentures due 1999, the 12% Intermediate Debentures due 2001, the
13 1/8% Subordinated Debentures due 2006, the 13% Junior Subordinated
debentures due 2007 and its existing bank indebtedness. The Refinancing
reduced the Company's total net indebtedness by approximately $132 million
and reduced the Company's annual interest expense, on a pro forma basis, by
approximately $21 million. The completion of the STFI Merger will reduce
the Company's annual interest expense by approximately $3 million. In
addition, a portion of the proceeds from the Banner Hardware Group
Disposition were used to repay all of Banner's outstanding bank
indebtedness, which will further reduce the Company's annual interest
expense by an additional $14 million.
The increase in the Company's shareholders' equity is expected to be
approximately $40 million resulting a projected gain of $90 million to be
recorded at the closing of the Banner Hardware Group Disposition, and an
estimated tax provision of $39 million and a minority interest effect of
$20 million. The operating income of the subsidiaries included in the
Banner Hardware Group Disposition was $6.1 million and $14.1 million for
the three and six months ended December 28, 1997, respectively. Whereas
the Company will no longer benefit from the operations of the disposed
Banner subsidiaries it expects to benefit from lower interest expense and
dividends paid on the AlliedSignal stock.
For the Company's fiscal years 1995, 1996, and 1997, and for the first
six months of fiscal 1998, Fairchild Technologies ("Technologies") had
operating losses of approximately $1.5 million, $1.5 million, $3.6 million,
and $5 million, respectively. In addition, as a result of the downturn in
the Asian markets, Technologies has experienced delivery deferrals,
reduction in new orders, lower margins and increased price competition.
In response, in February, 1998, the Company adopted a formal plan to
enhance the opportunities for disposition of Technologies, while improving
the ability of Technologies to operate more efficiently. The plan includes
a reduction in production capacity and headcount at Technologies, and the
pursuit of potential vertical and horizontal integration with peers and
competitors of the two divisions that constitute Technologies, or the
inclusion of those divisions in the Spin-Off. If the Company elects to
include Technologies in the Spin-Off, the Company believes that it would be
required to contribute substantial additional resources to allow
Technologies the liquidity necessary to sustain and grow both the Fairchild
Technologies' operating divisions.
In connection with the adoption of such plan, the Company will take an
after-tax reserve of approximately $22 million in discontinued operations
in the third fiscal quarter ending March 29, 1998, of which $14 million
(net of income tax benefit of $4 million) relates to an estimated loss on
the disposal of certain assets of Technologies, and $8 million relates to a
provision for expected operating losses over the next twelve months at
Technologies. While the Company believes that $22 million is a sufficient
charge for the expected losses in connection with the disposition of
Technologies, there can be no assurance that the reserve is adequate.
In order to focus its operations on the aerospace industry, the
Company is considering distributing (the "Spin-Off") to its shareholders
all of the stock of a subsidiary to be formed ("Spin-Co"), which may own
substantially all of the Company's non-aerospace assets. Although the
Company's ability to effect the Spin-Off is uncertain, the Company may
effect a spin-off of certain non-aerospace assets as soon as it is
reasonably practicable following receipt of a solvency opinion relating to
Spin-Co and all necessary governmental and third party approvals. In order
to effect the Spin-Off, approval is required from the board of directors of
the Company, however, shareholder approval is not required. The composition
of the assets and liabilities to be included in Spin-Co, and accordingly
the ability of the Company to consummate the Spin-Off, is contingent, among
other things, on obtaining consents and waivers under the Company's New
Credit Facility. In addition, the Company may encounter unexpected delays
in effecting the Spin-Off, and the Company can make no assurance as to the
timing thereof. In addition, prior to the consummation of the Spin-Off, the
Company may sell, restructure or otherwise change the assets and
liabilities that will be in Spin-Co, or for other reasons elect not to
consummate the Spin-Off. Consequently, there can be no assurance that the
Spin-Off will occur.
In connection with the possible Spin-Off, it is anticipated that the
Company will enter into an indemnification agreement pursuant to which Spin-
Co will assume and be solely responsible for all known and unknown past,
present and future claims and liabilities of any nature relating to the
pension matter described under "Legal Proceedings"; certain environmental
liabilities currently recorded as $7.5 million, but for which it is
reasonably possible the total expense could be $12.3 million on an
undiscounted basis; certain retiree medical cost and liabilities related to
discontinued operations for which the Company has accrued approximately
$31.3 million as of December 28, 1997 (see Note 11 to the Company's
Consolidated Financial Statements); and certain tax liabilities. In
addition, the Spin-Co would also be responsible for all liabilities
relating to the Technologies business and an allocation of corporate
expenses. Responsibility for such liabilities would require significant
commitments.
