-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XHFBHUJMJJibCFAEMYcNng2SqjUiHTMWsKf4YzgThUY4lVzm2JZ5UruPEcialj35 RDI86XwlKeH4gUD3oiXSlw== 0000950123-94-001349.txt : 19940816 0000950123-94-001349.hdr.sgml : 19940816 ACCESSION NUMBER: 0000950123-94-001349 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORAL CORP /NY/ CENTRAL INDEX KEY: 0000060357 STANDARD INDUSTRIAL CLASSIFICATION: 3812 IRS NUMBER: 131718360 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04238 FILM NUMBER: 94544130 BUSINESS ADDRESS: STREET 1: 600 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971105 MAIL ADDRESS: STREET 1: 600 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 10-Q 1 LORAL CORPORATION FORM 10-Q 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994 --------------------------- Commission file number 1-4238 LORAL CORPORATION 600 Third Avenue New York, New York 10016 Telephone: (212) 697-1105 State of incorporation: New York IRS identification number: 13-1718360 --------------------------- The registrant 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 and has been subject to such filing requirements for the past 90 days. As of July 26, 1994, there were 83,717,472 shares of Loral Corporation Common Stock outstanding. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I. FINANCIAL INFORMATION LORAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (Unaudited)
THREE MONTHS ENDED JUNE 30, ----------------------- 1994 1993 ---------- -------- Sales................................................................ $1,344,825 $849,451 Costs and expenses................................................... 1,231,186 779,269 ---------- -------- Operating income..................................................... 113,639 70,182 Interest and investment income....................................... 791 1,328 Interest expense..................................................... 23,699 8,340 ---------- -------- Income before income taxes and equity in net income (loss) of affiliates......................................................... 90,731 63,170 Income taxes......................................................... 34,478 23,373 ---------- -------- Income before equity in net income (loss) of affiliates.............. 56,253 39,797 Equity in net income (loss) of affiliates............................ (1,289) 554 ---------- -------- Net income........................................................... 54,964 40,351 Retained earnings, beginning of period............................... 643,373 460,288 Dividends............................................................ (11,694) (10,331) ---------- -------- Retained earnings, end of period..................................... $ 686,643 $490,308 ========== ======== Weighted average number of common shares outstanding................. 84,737 83,352 ========== ======== Earnings per share (primary)......................................... $ .65 $ .48 ========== ======== Cash dividends per common share...................................... $ .14 $ .125 ========== ========
See notes to condensed consolidated financial statements. 1 3 LORAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) (Unaudited)
JUNE 30, MARCH 31, 1994 1994 ---------- ---------- ASSETS: Current assets: Cash and cash equivalents......................................... $ 196,495 $ 238,498 Contracts in process.............................................. 1,355,030 1,328,338 Deferred income taxes............................................. 89,063 104,063 Other current assets.............................................. 125,131 173,714 ---------- ---------- Total current assets................................................ 1,765,719 1,844,613 ---------- ---------- Property, plant and equipment....................................... 1,947,565 1,926,978 Less, accumulated depreciation and amortization................... 672,344 620,554 ---------- ---------- 1,275,221 1,306,424 ---------- ---------- Cost in excess of net assets acquired, less amortization............ 1,334,010 1,342,872 Investment in affiliates............................................ 161,002 163,479 Deferred income taxes............................................... 32,873 37,873 Prepaid pension cost and other assets............................... 478,021 480,907 ---------- ---------- $5,046,846 $5,176,168 ========== ========== LIABILITIES and SHAREHOLDERS' EQUITY: Current liabilities: Current portion of debt........................................... $ 328 $ 173,928 Accounts payable, trade........................................... 216,762 248,657 Customer advances................................................. 277,650 286,273 Accrued employment costs.......................................... 217,405 201,238 Income taxes...................................................... 86,214 77,815 Other current liabilities......................................... 276,108 302,256 ---------- ---------- Total current liabilities........................................... 1,074,467 1,290,167 ---------- ---------- Postretirement benefits............................................. 633,703 639,266 Other liabilities................................................... 237,350 241,368 Long-term debt...................................................... 1,665,255 1,624,061 Shareholders' equity: Common stock, $.25 par value...................................... 21,129 21,056 Capital surplus................................................... 784,308 773,676 Retained earnings................................................. 686,643 643,373 ---------- ---------- 1,492,080 1,438,105 Less: Treasury stock, at cost........................................ 19,652 19,681 Equity adjustments............................................. 36,357 37,118 ---------- ---------- Total shareholders' equity.......................................... 1,436,071 1,381,306 ---------- ---------- $5,046,846 $5,176,168 ========== ==========
