-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uv95jVhRp2fAMdx8SkrO/lLOZlvOyTAamFROIK8B0f4dUrfKt9apaaEtJpVSrWNX 8BATYvao88Pgs8gw3N4U8w== 0000898430-97-004283.txt : 19971015 0000898430-97-004283.hdr.sgml : 19971015 ACCESSION NUMBER: 0000898430-97-004283 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19971014 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHITTAKER CORP CENTRAL INDEX KEY: 0000106945 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 954033076 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-05407 FILM NUMBER: 97694579 BUSINESS ADDRESS: STREET 1: 1955 NORTH SURVEYOR AVENUE CITY: SIMI VALLEY STATE: CA ZIP: 93063-3388 BUSINESS PHONE: 8055265700 MAIL ADDRESS: STREET 1: 1955 NORTH SURVEYOR AVENUE CITY: SIMI VALLEY STATE: CA ZIP: 93063-3388 10-Q/A 1 FORM 10-Q/A QUARTERLY REPORT FOR 7-31-97 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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 JULY 31, 1997 COMMISSION FILE NUMBER 0-20609 ---------------- WHITTAKER CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4033076 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1955 N. SURVEYOR AVENUE 93063 SIMI VALLEY, CALIFORNIA (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(805) 526-5700 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 11,149,473 shares, par value $.01 per share, as of July 31, 1997. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (AS AMENDED ON OCTOBER 14, 1997 TO REVISE NOTE 8) WHITTAKER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS ($ IN 000, EXCEPT FOR PER SHARE AMOUNTS)
FOR THE THREE FOR THE NINE MONTHS MONTHS ENDED JULY 31, ENDED JULY 31, ----------------- ------------------ 1997 1996 1997 1996 -------- ------- -------- -------- Sales................................... $ 48,596 $62,162 $143,383 $154,187 Costs and expenses Cost of sales......................... 37,482 36,824 97,628 89,208 Engineering and development........... 3,629 6,879 12,259 13,856 Selling, general and administrative... 21,328 24,025 63,554 51,040 Goodwill and other intangibles impairment charge.................... 8,107 -- 30,175 -- Acquired in-process research and development.......................... -- -- -- 11,700 Restructuring costs................... -- 866 5,268 1,406 -------- ------- -------- -------- Operating Loss.......................... (21,950) (6,432) (65,501) (13,023) Interest expense...................... 5,473 3,374 13,849 7,060 Interest income....................... (106) (479) (369) (6,101) Other (income) expense................ (219) 296 643 342 -------- ------- -------- -------- Loss before benefit for taxes........... (27,098) (9,623) (79,624) (14,324) Benefit for taxes....................... -- (3,677) -- (5,378) Net loss................................ $(27,098) $(5,946) $(79,624) $ (8,946) ======== ======= ======== ======== Average common and common equivalent shares outstanding (000)............... 11,149 11,029 11,136 9,704 ======== ======= ======== ======== Loss per share.......................... $ (2.43) $ (0.54) $ (7.15) $ (0.92) ======== ======= ======== ========
Unaudited See Notes to Consolidated Condensed Financial Statements 2 WHITTAKER CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS ($ IN 000)
UNAUDITED AT JULY 31, AT OCTOBER 31, 1997 1996 ----------- -------------- ASSETS ------ Current Assets Cash................................................. $ 4,628 $ 1,566 Receivables.......................................... 50,427 74,258 Inventories.......................................... 43,271 46,087 Other current assets................................. 2,380 2,319 Income taxes recoverable............................. 846 5,443 Deferred income taxes................................ 11,833 17,928 -------- -------- Total Current Assets................................. 113,385 147,601 -------- -------- Property and equipment, at cost...................... 59,634 89,787 Less accumulated depreciation and amortization....... (39,553) (46,421) -------- -------- Net Property and Equipment........................... 20,081 43,366 -------- -------- Other Assets Goodwill, net of amortization........................ 69,482 95,003 Other intangible assets, net of amortization......... 31,392 45,422 Notes and other noncurrent receivables............... 1,739 2,898 Other noncurrent assets.............................. 11,373 14,065 Net assets held for sale or development.............. 32,391 31,129 -------- -------- Total Other Assets............................... 146,377 188,517 -------- -------- Total Assets..................................... $279,843 $379,484 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities Current maturities of long-term debt................. $147,049 $161,482 Accounts payable..................................... 13,279 13,830 Accrued liabilities.................................. 37,186 38,020 -------- -------- Total Current Liabilities............................ 197,514 213,332 -------- -------- Other Liabilities Long-term debt....................................... 246 453 Other noncurrent liabilities......................... 11,567 12,019 Deferred income taxes................................ 18,286 22,544 -------- -------- Total Other Liabilities.............................. 30,099 35,016 -------- -------- Stockholders' Equity Capital stock Preferred stock.................................... 1 1 Common Stock....................................... 111 110 Additional paid-in capital........................... 71,036 70,321 Retained earnings (deficit).......................... (18,918) 60,704 -------- -------- Total Stockholders' Equity....................... 52,230 131,136 -------- -------- Total Liabilities and Stockholders' Equity....... $279,843 $379,484 ======== ========
See Notes to Consolidated Condensed Financial Statements 3 WHITTAKER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ($ IN 000)
FOR THE NINE MONTHS ENDED JULY 31, ------------------ 1997 1996 -------- -------- OPERATING ACTIVITIES Net loss.................................................. $(79,624) $ (8,946) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization........................... 17,395 12,014 Goodwill and other intangibles impairment charge........ 30,175 -- Net periodic pension expense (income)................... 441 (154) Acquired in-process research and development............ -- 11,700 Decrease (increase) in income taxes recoverable......... 4,597 (6,253) Change in deferred taxes................................ 1,837 (4,831) Changes in operating assets and liabilities: Decrease in receivables................................. 23,551 8,830 Decrease (increase) in inventories and other current assets................................................. 2,755 (6,105) Decrease in accounts payable and other liabilities...... (1,385) (7,637) -------- -------- Net cash used by operating activities..................... (258) (1,382) -------- -------- INVESTING ACTIVITIES Sale of property, plant and equipment..................... 19,307 -- Purchase of property, plant and equipment................. (3,476) (3,428) Purchased business........................................ -- (69,578) Net decrease in notes receivable.......................... 1,439 1,122 Increase in assets held for sale or development........... (1,262) (3,254) Other items, net.......................................... 541 1,119 -------- -------- Net cash provided (used) by investing activities.......... 16,549 (74,019) -------- -------- FINANCING ACTIVITIES Borrowings related to new credit agreement................ -- 88,250 Payment of term debt and other decreases in debt, net..... (14,640) (207) Deferred debt costs....................................... 695 (3,448) Other items, net.......................................... 716 142 -------- -------- Net cash provided (used) by financing activities.......... (13,229) 84,737 -------- -------- Net increase in cash...................................... 3,062 9,336 Cash at beginning of year................................. 1,566 161 -------- -------- Cash at end of period..................................... $ 4,628 $ 9,497 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the year for: Interest.............................................. $ 12,549 $ 6,687 ======== ======== Income taxes.......................................... $ 316 $ 214 ======== ========
