-----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, Z4/cfjMY/DamjD1gKQZRbVJCCfNtKSfspyJR2RTlcNs0tkcfjINUl0CTyixLFxWr /SfNQKcBW5DiWP+aQlmVqw== 0000891618-94-000040.txt : 19940215 0000891618-94-000040.hdr.sgml : 19940215 ACCESSION NUMBER: 0000891618-94-000040 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAYCHEM CORP CENTRAL INDEX KEY: 0000082206 STANDARD INDUSTRIAL CLASSIFICATION: 3640 IRS NUMBER: 941369731 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 001-08341 FILM NUMBER: 94507299 BUSINESS ADDRESS: STREET 1: 300 CONSTITUTION DR STREET 2: MS#120/8502 CITY: MENLO PARK STATE: CA ZIP: 94025-1164 BUSINESS PHONE: 4153613333 FORMER COMPANY: FORMER CONFORMED NAME: RAYTHERM CORP DATE OF NAME CHANGE: 19720526 10-Q 1 RAYCHEM FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1993 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 2-15299 RAYCHEM CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-1369731 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 300 Constitution Drive, Menlo Park, CA 94025-1164 (Address of principal executive offices) (Zip code)
(415) 361-3333 (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 ----- ----- As of February 8, 1994 the registrant had outstanding 42,732,047 shares of Common Stock, $1.00 par value. 2 RAYCHEM CORPORATION INDEX TO FORM 10-Q
Page Number ----------- PART I. FINANCIAL INFORMATION Item 1: Financial Information Consolidated Condensed Statements of Income - Three and Six Months Ended December 31, 1993 and 1992 1 Consolidated Condensed Balance Sheets - December 31, 1993 and June 30, 1993 2 Consolidated Condensed Statements of Cash Flows - Six Months Ended December 31, 1993 and 1992 3 Notes to Consolidated Condensed Financial Statements 4-6 Item 2: Management's Discussion and Analysis 7-13 of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1: Legal Proceedings 14 Item 4: Submission of Matters to a Vote of Security Holders 14 Item 6: Exhibits and Reports on Form 8-K 14 SIGNATURES 15
3 RAYCHEM CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands except share data) (Unaudited)
Three Months Ended Six Months Ended December 31, December 31, -------------------- ------------------- 1993 1992 1993 1992 ---- ---- ---- ---- Revenues $ 353,835 $ 351,958 $ 709,267 $ 700,597 Cost of goods sold 187,984 175,064 371,714 353,839 Research and development expense 35,306 31,663 68,920 62,738 Selling, distribution and administrative expense 119,858 119,954 234,080 231,073 Interest expense, net 3,345 3,876 6,048 7,921 Other expense, net 2,611 5,080 5,457 9,885 ----------- ----------- ----------- ----------- Income before income taxes and changes in accounting principles 4,731 16,321 23,048 35,141 Provision for income taxes 3,075 13,057 14,981 28,113 ----------- ----------- ----------- ----------- Income before changes in accounting principles 1,656 3,264 8,067 7,028 Cumulative effect of changes in accounting principles, net of $0 income taxes - - - 1,700 ----------- ----------- ----------- ----------- Net income $ 1,656 $ 3,264 $ 8,067 $ 8,728 =========== =========== =========== =========== Average number of common shares and equivalents outstanding 43,171,602 40,885,231 43,065,406 40,590,927 =========== =========== =========== =========== Earnings per common share: Income before changes in accounting principles $ 0.04 $ 0.08 $ 0.19 $ 0.18 Changes in accounting principles - - - 0.04 ----------- ----------- ----------- ----------- Net income $ 0.04 $ 0.08 $ 0.19 $ 0.22 =========== =========== =========== =========== Dividends per common share $ 0.08 $ 0.08 $ 0.16 $ 0.16 =========== =========== =========== ===========
See accompanying notes to consolidated condensed financial statements. 1 4 RAYCHEM CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands except share data)