Should the Spin-Off, as presently contemplated, occur prior to June of
1999, the Spin-Off will be a taxable transaction to shareholders of the
Company and could result in a material tax liability to the Company and its
shareholders. The amount of the tax to the Company and its shareholders is
uncertain, and if the tax is material to the Company, the Company may elect
not to consummate the Spin-Off. Because circumstances may change and
because provisions of the Internal Revenue Code of 1986, as amended, may be
further amended from time to time, the Company may, depending on various
factors, restructure or delay the timing of the Spin-Off to minimize the
tax consequences thereof to the Company and its shareholders.
With the year 2000 approaching, the Company is preparing all of its
computer systems to be Year 2000 compliant. Substantially all of the
systems within the Aerospace Fasteners segment are currently Year 2000
compliant. The Company expects to replace and upgrade some systems, which
are not Year 2000 compliant, within the Aerospace Distribution segment and
at Fairchild Technologies. The Company expects all of its systems will be
Year 2000 compliant on a timely basis. However, there can be no assurance
that the systems of other companies, on which the Company's systems rely,
will also be timely converted. Management is currently evaluating the cost
of ensuring that all of its systems are Year 2000 compliant.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, FASB issued two pronouncements, Statement of Financial
Accounting Standards No. 130 ("SFAS 130") "Reporting Comprehensive Income",
and Statement of Financial Accounting Standards No. 131 ("SFAS 131")
"Disclosures about Segments of an Enterprise and Related Information".
SFAS 130 establishes standards for reporting and display of comprehensive
income and its components in the financial statements. SFAS 131 supersedes
Statement of Financial Accounting Standards No. 14 "Financial Reporting for
Segments of a Business Enterprise" and requires that a public company
report certain information about its operating segments in annual and
interim financial reports. The Company will adopt SFAS 130 and SFAS 131 in
Fiscal 1999.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Third Amended and Restated Credit Agreement dated as of
December 19, 1997.
10.2 Amendment No. 2 dated as of December 23, 1997, to the
Interest Rate Hedge Agreement between
Registrant and Citibank, N.A. dated as of August 19,
1997.
* 27 Financial Data Schedules.
99.1 Financial statements, related notes thereto, including
exhibits, of Banner Aerospace, Inc. for the nine
months ended December 31, 1997 (incorporated by
reference to the Banner Aerospace Inc. Form 10-Q
for the nine months ended December 31, 1997).
(b) Reports on Form 8-K:
On December 8, 1997, the Company filed a Form 8-K to report on
Item 5 and Item 7. The Company filed Shared Technologies Fairchild Inc.
financial statements for each of the three years ended December 31, 1996,
and for the quarter ended September 30, 1997. Additionally, the Company
filed Nacanco Paketleme ("Nacanco") financial statements for the years
ended December 31, 1995 and 1996. On December 15, 1997, the Company
amended the aforementioned Form 8-K to include consent of Rothstein, Kass &
Co, P.C. as related to the STFI financial statements, and to include an
unaudited income statement for the year ended December 31, 1994 for
Nacanco.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to the signed on
its behalf by the undersigned hereunto duly authorized.
For THE FAIRCHILD CORPORATION
(Registrant) and as its Chief
Financial Officer:
By: Colin M. Cohen
Senior Vice President and
Chief Financial Officer
Date: April 3, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-28-1997
<CASH> 38,907
<SECURITIES> 8,487
<RECEIVABLES> 168,887
<ALLOWANCES> 7,892
<INVENTORY> 361,966
<CURRENT-ASSETS> 651,392
<PP&E> 257,844
<DEPRECIATION> 131,646
<TOTAL-ASSETS> 1,122,736
<CURRENT-LIABILITIES> 256,066
<BONDS> 371,610
0
0
<COMMON> 2,592
<OTHER-SE> 303,337
<TOTAL-LIABILITY-AND-EQUITY> 1,122,736
<SALES> 402,978
<TOTAL-REVENUES> 407,582
<CGS> 299,827
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<OTHER-EXPENSES> 0
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<INCOME-TAX> (3,121)
<INCOME-CONTINUING> (3,376)
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