Unaudited See Notes to Consolidated Condensed Financial Statements 4 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated condensed financial statements of Whittaker Corporation and its subsidiaries ("Whittaker" or the "Company") have been prepared in conformity with generally accepted accounting principles, consistent in all material respects with those applied in the Annual Report on Form 10-K/A for the year ended October 31, 1996. The interim financial information is unaudited, but reflects all adjustments which are of a normal recurring nature and, in the opinion of management, necessary to provide a fair statement of the results for the interim periods presented. The preparation of financial statements in conformity with generally accepted accounting principles may require management to make certain estimates and assumptions that could affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions include, among other things, future costs to complete long-term contracts, valuation of slow moving or obsolete inventories and amounts of estimated liabilities for contingent losses and future costs of litigation. Actual costs could differ from these estimates. The interim financial statements should be read in conjunction with the financial statements and related notes in the Company's Annual Report on Form 10-K/A for the year ended October 31, 1996. The results of operations for interim periods are not necessarily indicative of the results of operations for the full year. Primary earnings per share are computed based on the weighted average number of common and common equivalent shares outstanding except in those periods where the inclusion of average common equivalent shares would be antidilutive. Common stock equivalents include Series D Participating Convertible Preferred Stock ("Series D Preferred Stock") on an if converted basis, and dilutive employee stock options calculated using the treasury stock method. Fully diluted earnings per share include the additional potential dilutive effects of employee stock options under the treasury stock method except in periods where the inclusion of such additional shares would be antidilutive. The additional shares outstanding, assuming the conversion of the convertible debt, are included in all periods where the effect is dilutive. Fully diluted earnings per share are not presented because the calculations result in dilution of less than 3%. NOTE 2. ACQUISITIONS On April 10, 1996, the Company acquired all of the capital stock of Xyplex, Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon Company ("Raytheon"). Xyplex is a producer of high-speed internetworking equipment, terminal servers and shared media products for business local area networks. Xyplex also provides remote access products that interconnect with phone companies' wide area networks. The purchase price was $67.5 million in cash, subject to certain adjustments, and $50.0 million in the form of 1,974,333 newly issued shares of the Company's common stock. Other direct costs associated with the acquisition were approximately $1.4 million. The cash paid to Raytheon was obtained from the Company's existing bank credit agreement which was increased on April 10, 1996. The Xyplex acquisition was accounted for as a purchase and the balance sheet of Xyplex was combined with the Company's balance sheet as of April 30, 1996. The transaction resulted in the acquisition of intangible assets valued at $39.2 million which were being amortized on a straight-line basis over periods ranging from 5 to 15 years and goodwill of $62.8 million which was being amortized on a straight-line basis over 20 years. During the third quarter of 1997, the Company reduced the amortization periods for the goodwill and certain other intangible assets from 20 and 15 years, respectively, to 7 years (see Note 8). Acquired in-process research and development valued at $11.7 million was expensed at the acquisition date. The Company also assumed accrued liabilities of $16.6 million at the acquisition date. Prior to closing, Xyplex forgave the intercompany receivable due from Raytheon. Based on the Company's current projections, the undiscounted future cash flows from the Xyplex operation appear sufficient to recover the current carrying value of the intangible assets and goodwill. The Company intends to continue to evaluate the performance and cash flow projections of Xyplex as 5 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) well as its technological positioning in the enterprise edge market. There can be no assurance that such evaluations will not result in the write-off or acceleration of the amortization of these intangible assets and goodwill in future periods. The accompanying consolidated financial statements reflect the operating results of Xyplex since the effective date of the acquisition. The unaudited pro forma results of operations for the nine months ended July 31, 1996, assuming the consummation of the purchase as of November 1, 1995, are summarized below. The writeoff of acquired in-process research and development of $11.7 million is not reflected in these results (dollars in thousands except per share amounts):
FOR THE NINE MONTHS ENDED JULY 31, 1996 ------------------- Net sales............................................. $209,179 Net loss.............................................. $ (7,449) Loss per share........................................ $ (0.64)
NOTE 3. INVENTORIES Inventories consisted of the following:
JULY 31, OCTOBER 31, 1997 1996 ------- ----------- ($ IN 000) Parts and materials.................................. $25,195 $22,482 Work in process...................................... 16,494 14,162 Finished goods....................................... 3,086 8,349 Costs relating to long-term contracts................ 202 1,289 Unliquidated progress billings....................... (1,706) (195) ------- ------- $43,271 $46,087 ======= =======
NOTE 4. COMMITMENTS AND CONTINGENCIES In certain years, after evaluating the availability and cost of insurance, the Company did not purchase insurance for certain risks, including workers' compensation and product liability. Consequently, the Company is without insurance for various risks, including product liability for certain products it previously manufactured. The Company currently has workers' compensation insurance and product liability insurance for products it currently manufactures. The Company's insurance carriers have taken the position that in certain cases the Company is uninsured for environmental matters, a position that the Company disputes in certain instances. As a result primarily of the activities of its discontinued operations, the Company is a potentially responsible party in a number of actions filed under the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted to address public health and environmental concerns arising with respect to the past treatment and disposal of hazardous substances. The Company is also a potentially responsible party in a number of other actions brought under state laws patterned after CERCLA. In nearly all of these matters, the Company contributed a small amount (generally less than 1%) of the total treated or disposed of waste. In addition to the CERCLA and similar actions described above, the Company also, from time to time, conducts or participates in remedial investigations and cleanup activities at facilities currently or formerly occupied by its operating units. There are also various other claims and suits pending against the Company. 