(Unaudited) December 31, 1993 June 30, 1993 ----------------- ------------- Assets Current assets: Cash and cash equivalents $ 83,689 $ 133,946 Accounts receivable, net 266,269 245,344 Inventories: Raw materials 104,175 79,528 Work in process 54,910 49,819 Finished goods 85,943 96,565 ---------- ---------- Total inventories 245,028 225,912 Prepaid taxes 58,741 58,450 Other current assets 48,997 51,767 ---------- ---------- Total current assets 702,724 715,419 Property, plant and equipment 1,045,317 1,021,344 Less accumulated depreciation and amortization 539,193 519,531 ---------- ----------- Net property, plant and equipment 506,124 501,813 Other assets 114,716 115,038 ---------- ---------- Total assets $1,323,564 $1,332,270 ========== ========== Liabilities and Stockholders' Equity Current liabilities: Notes payable to banks $ 19,929 $ 38,557 Accounts payable 64,079 66,301 Other accrued liabilities 164,228 181,534 Income taxes 26,948 25,052 Current maturities of long-term debt 3,900 3,152 ---------- ---------- Total current liabilities 279,084 314,596 Long-term debt 246,977 233,853 Deferred income taxes 26,203 29,481 Other long-term liabilities 69,407 62,398 Minority interest 4,225 2,438 Stockholders' equity: Preferred Stock, $1.00 par value Authorized: 15,000,000 shares; Issued: none - - Common Stock, $1.00 par value Authorized: 72,150,000 shares Issued: 42,456,870 and 41,874,773 shares, respectively 42,457 41,875 Additional contributed capital 338,569 321,512 Retained earnings 333,150 331,850 Currency translation (15,805) (5,100) Notes receivable from sale of stock (703) (633) ---------- ---------- Total stockholders' equity 697,668 689,504 ---------- ---------- Total liabilities and stockholders' equity $1,323,564 $1,332,270 ========== ==========
See accompanying notes to consolidated condensed financial statements. 2 5 RAYCHEM CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months ended December 31 (in thousands) 1993 1992 ---- ---- Cash flows from operating activities: Net income $ 8,067 $ 8,728 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Payments for restructuring and divestitures (3,696) (10,400) Changes in accounting principles - (1,700) Depreciation and amortization 38,975 38,244 Deferred income tax 3 721 Changes in certain assets and liabilities, net of effects from restructuring and divestitures: Accounts receivable (26,665) 15,986 Inventories (23,309) (9,164) Accounts payable and accrued liabilities (10,779) (8,928) Income taxes (1,612) (11,118) Other assets and liabilities 4,838 (606) -------- -------- Net cash provided by (used in) operating activities (14,178) 21,763 -------- -------- Cash flows from investing activities: Investment in property, plant and equipment (51,288) (35,534) Disposition of property, plant and equipment 7,735 2,197 -------- -------- Net cash used in investing activities (43,553) (33,337) -------- -------- Cash flows from financing activities: Net proceeds from (payment of) short-term debt (16,419) 5,540 Proceeds from long-term debt 15,880 - Payments of long-term debt (839) (1,142) Common Stock issued under employee benefits plans 17,639 20,703 Repayments of stockholder notes receivable 160 2,437 Cash dividends (6,767) (6,495) -------- -------- Net cash provided by financing activities 9,654 21,043 -------- -------- Effect of exchange rate changes on cash and cash equivalents (2,180) (3,803) -------- -------- Increase (decrease) in cash and cash equivalents (50,257) 5,666 Cash and cash equivalents at beginning of period 133,946 148,862 -------- -------- Cash and cash equivalents at end of period $ 83,689 $154,528 ======== ======== Supplemental Disclosures: Cash paid for: Interest (net of amounts capitalized) $ 7,211 $ 13,191 Income taxes 15,088 41,718
See accompanying notes to consolidated condensed financial statements. 3 6 RAYCHEM CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) STATEMENT OF ACCOUNTING PRESENTATION In the opinion of management, the accompanying unaudited consolidated condensed financial statements include all adjustments, including normal recurring accruals, necessary to present fairly the results of operations for the three and six months ended December 31, 1993 and 1992, the financial position as of December 31, 1993 and the cash flows for the six months ended December 31, 1993 and 1992. The June 30, 1993 balance sheet included is derived from the consolidated financial statements included in the company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993. Certain prior-period amounts have been reclassified to conform with the fiscal 1994 financial statement presentation. BUSINESS SEGMENTS Revenues and operating income (loss) by business segment are as follows:
In thousands ---------------------------------------------------------------------- Three Months Ended Six Months Ended December 31, December 31, ----------------------------------- ------------------------------- 1993 1992 1993 1992 -------------- --------------- -------------- ------------ Revenues - -------- Electronics $ 127,476 $ 124,369 $ 254,080 $ 242,418 Industrial 108,611 119,072 221,349 235,010 Telecommunications 109,201 105,358 224,535 219,344 Raynet 8,547 3,159 9,303 3,825 ------------- --------- ------------- --------- Total revenues $ 353,835 $ 351,958 $ 709,267 $ 700,597 ============= ========= ============= ========= Operating income (loss) - ----------------------- Electronics $ 21,026 $ 16,743 $ 46,624 $ 27,693 Industrial 16,246 27,152 37,911 54,335 Telecommunications 23,047 20,431 50,141 49,254 Raynet (28,964) (21,342) (57,553) (44,026) Corporate (20,668) (17,707) (42,570) (34,309) ------------- -------- ------------- --------- Total operating income $ 10,687 $ 25,277 $ 34,553 $ 52,947 ============= ======== ============= =========
REVENUES Effective in the third quarter of 1993, the company reclassified royalty and license income from "other expense, net" to "revenues." Prior period amounts have been reclassified to conform with this presentation. The following table summarizes total revenues:
In thousands ----------------------------------------------------------------------- Three Months Ended Six Months Ended December 31, December 31, --------------------------------- --------------------------- 1993 1992 1993 1992 ------------- --------- -------- --------- Revenues - -------- Product sales $ 352,904 $ 349,477 $708,049 $ 698,025 Other revenue 931 2,481 1,218 2,572 ------------- --------- -------- --------- Total revenues $ 353,835 $351,958 $709,267 $ 700,597 ============= ========= ======== =========
4 7 CHANGES IN ACCOUNTING PRINCIPLES The company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (FAS 106), effective as of July 1, 1992. This statement requires accrual accounting for all postretirement benefits other than pensions. In the third quarter of 1993, the company elected, effective July 1, 1992, to immediately recognize the transition obligation as the cumulative effect of a change in accounting principle, resulting in a decrease to net income of $2.3 million, or $0.06 per share. Effective July 1, 1992 the company adopted Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes." The adoption of this standard changed the company's method of accounting for income taxes from the deferred method to an asset and liability method. The standard was adopted on a prospective basis in the third quarter of 1993. The cumulative effect of adopting the standard was a $4.0 million, or $0.10 per share, increase in net income. RECENT ACCOUNTING STANDARDS In November 1992, the Financial Accounting Standards Board issued Statement No. 112, "Employers' Accounting for Postemployment Benefits." The statement changes the method of accounting for certain postemployment benefits from a cash basis to an accrual basis. The statement must be adopted in the first quarter of 1995. The company has not yet fully determined the impact of adoption on the company's results of operations or financial condition. INCOME TAXES On August 10, 1993 the U.S. federal corporate income tax rate was increased to 35% from 34%, effective January 1, 1993. The effect of this income tax rate change was to increase the company's gross deferred tax assets by $5 million and to correspondingly increase the valuation allowance by approximately $5 million. LONG-TERM DEBT In December 1992 the company entered into a three-year interest rate swap agreement which effectively converted $100 million of notional principal amount from a fixed rate to a floating rate. Under the agreement, which matures on December 8, 1995, the company makes payments to a counter party at variable rates based on LIBOR, reset every six months, and in return receives payments based on a fixed rate of 5.715%. The LIBOR rate for the period from June 8, 1993 to December 8, 1993 was 3.4375% which reduced interest expense in the period by $1.2 million. On December 8, 1993, the company terminated the swap agreement. The termination resulted in a gain of $2.7 million which has been deferred and will be amortized over the remaining life of the hedged debt. Of this amount, $0.1 million of the gain was recognized through December 31, 1993 as a reduction of interest expense. 