See notes to condensed consolidated financial statements. 2 4 LORAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (Unaudited)
THREE MONTHS ENDED JUNE 30, ----------------------- 1994 1993 --------- --------- Operating activities: Net income......................................................... $ 54,964 $ 40,351 Deferred income taxes.............................................. 20,000 Depreciation and amortization...................................... 67,219 37,839 Equity in net (income) loss of affiliates.......................... 1,289 (554) Changes in assets and liabilities: Contracts in process............................................ (26,692) 964 Other current assets............................................ 52,135 17,324 Other assets.................................................... (349) 3,291 Accounts payable and accrued liabilities........................ (142) (25,413) Income taxes.................................................... 9,587 8,284 Postretirement benefits and other liabilities................... (9,581) (12,078) Other........................................................... (570) (277) --------- --------- Net cash provided by operating activities.......................... 167,860 69,731 --------- --------- Investing activities: Acquisition of businesses.......................................... (6,100) Advances to affiliates............................................. (3,552) (1,087) Capital expenditures, net.......................................... (22,050) (14,177) --------- --------- (25,602) (21,364) --------- --------- Financing activities: Net payments under revolving credit facilities and commercial paper........................................................... (782,317) (60,607) Proceeds from borrowings........................................... 650,000 Payments of debt................................................... (89) (37,398) Dividends paid..................................................... (11,694) (10,331) Proceeds from common stock issuance for stock options and employee benefit plans................................................... 10,196 2,887 Other.............................................................. (50,357) --------- --------- (184,261) (105,449) --------- --------- Net decrease in cash and cash equivalents............................ (42,003) (57,082) Cash and cash equivalents, beginning of period....................... 238,498 116,902 --------- --------- Cash and cash equivalents, end of period............................. $ 196,495 $ 59,820 ========= ========= Supplemental information: Interest paid during the period.................................... $ 16,525 $ 5,897 ========= ========= Income taxes paid during the period................................ $ 4,158 $ 7,451 ========= =========
See notes to condensed consolidated financial statements. 3 5 LORAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules of the Securities and Exchange Commission ("SEC") and, in the opinion of the Company, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of financial position, results of operations and cash flows. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules. The Company believes that the disclosures made are adequate to make the information presented not misleading. The condensed consolidated statement of income for the three months ended June 30, 1994 is not necessarily indicative of the results to be expected for the full year. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes thereto included in the Company's latest annual report. 2. ACCOUNTING CHANGE: Effective April 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS 112"). SFAS 112 requires that the costs of benefits provided to employees after employment but before retirement be recognized in the financial statements on an accrual basis. The adoption of SFAS 112 did not have a material effect on the financial position or results of operations of the Company. 3. ACQUISITIONS: On March 1, 1994, effective January 1, 1994, the Company, through its newly formed wholly owned subsidiary, Loral Federal Systems Company ("LFS"), acquired substantially all the assets and liabilities of the Federal Systems Company, a division of International Business Machines Corporation, for $1,503,500,000 in cash, plus acquisition costs of $8,000,000. This acquisition has been accounted for as a purchase. As such, the condensed consolidated financial statements reflect the results of operations of the acquired entity from the date of acquisition. Had this acquisition occurred on April 1, 1993, the unaudited pro forma sales, net income and earnings per share for the three months ended June 30, 1993 would have been: $1,419,100,000; $37,500,000; and $.45, respectively. The results, which are based on various assumptions, are not necessarily indicative of what would have occurred had the acquisition been consummated as of April 1, 1993. Performance under acquired contracts in process of LFS and prior acquisitions contributed after-tax income of $18,852,000 and $11,215,000, net of after-tax interest cost on debt related to the acquisitions, and incremental amortization of cost in excess of net assets acquired of $16,704,000 and $4,985,000 for the three months ended June 30, 1994 and 1993, respectively. 4 6 LORAL CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. CONTRACTS IN PROCESS: Billings and accumulated costs and profits on long-term contracts, principally U.S. Government, comprise the following:
JUNE 30, MARCH 31, 1994 1994 ----------- ----------- (In thousands) Billed contract receivables............................ $ 430,094 $ 423,894 Unbilled contract receivables.......................... 1,872,257 1,901,156 Inventoried costs...................................... 484,833 557,259 ----------- ----------- 2,787,184 2,882,309 Less, unliquidated progress payments................... (1,432,154) (1,553,971) ----------- ----------- Net contracts in process............................... $ 1,355,030 $ 1,328,338 =========== ===========
5. DEBT: In May 1994, the Company increased its existing shelf registration statement to issue up to $800,000,000 of debt or equity securities. In June 1994, the Company issued $250,000,000 7 3/8% Senior Notes due 2004 and $400,000,000 8 3/8% Senior Debentures due 2024 under the shelf registration statement. These securities are not callable and are not subject to any sinking fund provisions. The proceeds were used to reduce the Company's outstanding commercial paper borrowings. In June 1994, the Company cancelled its 364-day $500,000,000 revolving credit facility. 6. CONTINGENCIES: At acquisition, LFS's contracts in process included a systems integration contract with the Federal Aviation Administration ("FAA") for the modernization of the U.S. air traffic control system. Prior to the acquisition, discussions were held between LFS and FAA officials with respect to modifying certain terms and conditions of the contract. In December 1993, the FAA initiated a comprehensive review of the contract. In June 1994, the FAA (i) reduced the scope of the contract by eliminating certain requirements of the program and (ii) suspended certain other program activities pending completion of their review. The ultimate extent of the contract modifications is not determinable at this time. The final purchase price of LFS is subject to a reduction, up to a specified limit, based upon the outcome of these matters. In the opinion of management, and in light of the potential reduction of the LFS purchase price and reserves provided, the ultimate outcome of this matter will not have a material adverse effect on the financial position or results of operations of the Company. 5 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1994 AND JUNE 30, 1993 Effective January 1, 1994, the Company, through Loral Federal Systems Company ("LFS") acquired substantially all the assets and liabilities of the Federal Systems Company, a division of International Business Machines Corporation. The results of operations of LFS are included from the effective date of acquisition. (See Note 3 to Condensed Consolidated Financial Statements.) Sales for the quarter ended June 30, 1994 increased to $1,344,825,000 from $849,451,000 in the prior year. Net income for the quarter ended June 30, 1994 increased to $54,964,000 or $.65 per share, compared with $40,351,000, or $.48 per share in the prior year. Earnings per share for the quarter ended June 30, 1994 are based on 84,737,000 primary weighted average shares outstanding, compared with 83,352,000 in the prior year. The sales increase was attributable to the results of the acquired LFS business, and higher volume on Multiple Launch Rocket System (MLRS), Army Tactical Missile System (ATACMS) and F/A-18 Forward-Looking Infrared (FLIR) targeting and weapon delivery system; offset by lower volume on AN/BSY-2 combat control system for the U.S. Navy's SSN-21 attack submarine, gyro-optic assemblies for Maverick missiles, Rapid Execution and Combat Targeting (REACT) launch control system and Automated Remote Tracking Station (ARTS). Operating income increased to $113,639,000 from $70,182,000 in the prior year. Operating income as a percentage of sales increased to 8.5% in the quarter ended June 30, 1994 from 8.3% in the prior year, as a result of improved margins due to operating efficiencies, particularly at the Loral Vought Systems business acquired in August 1992; offset by lower margins of the acquired LFS business. Excluding the effect of the acquired LFS business, operating income, as a percentage of sales increased to 10.0% from 8.3%. Net interest expense increased to $22,908,000 from $7,012,000 in the prior year, primarily due to the impact of debt incurred as a result of the LFS acquisition. The Company continues to benefit from an emphasis on cash management procedures. The Company's free cash flow (net cash from operating activities, less net capital expenditures, plus proceeds of stock purchases by employee benefit plans and exercises of stock options) was $156,006,000 and $58,441,000 for the quarters ended June 30, 1994 and 1993, respectively. The Company's effective tax rate increased to 38% in the quarter ended June 30, 1994 from 37% in the prior year due to the Omnibus Budget Reconciliation Act of 1993, which was signed into law on August 10, 1993. Equity in net income (loss) of affiliates was a loss of $1,289,000 for the quarter ended June 30, 1994, compared with income of $554,000 in the prior year, reflecting the Company's share of the development costs of Globalstar, a limited partnership formed in March 1994. FINANCIAL CONDITION The LFS purchase price was initially financed through cash on hand and commercial paper borrowings which were supported by $1,200,000,000 five-year and $500,000,000 364-day revolving credit facilities. As originally planned, in order to fix interest costs and lengthen maturities, in June 1994, the Company issued $250,000,000 7 3/8% Senior Notes due 2004 and $400,000,000 8 3/8% Senior Debentures due 2024. The proceeds were used to reduce the Company's outstanding commercial paper borrowings, including the $173,548,000 which was classified as current portion of debt at March 31, 1994. Additionally, the Company cancelled the 364-day $500,000,000 revolving credit facility. (See Note 5 to Condensed Consolidated Financial Statements.) The Company's current ratio improved to 1.6:1 at June 30, 1994, compared with 1.4:1 at March 31, 1994. The debt (net of cash) to equity ratio improved to 1.02:1 at June 30, 1994 from 1.13:1 at March 31, 1994. 6 8 PART II -- OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On July 26, 1994, at the Company's Annual Meeting of Stockholders, the following proposals were acted on: (1) In an uncontested election four nominees for the Board of Directors were elected to three year terms expiring in 1997, and one nominee was elected to a two year term expiring in 1996. The votes were as follows:
FOR WITHHELD ---------- -------- Charles Lazarus.................................. 68,558,941 286,046 Malvin A. Ruderman............................... 68,571,898 273,089 Bernard L. Schwartz.............................. 68,567,160 277,827 E. Donald Shapiro................................ 68,566,747 278,240 Thomas J. Stanton, Jr. .......................... 68,572,920 272,067
(2) The Incentive Compensation Plan for Senior Executives was approved. The votes were as follows: For.......................................................... 50,798,538 Against...................................................... 11,638,044 Abstentions.................................................. 675,765 Broker non-votes............................................. 5,732,640
(3) The 1994 Stock Option and Incentive Stock Purchase Plan was approved. The votes were as follows: For.......................................................... 48,902,031 Against...................................................... 13,713,412 Abstentions.................................................. 494,081 Broker non-votes............................................. 5,735,463
(4) The selection of Coopers & Lybrand to serve as independent auditors for the fiscal year ending March 31, 1995, was ratified. The votes were as follows: For.......................................................... 66,714,835 Against...................................................... 1,042,513 Abstentions.................................................. 1,087,639
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following exhibits are filed as part of this report: Exhibit 11 Computation of Earnings per Common Share for the three months ended June 30, 1994 and 1993 Exhibit 12 Computation of Ratio of Earnings to Fixed Charges for the three months ended June 30, 1994 and 1993
(b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended June 30, 1994. 7 9 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. LORAL CORPORATION -------------------------------------- Registrant Date: August 11, 1994 MICHAEL P. DEBLASIO -------------------------------------- Michael P. DeBlasio Senior Vice President -- Finance (Principal Financial Officer) and Registrant's Authorized Officer 8 10 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 11 Computation of Earnings per Common Share 12 Computation of Ratio of Earnings to Fixed Charges EX-11 2 COMPUTATION OF EARNINGS PER COMMON SHARE 1 EXHIBIT 11 LORAL CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (Unaudited)
THREE MONTHS ENDED JUNE 30, ------------------- 1994 1993 ------- ------- Primary: Net income applicable to common shares.............................. $54,964 $40,351 ======= ======= Shares: Weighted average common shares outstanding.......................... 83,332 82,352 Common equivalent shares applicable to stock options................ 1,405 1,000 ------- ------- Average number of shares outstanding and common equivalent shares... 84,737 83,352 ======= ======= Primary earnings per common share and common equivalent share............ $ .65 $ .48 ======= ======= Fully Diluted: Net income applicable to common shares.............................. $54,964 $40,351 ======= ======= Shares: Average number of common shares as adjusted for primary computation........................................................ 84,737 83,352 Incremental increase to shares under stock options where the quarter's ending market price is higher than the average market price during the quarter........................................... 136 ------- ------- Average number of shares outstanding on a fully diluted basis....... 84,737 83,488 ======= ======= Earnings per common share assuming full dilution......................... $ .65 $ .48 ======= =======
9 EX-12 3 COMPUTATION OF RATIO AND SUBSIDIARIES 1 EXHIBIT 12 LORAL CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS, EXCEPT RATIOS) (Unaudited)
THREE MONTHS ENDED JUNE 30, -------------------- 1994 1993 -------- ------- Earnings: Income before taxes and equity in net income (loss) of affiliates........................................ $ 90,731 $63,170 Add: Interest expense................................................... 23,252 8,283 Amortization of debt expense....................................... 447 57 Amortization of capitalized interest............................... 290 355 Interest component of rent expense................................. 6,347 3,431 -------- ------- Earnings.............................................................. $121,067 $75,296 ======== ======= Fixed charges: Interest expense...................................................... $ 23,252 $ 8,283 Amortization of debt expense.......................................... 447 57 Capitalized interest.................................................. 59 7 Interest component of rent expense.................................... 6,347 3,431 -------- ------- Fixed charges......................................................... $ 30,105 $11,778 ======== ======= Ratio of earnings to fixed charges...................................... 4.02x 6.39x ======== =======
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