6 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) At July 31, 1997, the Company had provided for its aggregate liability related to various claims, including uninsured risks and potential claims in connection with the environmental matters noted above but excluding the environmental remediation activities related to its property located in the City of Santa Clarita, California. The amounts provided on the Company's books for contingencies, including environmental matters, are recorded at gross amounts. Because of the uncertainty with respect to the amount of probable insurance recoveries, these potential insurance recoveries are not taken into account as a reduction of those amounts provided unless an insurance carrier has agreed to such coverage. The Company has made cash expenditures of approximately $2.4 million for these environmental matters during the nine months ended July 31, 1997. The Company does not anticipate that these matters will have a material adverse effect on the Company's financial position, or on its ability to meet its working capital and capital expenditure needs. Although the Company has recorded estimated liabilities for contingent losses, including uninsured risks and claims in connection with environmental matters, in accordance with generally accepted accounting principles, the absence of or denial of various insurance coverages and the filing of future environmental claims which are unknown to the Company at this time represent a potential exposure for the Company, and the results of operations of the Company in future periods could be adversely affected if uninsured losses in excess of amounts recorded were to be incurred. NOTE 5. LONG-TERM DEBT On April 10, 1996, the Company increased the amount of its bank credit facility to $170.0 million. At July 31, 1997, the credit facility consisted of an $85.0 million revolving credit facility that expires in April 2001 of which the Company was permitted to utilize $83.0 million, and a $57.2 million term loan payable as noted below. The interest rate on loans outstanding under the credit agreement is equal to the agent bank's prime rate plus 3.5% and interest is payable monthly. The Company is obligated to pay letter of credit fees which range between 4.125% per annum and 4.625% per annum on the aggregate amount of outstanding letters of credit and commitment fees on the unused amount of the revolving credit facility. Additional borrowings under the credit facility will be used to fund future working capital and other corporate requirements. At July 31, 1997, the Company had $8.3 million of letters of credit outstanding and unused and available credit of $0.2 million under its revolving credit facility. On August 15, 1997, the Company reduced the letters of credit outstanding under its revolving credit facility to $3.1 million. The Company's obligations under the credit agreement are secured by a pledge of shares of stock of subsidiaries of the Company, accounts receivable, inventory, equipment, intellectual property and other assets of the Company and its subsidiaries. The agreement includes four financial ratio covenants with respect to the Company's financial leverage, cash flow, and net worth. At July 31, 1997, the Company was not in compliance with any of the financial ratio covenants. The Company has obtained a waiver of the defaults up to, but not including December 31, 1997. The waiver dated as of July 31, 1997 requires the Company to make, in addition to previously scheduled quarterly principal payments, additional principal payments on the term loan by September 30, 1997, in an aggregate amount of not less than $20 million and to pay a fee on November 3, 1997 equal to the greater of 1.5% of the total credit agreement commitment on October 31, 1997 or $750,000. In addition, the waiver permits the Company to retain 50 percent of the net cash proceeds from certain asset sales which, prior to the waiver, would have been applied in their entirety to repay the term loan. There can be no assurance that in future periods the Company will be in compliance with any of the financial ratio covenants contained in its credit agreement, or that, after expiration of the current waiver on December 31, 1997, additional waivers of the financial covenants will be obtained. There can be no assurance that any future waivers would contain terms which would be as favorable to the Company as, or would materially differ from, waivers granted in the past. Consequently, bank debt in the amount of $119.3 million, which otherwise would have been classified as noncurrent, has been classified as current. Acceleration of the debt under the credit agreement by the bank lending group upon the Company's failure, after December 31, 1997, to comply 7 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) with any of the financial ratio covenants noted above would be an event of default under the $15 million 7% convertible subordinated note issued to Hughes Electronics Corporation. Because of this possible cross default, the entire $15 million principal balance of the 7% convertible subordinated note has been classified as current debt. Under the Company's 7% convertible subordinated note, the Company may not pay or declare cash dividends or redeem shares of the Company if the Company's tangible net worth is less than $15 million. As of July 31, 1996, the Company's tangible net worth was less than $15 million and the Company has not paid or declared dividends (including the quarterly dividend for the Series D Preferred Stock) or redeemed shares since that date. However, dividends on the Series D Preferred Stock have been accrued since that date. In order to reduce the risk of higher interest expense under the Company's credit agreement that could result from an increase in the level of market interest rates, the Company in June 1996 purchased an interest rate cap with an initial notional amount of $42.5 million. Under the terms of the interest rate cap, the Company will receive a payment at the end of each quarterly period, as defined in the interest rate cap agreement, if three-month LIBOR at the beginning of the period exceeds 7.5%. The amount of such payment will be the interest for such period on the notional amount of the interest rate cap at the beginning of such period calculated using an interest rate equal to the positive difference, if any, between LIBOR at the beginning of such period and 7.5%. The interest rate cap expires in July 1999. The cost of this interest rate cap is being amortized over its 37-month term. At July 31, 1997, the unamortized cost was $174,000. On February 26, 1997, the Company concluded the sale and leaseback of its Simi Valley facilities. The net proceeds of $17.4 million from the sale were used to prepay term debt under the Company's credit agreement. The initial lease term covers a 15 year period ending February 28, 2012 and calls for rent escalations of 6% every three years beginning with the fourth year. NOTE 6. BUSINESS SEGMENTS The Company develops specialized aerospace and electronics technologies to create products and customer solutions for aircraft, defense, communications and industrial markets. The Company operates in two business segments: Aerospace, which designs, manufactures, and distributes a wide variety of fluid control devices and fire detection systems, as well as defense electronics products and systems, and Communications, which designs, develops, and markets a comprehensive line of networking products and services. Operating profit (loss) is total revenue less operating expenses. General corporate expenses have not been allocated to the business segments and are shown as a separate expense element of operating profit (loss) to reconcile to consolidated operating profit (loss). The Communications segment 1997 three months and nine months operating results include a cumulative adjustment of $8.1 million related to the reduction of the amortization lives of the goodwill and certain other intangible assets recorded in connection with the 1996 acquisition of Xyplex, Inc. (see Note 8). The nine month 1997 Communications segment operating results also include an impairment charge of $22.1 million related to the goodwill and other intangibles recorded in connection with the 1995 acquisition of Hughes LAN Systems, Inc. (see Note 8). Communications segment operating results for the first nine months of 1997 include restructuring costs of $5.3 million (see Note 7). Inventory writedowns in connection with the restructuring efforts and asset writedowns and other write-offs also negatively impacted the Communications segment 1997 three months and nine months operating results by $6.3 million and $9.0 million, respectively. The Aerospace segment 1997 operating results for the three months and nine months include $0.8 million and $2.8 million, respectively, for one-time charges in connection with the move of the Concord, California operation to Simi Valley, California and other inventory write-offs. 8 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Information about the Company's operations by business segment for the periods ended July 31, 1997 and 1996 follows ($ in thousands):