5 8 CONTINGENCIES The company has been named, among others, as a potentially responsible party ("PRP") in administrative proceedings alleging that it may be liable for the costs of correcting environmental conditions at certain hazardous waste sites. At most of the sites, the company is alleged to be a de minimis generator of hazardous wastes, and the company believes that it has limited or no liability for clean-up costs at these sites. At the only site where the company's alleged involvement exceeds that of a de minimis generator, there are numerous, large PRPs which already have undertaken clean-up work. As a result, the company believes that it is highly unlikely that it will be held responsible for the total clean-up costs. The company believes its liability, if any, will not be material to the company. The company has also been notified by a state environmental agency that it may be required to investigate the need for remedial work at one of its manufacturing sites. The company currently is conducting such investigations on a voluntary basis. Additionally, the company and its subsidiaries have been named as defendants in lawsuits arising from an environmental cost recovery matter and various commercial matters, including product liability. The principal product liability litigation involves a variety of claims arising from the company's heat-tracing and freeze-protection products. Legal proceedings tend to be unpredictable and costly. Based on currently available information, however, management believes that the resolution of pending claims, regulatory inquiries, and legal proceedings will not have a material adverse effect on the company's operating results or financial position. SUBSEQUENT EVENTS On January 18, 1994 the company's Board of Directors declared a quarterly cash dividend of $0.08 per share of Common Stock, payable on March 9, 1994 to stockholders of record as of February 9, 1994. 6 9 RAYCHEM CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OVERVIEW The company reported second quarter 1994 net income of $2 million, or $0.04 per share, versus net income of $3 million, or $0.08 per share, in the second quarter of 1993. Revenues of $354 million increased 6% from the year-ago quarter on a constant currency basis. For the six months ended December 31, 1993, net income was $8 million, or $0.19 per share, compared to net income of $9 million, or $0.22 per share, for the same period in the prior year. Revenues for the six-month period ended December 31, 1993, increased 9% on a constant currency basis to $709 million. In the third quarter of 1993, the company adopted, effective July 1, 1992, Statements of Financial Accounting Standards Nos. 106 and 109. The cumulative effect of these accounting changes (a credit of $2 million, or $.04 per share) has been reflected in the restated results for the six months ended December 31, 1992. Excluding the effect of Raynet, Raychem's pretax income decreased to $35 million in the three months ended December 31,1993, from $39 million a year earlier, in part reflecting adverse currency movements in Europe. The Raynet pretax loss for the quarter was $30 million, compared with a $22 million loss in the previous year's second quarter. Raynet's results included a $2 million severance provision reflecting a restructuring and work force reduction of approximately 80 people throughout the organization, roughly 10% of Raynet's employment. The company's estimated annual effective tax rate was 65% compared to 80% in the prior-year period. The lower tax rate resulted primarily from an anticipated reduction of losses to be generated by U.S. operations in 1994. A tentative ruling has been entered in Raychem's favor for $9 million in its action against the company's insurers arising out of the settlement of a class action securities suit in December 1991. No benefit has been recognized in the second quarter 1994 financial results because the matter is subject to further judicial proceedings. The following discussion of the results of operations is presented based on the company's business segments--electronics, industrial, and telecommunications--(which along with the corporate groups are referred to collectively as the "core business") and Raynet Corporation, which was established as a separate subsidiary in calendar 1987 to commercialize certain fiber-optic technology for the telecommunications and cable television markets. This discussion is supplemented with condensed consolidating financial statements included on pages 11 through 13. 