FOR THE THREE FOR THE NINE MONTHS ENDED MONTHS ENDED JULY JULY 31, 31, ----------------- ------------------ 1997 1996 1997 1996 -------- ------- -------- -------- SALES: Aerospace............................... $ 26,243 $30,550 $ 75,700 $ 93,056 Communications.......................... 22,353 31,612 67,683 61,131 -------- ------- -------- -------- $ 48,596 $62,162 $143,383 $154,187 ======== ======= ======== ======== OPERATING PROFIT (LOSS): Aerospace............................... $ 969 $ 4,885 $ 6,678 $ 17,139 Communications.......................... (20,377) (8,292) (64,024) (23,093) Corporate and Other..................... (2,542) (3,025) (8,155) (7,069) -------- ------- -------- -------- $(21,950) $(6,432) $(65,501) $(13,023) ======== ======= ======== ========
NOTE 7. RESTRUCTURING COSTS During the first nine months of 1997, the Company's Communications segment recognized restructuring costs aggregating $5.3 million. This charge was taken to cover the costs of closing its Santa Clara, California facility and integrating that operation into its Littleton, Massachusetts facility. These costs include severance payments to approximately 75 employees, the write-down of idle fixed assets to net realizable value and other costs associated with the closedown of the Santa Clara facility. The Enterprise Hub product line formerly sold and supported from the Santa Clara facility will be sold through Xyplex Networks sales channels and will continue to be supported from the Littleton facility. During the first nine months of 1997, charges made against the restructuring reserve included severance payments of $2.2 million, fixed asset writedowns of $1.5 million, site closing costs of $0.6 million and other costs of $1.0 million. NOTE 8. IMPAIRMENT CHARGE In April 1995, the Company acquired all of the stock of Hughes LAN Systems, Inc. The subsidiary was renamed Whittaker Communications, Inc. ("WCI"). Goodwill and intangible assets were recorded at the date of acquisition to recognize the fact that the acquisition of the Enterprise Hub product line and systems integration business was a key early step in the build-up and market positioning of the Company's communications business and the second phase of its transition from sole dependence on its aerospace and defense business. During 1996, revenue from these product lines declined and operating losses increased due to delays of key product enhancements, increased competition and key employee attrition. During the first quarter of 1997, in an effort to restructure the communications segment and reverse the continuing decline in revenue and the continuing increase in operating losses from the Enterprise Hub products and system integration business, the Company decided to close the Santa Clara operation of WCI and integrate that operation into the operation of Xyplex, Inc., which the Company acquired from Raytheon Company in April, 1996. Nevertheless, revenues continued to decline to de minimus levels and operating losses continued to be incurred. In consideration of this continued deterioration the Company determined that the goodwill and other intangibles previously recorded had no remaining value and therefore recognized a goodwill and other intangible asset impairment charge of $22.1 million in April 1997. 9 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In connection with the April 1996 acquisition of Xyplex, Inc., the Company acquired goodwill and other intangible assets of $62.8 million and $39.2 million, respectively. These assets were being amortized, on a straight-line basis, over periods of 20 years in the case of goodwill and five to 15 years in the case of other intangible assets. During the third quarter of 1997, the Company reduced the amortization periods for goodwill and certain other intangible assets from 20 and 15 years, respectively, to seven years. This adjustment resulted in an $8.1 million goodwill and other intangible asset impairment charge which represents the increased amortization from the date of acquisition to the beginning of the third quarter of 1997. Included in the 1997 third quarter and nine-month operating results is additional amortization expense of $1.8 million representing the effects of the change subsequent to the second quarter of 1997. The Company intends to continue to evaluate the performance and cash flow projections of Xyplex as well as the technological positioning of Xyplex in the enterprise edge market. There can be no assurance that such evaluations will not result in additional write-offs of goodwill and other intangibles in future periods. Such evaluations are based on the continued operation of Xyplex. The Company is considering, among other strategic options, the disposition of Xyplex. It is likely that such a sale would result in the recognition of a loss. NOTE 9. SUBSEQUENT EVENT On September 4, 1997, the Company entered into an agreement, subject to certain conditions and approvals, to sell the assets of its defense electronics unit to Condor Systems, Inc. The Company intends to report the operating results and net assets of this unit as a discontinued operation in the fourth quarter of 1997. Had the agreement to sell this unit been reached in the third quarter, the sales and operating loss of the continuing operations of the Company would have been $45.0 million and $20.2 million, respectively for the three months ended July 31, 1997. For the nine months ended July 31, 1997, sales and operating loss from continuing operations would have been $132.0 million and $61.1 million, respectively. Sales from continuing operations for the three months and nine months ended July 31, 1996 would have been $55.6 million and $132.5 million, respectively and the operating loss from continuing operations would have been $4.1 and $8.6 million, respectively. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (AS AMENDED ON OCTOBER 14, 1997 TO REVISE RESULTS OF OPERATIONS--COMPARISON OF NINE MONTHS ENDED JULY 31, 1997 AND 1996--SELLING, GENERAL AND ADMINISTRATIVE) RECENT DEVELOPMENTS The Company has engaged financial advisors to assist the Company in its exploration of strategic options, including the disposition of Xyplex and any of its other business units and assets. The Company has not received any offers of purchase other than as described in Note 9, above. However, discussions are continuing with other potential acquirers and the Company cannot predict if additional dispositions will occur or the amount of cash such dispositions would generate. Under the terms of the Company's credit agreement, a portion of the net proceeds of such dispositions are required to be applied to the prepayment of the Company's term loan. In addition, strategic options being considered may include the acquisition of the Company by purchase or merger. RESULTS OF OPERATIONS Comparison of Three Months Ended July 31, 1997 and 1996 Sales. The Company's third quarter 1997 sales of $48.6 million decreased by $13.6 million (21.8%) over third quarter sales in the prior fiscal year. Sales generated by the Company's Communications segment decreased by $9.3 million, primarily as a result of lower sales of Enterprise Hub related products and lower sales of network access and internetworking products resulting from the integration of a new sales force. The Company's Aerospace segment sales for the third quarter of fiscal 1997 were down $4.3 million (14.1%) from the same period in 1996, because of reduced sales of defense electronics products, reduced sales from contracts qualifying, under the Company's current policy, for revenue recognition using the percentage of completion method, and reduced sales of fire and overheat detectors resulting from production inefficiencies associated with the move of the Concord, California operation to Simi Valley, California. These reductions were partially offset by increased sales of OEM commercial valves. Gross Margin. The Company's gross margin for the third quarter of 1997 as a percentage of sales was 22.9%, compared with 40.8% for the third quarter of 1996. The third quarter 1997 gross margin consists of Communications segment gross margin of $5.2 million (23.2% of sales), and Aerospace segment gross margin of $5.9 million (22.6% of sales). Communications segment gross margin as a percentage of sales decreased from 45.8% in the third quarter of 1996 due to inventory write-offs and reserves for estimated future contract costs in excess of anticipated revenues recorded in the third quarter of 1997. Aerospace segment gross margin as a percentage of sales decreased from 35.5% in the third quarter of 1996 to 22.6% in the third quarter of 1997 primarily reflecting cost growth in certain defense electronics programs, lower margins from fluid and pneumatic controls resulting from reduced sales levels, production inefficiencies in the fire and overheat detector product line associated with the move of the Concord, California operation to Simi Valley, California and inventory and loss job reserves established during the third quarter of 1997. Engineering and Development. Engineering and development expenses for the third quarter of 1997 decreased from the third quarter of 1996. The third quarter 1997 engineering and development expenses consisted of Communications segment expenses of $3.4 million (15.2% of sales) and Aerospace segment expenses of $0.2 million (0.9% of sales). The third quarter 1997 Communications segment decrease in engineering and development expenses reflected reduced headcount at Xyplex Networks and a reduction in spending on Enterprise Hub related products. To maintain its competitive market position in the Communications segment, the Company expects to continue to invest a significant amount of its resources in the development of new Communications products and product enhancements. However, the Company anticipates that engineering and development expenditures by its Communications segment in 1997 will, as a percentage of sales, be less than 1996 levels. Aerospace segment engineering and development expenses for the third quarter decreased by $0.2 million from 1996 to 1997. 11 Selling, General and Administrative. Selling, general and administrative expenses (SG&A) for the third quarter of 1997 decreased by $2.7 million from the third quarter of 1996, from $24.0 million in 1996 to $21.3 million in 1997. Communications segment SG&A expenses for the third quarter decreased by $1.4 million from 1996 to 1997 due primarily to a reduction in headcount at Xyplex Networks and the restructuring and move of its Santa Clara, California operations to its Littleton, Massachusetts facility. Partially offsetting these reductions were increased amortization expense related to goodwill and other intangibles and costs associated with the Company's new system integration business. Communications segment SG&A expenses for the third quarter of 1997 were $14.1 million (62.9% of sales), which included amortization expense of $4.0 million related to goodwill and intangible assets, compared with SG&A expenses of $15.5 million (48.9% of sales), which included amortization expense of $2.6 million related to goodwill and intangible assets, for the third quarter of 1996. Aerospace segment SG&A expenses were $4.7 million (18.0% of sales) for the third quarter of 1997 compared to $5.5 million (18.2% of sales) for the same period in 1996, reflecting primarily reduced management incentive costs and headcount. In connection with the April 1996 acquisition of Xyplex, Inc., the Company acquired goodwill and other intangible assets of $62.8 million and $39.2 million, respectively. These assets were being amortized, on a straight-line basis, over periods of 20 years in the case of goodwill and five to 15 years in the case of other intangible assets. During the third quarter of 1997, the Company reduced the amortization periods for the goodwill and certain other intangible assets from 20 and 15 years, respectively, to seven years. This adjustment resulted in an $8.1 million goodwill and other intangible asset impairment charge which represents the increased amortization from the date of acquisition to the beginning of the third quarter of 1997. Included in the 1997 third quarter operating results is additional amortization expense of $1.8 million which has been included in the amortization expense recorded in the Communications segment SG&A for the third quarter of 1997. Interest Expense. Interest expense increased to $5.5 million for the third quarter of 1997 from $3.4 million for the same period of 1996 primarily as a result of higher interest rates. Other Expense. Other expense, in the third quarter of 1997, decreased by $0.5 million over the same period of 1996 reflecting a gain on the sale of an investment partially offset by the writedown of certain noncurrent assets to their net realizable value and adjustments to loss reserves for environmental and other issues. Income Taxes. In compliance with FASB 109, the Company has established a full valuation allowance against its potential carry forward benefits. The Company will continue to offset income tax benefits with this valuation allowance until such time as its pretax profits would allow for the elimination of this allowance. Comparison of Nine Months Ended July 31, 1997 and 1996 Sales. The Company's sales for the nine months ended July 31, 1997 of $143.4 million decreased by $10.8 million (7.0%) over sales in the same period of the prior fiscal year. Sales generated by the Company's Communications segment increased by $6.6 million, primarily as a result of the acquisition of Xyplex, Inc. partially offset by decreased sales of Enterprise Hub related products reflecting the negative effect associated with the restructuring and move of its Santa Clara, California operations to its Littleton, Massachusetts facility and the Company's increased emphasis on sales of network access products for the enterprise edge market. The Company's Aerospace segment sales for the first nine months of fiscal 1997 were down $17.4 million (18.7%) from the same period in 1996, due to reduced sales of defense electronics products, reduced sales from contracts qualifying, under the Company's current policy, for revenue recognition using the percentage of completion method and reduced sales of certain industrial products. Also negatively impacting the 1997 nine months sales were reductions resulting from production inefficiencies associated with the move of the fire and overheat detector operations from Concord, California to Simi Valley, California. 