7 10 CORE BUSINESS OPERATIONS Core business revenues for the second quarter of 1994 decreased to $345 million from $349 million in the prior-year period. Revenue growth was 4% on a constant currency basis. Revenues for the six months ended December 31, 1993, were $700 million compared to $697 million in the comparable prior-year period, a constant currency increase of 8%. Revenues in the electronics business segment were $127 million for the three months ended December 31, 1993, representing a 5% increase in constant currency terms over the prior-year quarter. Increased sales of PolySwitch were partially offset by reduced shipments of Wire and Cable and Thermofit products. Operating income grew to $21 million from $17 million a year ago reflecting increased sales volume and reduced operating expenses which more than offset a slight decline in gross profit percentage. Revenues for the six months ended December 31, 1993, were $254 million compared to $242 million in the comparable prior-year period. Operating income in the six months ended December 31, 1993, increased to $47 million from $28 million in the comparable prior year period, in part reflecting increased sales and profitability in the segment's PolySwitch division. Revenues in the industrial business segment for the three months ended December 31, 1993, were $109 million, a slight reduction on a constant currency basis over the prior-year period. Shipments by the Electrical Products and Ultratec divisions were impacted by the recession in Europe. In addition, shipments of several pipeline projects for the Ultratec division were delayed until the third quarter of 1994. Operating income declined to $16 million from $27 million a year ago in part reflecting lower sales volumes and a decline in gross profit percentage caused by adverse exchange rate movements. Revenues for the six months ended December 31, 1993, were $221 million compared to $235 million in the comparable prior-year period. Operating income was $38 million, $16 million below the comparable prior-year period. Revenues in the telecommunications business segment for the three months ended December 31, 1993, were $109 million, a 13% increase in constant currency terms over the prior-year quarter. Although sales growth was strong, particularly in Latin America and Asia, new orders declined, primarily in the People's Republic of China. Operating income was $23 million, $3 million above the prior-year period. Gross profit percentage remained essentially unchanged compared with the comparable prior-year period. Revenues for the six months ended December 31, 1993, were $225 million compared to $219 million in the comparable prior-year period. Operating income remained unchanged at approximately $50 million and gross profit percentage declined slightly. The core business' selling, distribution and administrative expense as a percentage of revenues was 32% for the quarters ended December 31, 1993, and 1992. For the six-month period ended December 31, 1993, such expenses represented 31% of revenues, which is consistent with the comparable period in the prior year. Other expense, net, for the second quarter of 1994 was $2 million compared to $5 million in the year-ago period. For the six-month period ended December 31, 1993, other expense, net was $5 million compared to $9 million in the comparable prior-year period, in part reflecting reduced foreign currency exchange losses. Orders exceeded shipments in the industrial segment, were approximately equal to shipments in the electronics segment and were lower than shipments in the telecommunications segment. Overall, orders were below shipments for the core business in the three months ended December 31, 1993. 8 11 RAYNET OPERATIONS Raynet Corporation recorded revenues of $9 million for the three- and six-month periods ended December 31, 1993, compared with $3 and $4 million, respectively, in the comparable prior year periods. Raynet's pretax loss for the quarter was $30 million, compared with a $22 million loss in the previous year's second quarter. For the six months ended December 31, 1993, Raynet's pretax loss increased to $59 million from $46 million in the comparable period of the prior year. Raynet's second quarter revenues include deliveries to NYNEX and Bezeq of Israel. Product was also shipped to the Deutsche Bundespost Telekom (DBP) in Germany, Korea Telecom, and France Telecom with revenue recognition deferred until formal customer acceptance. The sales value of product shipped to Germany, Korea, and France, but not recognized as revenue, was approximately $15 million at December 31, 1993. The majority of these contract revenues are expected to be recognized in the second half of this fiscal year as the systems covered by contracts are turned up in the field. Research and development expense increased to $11 million for the quarter ended December 31, 1993, from $9 million in the comparable year-ago quarter. For the six-month period ended December 31, 1993, research and development expense was $22 million compared to $18 million in the prior-year period. Selling, distribution and administrative expense increased to $10 million for the quarter ended December 31, 1993, from $8 million in the second quarter of the prior year. For the six-month period, selling, distribution, and administrative expense increased to $19 million from $17 million in the year-ago period. The increase is due primarily to restructuring charges. OUTLOOK The company is cautious about the remainder of 1994 due to continued sluggishness in the economies of Europe and Japan, and slow growth in many of the company's markets in the United States. Overall, the company believes that there will be modest sales growth in 1994. On February 10, 1994, the company announced its expectation that the 1994 loss from Raynet will be somewhat more than the loss incurred in 1993. The projected higher loss is attributed to delays in revenue recognition for the DBP OPAL '93 project in Germany, restructuring charges, and slower than anticipated business development in other markets. This is expected to result in both higher U.S. losses and a significantly higher estimated annual effective tax rate than previously anticipated. Accordingly, the third quarter's results are expected to include an incremental tax provision to raise the company's estimated annual effective tax rate. Recent alliances of telecommunications, cable television, and media businesses have created considerable uncertainty regarding communications technologies to be deployed in the United States and other regions of the world, as well as the timing of these deployments. The decisions regarding these technologies and the timing of deployment may have a material effect on Raynet's and Raychem's future revenues and profitability. 9 12 LIQUIDITY AND CAPITAL RESOURCES CONSOLIDATED Debt exceeded cash by $187 million at December 31, 1993, compared to $142 million at June 30, 1993. The $45 million increase in debt net of cash reflects increased cash needs at Raynet and capital expenditures in the core business partially offset by cash flow from core business operations. At December 31, 1993, the company had $84 million in cash and cash equivalents, $315 million in committed credit facilities (of which $4 million was utilized) and approximately $158 million in various uncommitted credit facilities (of which $40 million was utilized). The combination of cash and cash equivalents, available lines of credit, and future cash flows from operations are expected to be sufficient to satisfy substantially all of the company's needs for working capital, normal capital expenditures, and anticipated dividends. The cash requirements for Raynet will be determined as the business develops, and alternative methods of financing may be considered. CORE BUSINESS Net cash provided by operating activities increased to $55 million for the first half of 1994 from $48 million for the corresponding period of 1993. This increase resulted from decreased income tax payments, reduced spending on restructuring and divestitures, and proceeds from the termination of the interest rate swap agreement. Inventory, as measured by the number of days of inventory on hand, improved to 114 days for the second quarter compared to 121 days for the year-ago period. Receivables, as measured by the number of billing days outstanding, increased slightly to 61 days at December 31, 1993, compared to 60 days at December 31, 1992. Capital expenditures of $46 million increased $14 million in the first half of 1994 compared to the prior-year period, mainly due to higher spending for a new PolySwitch manufacturing plant in Japan, increased PolySwitch capacity in Menlo Park, and for new manufacturing equipment at the company's