12 Gross Margin. The Company's gross margin for the first nine months of 1997 as a percentage of sales was 31.9%, compared with 42.1% for the first nine months of 1996. The 1997 gross margin consists of Communications segment gross margin of $23.7 million (35.0% of sales), and Aerospace segment gross margin of $22.1 million (29.1% of sales). Communications segment gross margin as a percentage of sales decreased from 46.3% in the same period of 1996 primarily because of inventory write-downs in connection with both the restructuring and move of operations from Santa Clara to Littleton and lower than anticipated sales levels. Aerospace segment gross margin as a percentage of sales decreased from 39.4% in the first nine months of 1996 to 29.1% in the first nine months of 1997 primarily reflecting production inefficiencies associated with the move of the Concord, California operations to Simi Valley, California, lower sales volume of fluid control devices, inventory write-offs and decreased margins on defense electronic products. Engineering and Development. Engineering and development expenses for the first nine months of 1997 decreased by $1.6 million from the first nine months of 1996. The 1997 engineering and development expenses consist of Communications segment expenses of $11.4 million (16.8% of sales) and Aerospace segment expenses of $0.9 million (1.2% of sales). Communications segment engineering and development expenses decreased by $0.5 million from 1996 to 1997 primarily due to decreased spending for Enterprise Hub related products partially offset by the inclusion of Xyplex engineering and development expenses since its acquisition on April 10, 1996. To maintain its competitive market position in the Communications segment, the Company expects to continue to invest a significant amount of its resources in the development of new Communications products and product enhancements. However, the Company anticipates that engineering and development expenditures by its Communications segment in 1997 will, as a percentage of sales, be less than 1996 levels. Aerospace segment engineering and development expenses decreased by $1.1 million from 1996 to 1997. Selling, General and Administrative. Selling, general and administrative expenses (SG&A) for the first nine months of 1997 increased by $12.5 million from the first nine months of 1996, from 33.1% of sales in 1996 to 44.3% of sales in 1997. Communications segment SG&A expenses increased by $13.9 million from the first nine months of 1996 to the first nine months of 1997 due primarily to the inclusion of Xyplex SG&A expenses since its acquisition on April 10, 1996 and increased amortization expense related to goodwill and other intangibles. Communications segment SG&A expenses for the first nine months of 1997 were $40.9 million (60.4% of sales), which included amortization expense of $9.3 million related to goodwill and intangible assets, compared with SG&A expenses of $27.0 million (44.1% of sales), which included amortization expense of $4.2 million related to goodwill and intangible assets, for the first nine months of 1996. Aerospace segment SG&A expenses were $14.5 million (19.2% of sales) for the first nine months of 1997 compared to $17.0 million (18.3% of sales) for the same period in 1996. In April 1995, the Company acquired all of the stock of Hughes LAN Systems, Inc. The subsidiary was renamed Whittaker Communications, Inc. ("WCI"). Goodwill and intangible assets were recorded at the date of acquisition to recognize the fact that the acquisition of the Enterprise Hub product line and systems integration business was a key early step in the build-up and market positioning of the Company's communications business and the second phase of its transition from sole dependence on its aerospace and defense business. During 1996, revenue from these product lines declined and operating losses increased due to delays of key product enhancements, increased competition and key employee attrition. During the first quarter of 1997, in an effort to restructure the communications segment and reverse the continuing decline in revenue and the continuing increase in operating losses from the Enterprise Hub products and system integration business, the Company decided to close the Santa Clara operation of WCI and integrate that operation into the operation of Xyplex, Inc., which the Company acquired from Raytheon Company in April, 1996. Nevertheless, revenues continued to decline to de minimus levels and operating losses continued to be incurred. In consideration of this continued deterioration the Company determined that the goodwill and other intangibles previously recorded had no remaining value and therefore recognized a goodwill and other intangible asset impairment charge of $22.1 million in April 1997. 13 In connection with the April 1996 acquisition of Xyplex, Inc., the Company acquired goodwill and other intangible assets of $62.8 million and $39.2 million, respectively. These assets were being amortized, on a straight-line basis, over periods of 20 years in the case of goodwill and five to 15 years in the case of other intangible assets. During the third quarter of 1997, the Company reduced the amortization periods for the goodwill and certain other intangible assets from 20 and 15 years, respectively, to seven years. This adjustment resulted in an $8.1 million goodwill and other intangible asset impairment charge which represents the increased amortization from the date of acquisition to the beginning of the third quarter of 1997. Included in the 1997 nine-month operating results is additional amortization expense of $1.8 million which has been included in the amortization expense recorded in the Communications segment SG&A for the nine months of 1997. Restructuring Costs. During the first nine months of 1997, the Communications segment recognized costs and related liabilities of $5.3 million in connection with the integration of its Santa Clara, California operation into its Littleton, Massachusetts facility. The liabilities include $2.2 million for severance payments, $2.1 million for facility closedown costs and $1.0 million for the write-off of other assets and other costs. During the first nine months of 1997, charges made against the restructuring reserve included severance payments of $2.2 million, fixed asset writedowns of $1.5 million, site close costs of $0.6 million and other costs of $1.0 million. Interest Expense. Interest expense increased to $13.8 million for the first nine months of 1997 from $7.1 million for the same period of 1996 primarily as a result of incremental debt related to the acquisition of Xyplex and higher interest rates. Other Expense. Other expense for the first nine months of 1997 increased by $0.3 million over the same period of 1996 reflecting the writedown of assets to net realizable value, loss reserves for environmental and other issues partially offset by a gain on the sale of an investment. Income Taxes. In compliance with FASB 109, the Company has established a full valuation allowance against its potential carry forward benefits. The Company will continue to offset income tax benefits with this valuation allowance until such time as its pretax profits would allow for the elimination of this allowance. Operating Results. In addition to the impairment charges and restructuring costs described above, the Company recognized other write-offs and one-time charges in connection with its overall streamlining and integration efforts. The Communications segment incurred costs of $6.3 million for the writedown of inventories which became excess or obsolete in connection with the restructuring plan. The Aerospace segment incurred costs of $2.0 million for the closing and move of its Concord, California facility to Simi Valley, California. ACQUISITION On April 10, 1996, the Company acquired all of the capital stock of Xyplex, Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon Company ("Raytheon"). Xyplex is a producer of high-speed internetworking equipment, terminal servers and shared media products for business local area networks. Xyplex also provides remote access products that interconnect with phone companies' wide area networks. The purchase price was $67.5 million in cash, subject to certain adjustments, and $50.0 million in the form of 1,974,333 newly issued shares of the Company's common stock. Other direct costs associated with the acquisition were approximately $1.4 million. The cash paid to Raytheon was obtained from an amendment to the Company's existing credit facility entered into on April 10, 1996. The Xyplex acquisition was accounted for as a purchase and the balance sheet of Xyplex was combined with the Company's balance sheet as of April 30, 1996. The transaction resulted in the acquisition of intangible assets valued at $39.2 million which were being amortized on a straight-line basis over periods ranging from five to 15 years, goodwill of $62.8 million which was being amortized on a straight-line basis over 20 years. Acquired in-process research and development valued at $11.7 million was expensed at the acquisition date. The Company also assumed accrued liabilities of $16.6 million at the acquisition date. Prior to closing, Xyplex 14 forgave the intercompany receivable due from Raytheon. During the third quarter of 1997, the Company reduced the amortization periods for the goodwill and certain other intangible assets from 20 and 15 years, respectively, to seven years. This adjustment resulted in an $8.1 million goodwill and other intangible asset impairment charge which represents the increased amortization from the date of acquisition to the beginning of the third quarter of 1997. Included in the 1997 third quarter and nine-months operating results is additional amortization expense of $1.8 million which has been included in the amortization expense recorded in the Communications segment SG&A for the third quarter and nine months of 1997. Based on the Company's current projections, the undiscounted future cash flows from the Xyplex operation appear sufficient to recover the carrying value of the intangible assets and goodwill. The Company intends to continue to evaluate the performance and cash flow projections of Xyplex as well as its technological positioning in the enterprise edge market. There can be no assurances that such evaluations will not result in additional write- offs. Such evaluations are based on the continued operation of Xyplex. The Company is considering, among other strategic options, the disposition of Xyplex. It is likely that such a sale would result in the recognition of a loss. Sales of Xyplex products and services contributed substantial revenues to the Company beginning in the third quarter of 1996, as well as resulting in increased operating expenses. A significant portion of the increase in operating expenses for the nine months ended July 31, 1997 over the corresponding 1996 period was due to the acquisition of Xyplex and the integration of the Whittaker Communications, Inc. ("WCI") and Xyplex operations. FINANCIAL CONDITION AND LIQUIDITY On April 10, 1996, in conjunction with the purchase of Xyplex, the Company amended and increased its bank credit facility and borrowed an additional $76.5 million under such facility. At that time the credit agreement consisted of an $85.0 million revolving credit facility with a five-year term and an $85.0 million term loan repayable in quarterly installments over five years. The cash payment to Raytheon Company for the purchase of Xyplex on April 10, 1996 was $67.3 million. At July 31, 1997, the Company's debt totaled $147.3 million, which consisted of $74.5 million of loans under the revolving credit facility, $57.2 million under the term loan, $15.0 million of convertible subordinated debt, and $0.6 million of other debt. In addition, there were $8.3 million of letters of credit outstanding under the revolving credit facility. The Company was not in compliance with any of the four financial ratio covenants in its bank credit agreement at July 31, 1997. The Company has obtained a waiver of the defaults up to, but not including December 31, 1997. The most recent waiver agreement dated as of July 31, 1997 requires the Company to make, in addition to previously scheduled quarterly principal payments, additional principal payments on the term loan by September 30, 1997 in an aggregate amount of not less than $20 million, and to pay a fee on November 3, 1997 equal to the greater of 1.5% of the total credit agreement commitment on October 31, 1997 or $750,000. In addition, the waiver permits the Company to retain 50 percent of the net cash proceeds from certain asset sales which prior to such waiver would have been applied in their entirety to repay the term loan. There can be no assurance that in future periods, the Company will be in compliance with any of the financial ratio covenants contained in its credit agreement, or that, after expiration of the waiver on December 31, 1997, additional waivers of the financial covenants will be obtained and, if obtained, that any such waivers would contain terms which would be as favorable to the Company as, or would materially differ from, waivers granted in the past. Consequently, bank debt in the amount of $119.3 million, which otherwise would have been classified as noncurrent, has been classified as current. Furthermore, acceleration of the debt under the credit agreement by the bank lending group upon the Company's failure, after December 31, 1997, to comply with any of the financial ratio covenants would be an event of default under the $15 million 7% convertible subordinated note issued by the Company to Hughes Electronics Corporation as partial consideration for its purchase of WCI in 1995. Because of this possible cross-default, the entire $15 million principal balance of the 7% convertible subordinated note has also been classified as current debt. At July 31, 1997, the Company had unused and available credit of $0.2 million under its revolving credit facility. 15 The Company believes that its existing cash and available credit under its revolving credit facility will be adequate to pay the waiver fee on November 3, 1997, and to meet future operating cash needs through the end of the current fiscal year. Thereafter, the Company may need additional financing to meet its operating cash needs. However, there can be no assurance that the Company will be able to obtain such additional financing. Debt as a percent of total capitalization (stockholders' equity plus debt) was 69.8% at July 31, 1997, compared with 55.3% at October 31, 1996. The current ratio at July 31, 1997 was 0.57, compared with 0.69 at October 31, 1996, while working capital was ($84.1) million at July 31, 1997, compared with ($65.7) million at October 31, 1996. Excluding the debt reclassifications discussed above, the current ratio would have been 1.79 and working capital would have been $50.2 million at July 31, 1997 and at October 31, 1996 the current ratio and working capital would have been 2.36 and $85.3 million. Cash flow used by operations for the first nine months of 1997 was $0.3 million, compared to $1.4 million for the same period in 1996. The $1.1 million decrease in cash flow used by operations from 1996 to 1997 was due primarily to the other intangibles impairment charge, decreases in accounts receivable, decreases in income taxes recoverable and decreases in inventories and other current assets substantially offset by the increase in net loss and the write-off of acquired in-process research and development in 1996. Capital expenditures during the first nine months of 1997 were $3.5 million, compared to $3.4 million for the same period of 1996. At July 31, 1997, there were approximately $1.2 million of approved capital expenditures outstanding for the replacement and upgrade of existing plant and equipment at the Company's various facilities. Funds for these and other capital expenditures are expected to be provided from operations and advances under the credit agreement. Capital expenditure amounts are a component of one of the financial ratio covenants contained in the Company's credit agreement. The Company is evaluating the most advantageous means to realize the value of a 996-acre parcel of land which was formerly used by a discontinued technology unit. The land is located in the city of Santa Clarita, California, approximately 35 miles from downtown Los Angeles. In September 1995, the City of Santa Clarita granted entitlements necessary to develop this property as a mixed-use residential, commercial, and light industrial development. The initial term of the entitlements was ten years. In February 1996, the City approved a development agreement which, among other things, extended the ten- year term of the entitlements to over 20 years. Cash expenditures related to the environmental remediation of this property were $1.4 million during the first nine months of 1997. The Company believes that current real estate market conditions are less likely to result in realization of the highest value of the property from a cash sale of the property in its current condition than from either an agreement with a developer to participate in the remediation of the property and the development of the property's infrastructure for sale of parcels to merchant builders or from the Company's remediation and infrastructure development of the property itself. There can be no assurance, however, that such a development agreement will be reached or that the Company will have the financial and development capabilities to develop the property itself. The Company believes that the undiscounted cash flows from the development of this property will be sufficient to recover its carrying value as well as the costs to complete remediation activities. On February 26, 1997, the Company concluded the sale and leaseback of its Simi Valley facilities. The net proceeds of $17.4 million from the sale were used to prepay term debt under the Company's credit agreement. The lease term covers the fifteen year period ending February 28, 2012 and calls for rent escalations of 6% every three years beginning with the fourth year. Statements made herein that are not based on historical fact are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The risk factors that could cause actual results to differ from the forward looking statements include delay in developing new programs and products, inability to qualify for new programs or to develop new products, loss of existing business and inability to attract new business and customers, reduced spending by commercial and defense customers and development of competing products. 16 EXHIBITS TO PART I I(a)Calculation of Earnings (Loss) Per Share. 17 EXHIBIT I(A) WHITTAKER CORPORATION CALCULATION OF EARNINGS (LOSS) PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE NINE MONTHS ENDED JULY 31, ----------------- 1997 1996 -------- ------- PRIMARY EARNINGS (LOSS) PER SHARE EARNINGS (LOSS) Net loss...................................................... $(79,624) $(8,946) Adjustments................................................... -- -- -------- ------- Net loss used in primary earnings per share calculations...... $(79,624) $(8,946) ======== ======= AVERAGE COMMON AND COMMON EQUIVALENT SHARES Weighted average number of common shares outstanding.......... 11,136 9,704 Common equivalent shares: Series D Participating Convertible Preferred Stock.......... -- -- Stock options included under treasury stock method.......... -- -- -------- ------- TOTAL......................................................... 11,136 9,704 ======== ======= Primary Loss Per Share........................................ $ (7.15) $ (0.92) ======== =======
NOTE Loss per share has been computed based on the weighted average number of shares outstanding during the periods. Common equivalent shares have been excluded from the calculations as antidilutive. Common stock equivalents include Series D Participating Convertible Preferred Stock on an if converted basis, and dilutive employee stock options calculated using the treasury stock method. Unaudited 18 WHITTAKER CORPORATION CALCULATION OF EARNINGS (LOSS) PER SHARE--(CONTINUED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR NINE MONTHS ENDED JULY 31, ----------------- 1997 1996 -------- ------- FULLY DILUTED EARNINGS (LOSS) PER SHARE EARNINGS (LOSS) Net loss used in primary earnings per share calculation (above).................................................... $(79,624) $(8,946) Adjustments................................................. -- -- -------- ------- Net loss used in fully diluted earnings per share calculations............................................... $(79,624) $(8,946) ======== ======= AVERAGE SHARES USED TO CALCULATE FULLY DILUTED EARNINGS (LOSS) PER SHARE Average common and common equivalent shares (above)......... 11,136 9,704 Add: Additional stock options included under treasury stock method................................................... -- -- Additional shares assuming conversion of subordinated convertible debt......................................... -- -- -------- ------- TOTAL....................................................... 11,136 9,704 ======== ======= Fully Diluted Loss Per Share................................ $ (7.15) $ (0.92) ======== =======
NOTES Loss per share has been computed based on the weighted average number of common shares outstanding during the periods. Common equivalent shares and the assumed conversion of subordinated convertible debt have been excluded from the calculations as antidilutive. Common stock equivalents include Series D Participating Convertible Preferred Stock on an if converted basis, and dilutive employee stock options calculated using the treasury stock method. Fully diluted earnings per share do not include the additional potential dilutive effect of employee stock options as inclusion of such amounts would be antidilutive. Unaudited 19 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Environmental Matters As a result primarily of the activities of its discontinued operations, the Company is a potentially responsible party in a number of actions filed under the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted to address public health and environmental concerns arising with respect to the past treatment and disposal of hazardous substances. The Company is also a potentially responsible party in a number of other actions brought under state laws patterned after CERCLA. In nearly all of these matters, the Company contributed a small amount (generally less than 1%) of the total treated or disposed of waste. In addition to the CERCLA and similar actions described above, the Company also, from time to time, conducts or participates in remedial investigations and cleanup activities at facilities currently or formerly occupied by its operating units. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. * 10.1 Seventh Amendment and Waiver, dated as of June 29, 1997, among Registrant, NationsBank of Texas, N.A., as Agent, and the financial institutions named therein as Lenders. (Exhibit 10.1 to Form 10-Q for the quarter ended July 31, 1997.) 10.2 Eighth Amendment and Waiver, dated as of July 31, 1997, among Registrant, NationsBank of Texas, N.A., as Agent, and the financial institutions named therein as Lenders. (Exhibit 10.2 to Form 10-Q for the quarter ended July 31, 1997.) 10.3 Asset purchase agreement, dated as of September 4, 1997, by and among Whittaker Corporation, Whittaker Communications Limited, Whittaker Services Corporation and Condor Systems, Inc. (Exhibit 10.3 to Form 10-Q for the quarter ended July 31, 1997.) 11. Statements re computation of per share earnings for the three months ended July 31, 1997 (Exhibit I(a) of Part I to this Form 10-Q/A). 27. Financial Data Schedule. (Exhibit 27 to Form 10-Q for the quarter ended July 31, 1997.)
- -------- * Exhibits followed by a parenthetical reference are incorporated by reference to the documents described therein. (b) Reports on Form 8-K. During the quarter ended July 31, 1997, the Company did not file any reports on Form 8-K. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WHITTAKER CORPORATION By: /s/ John K. Ott ------------------------------- Date: October 14, 1997 John K. Otto Vice President, Chief Financial Officer and Treasurer 21 -----END PRIVACY-ENHANCED MESSAGE-----