telecommunications facility in North Carolina. The company received $4 million from the sale of a building in the United States. RAYNET Net cash used in operating activities at Raynet increased to $69 million for the six months ended December 31, 1993, as compared to $26 million in the corresponding prior-year period. The higher cash outflow for the six-month period was primarily due to inventory builds in anticipation of future shipments, greater loss from operations, and higher receivables from increased sales. Cash flow in the year-ago period benefited from the collection of an $12 million development contract receivable from DBP. 10 13 RAYCHEM CORPORATION Condensed Consolidating Statements of Operations (in thousands)
THREE MONTHS ENDED DECEMBER 31 (UNAUDITED) ------------------------------------------------------------- CORE BUSINESS RAYNET CONSOLIDATED ---------------- --------------- ---------------- 1993 1992 1993 1992 1993 1992 ---- ---- ---- ---- ---- ---- Revenues $ 345,288 $ 348,799 $ 8,547 $ 3,159 $ 353,835 $ 351,958 Cost of goods sold 171,651 167,971 16,333 7,093 187,984 175,064 Research and development expense 24,118 22,683 11,188 8,980 35,306 31,663 Selling, distribution and administrative expense 109,868 111,526 9,990 8,428 119,858 119,954 Interest expense, net 2,597 3,141 748 735 3,345 3,876 Other expense, net 2,357 4,843 254 237 2,611 5,080 ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) before income taxes 34,697 38,635 (29,966) (22,314) 4,731 16,321 Provision for income taxes 3,073 13,010 2 47 3,075 13,057 ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 31,624 $ 25,625 $ (29,968) $ (22,361) $ 1,656 $ 3,264 ========== ========== ========== ========== ========== ==========
SIX MONTHS ENDED DECEMBER 31 (UNAUDITED) ------------------------------------------------------------ CORE BUSINESS RAYNET CONSOLIDATED --------------- ---------------- --------------- 1993 1992 1993 1992 1993 1992 ---- ---- ---- ---- ---- ---- Revenues $ 699,964 $ 696,772 $ 9,303 $ 3,825 $ 709,267 $ 700,597 Cost of goods sold 345,969 341,062 25,745 12,777 371,714 353,839 Research and development expense 47,212 44,436 21,708 18,302 68,920 62,738 Selling, distribution and administrative expense 214,677 214,301 19,403 16,772 234,080 231,073 Interest expense, net 4,558 6,473 1,490 1,448 6,048 7,921 Other expense, net 5,127 9,359 330 526 5,457 9,885 ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) before income taxes and changes in accounting principles 82,421 81,141 (59,373) (46,000) 23,048 35,141 Provision for income taxes 14,948 28,022 33 91 14,981 28,113 ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) before changes in accounting principles 67,473 53,119 (59,406) (46,091) 8,067 7,028 Cumulative effect of changes in accounting principles, net of $0 income taxes - 1,700 - - - 1,700 ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 67,473 $ 54,819 $ (59,406) $ (46,091) $ 8,067 $ 8,728 ========== ========== ========== ========== ========== ==========
11 14 RAYCHEM CORPORATION Condensed Consolidating Balance Sheets (in thousands)
Core Business Raynet Consolidated* ---------------------- --------------------- --------------------- (Unaudited) (Unaudited) (Unaudited) 12/31/93 6/30/93 12/31/93 6/30/93 12/31/93 6/30/93 -------- ------- -------- ------- -------- ------- ASSETS Current assets Cash and cash equivalents $ 77,232 $ 116,115 $ 6,457 $ 17,831 $ 83,689 $ 133,946 Accounts receivable, net 245,353 237,492 20,916 7,852 266,269 245,344 Inventories 212,430 215,301 32,598 10,611 245,028 225,912 Other current assets 103,652 107,377 4,086 2,840 107,738 110,217 ---------- ----------- --------- ----------- ----------- ---------- Total current assets 638,667 676,285 64,057 39,134 702,724 715,419 ---------- ----------- --------- ----------- ----------- ---------- Net property, plant and equipment 478,188 474,544 27,936 27,269 506,124 501,813 Investment in Raynet 40,194 36,264 - - - - Other assets 100,388 101,811 14,328 13,227 114,716 115,038 ---------- ----------- --------- ----------- ----------- ---------- Total assets $1,257,437 $ 1,288,904 $ 106,321 $ 79,630 $ 1,323,564 $1,332,270 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to banks $ 16,769 $ 38,557 $ 3,160 $ - $ 19,929 $ 38,557 Intercompany accounts payable (receivable) (17,262) (11,372) 17,262 11,372 - - Accounts payable 39,012 56,170 25,067 10,131 64,079 66,301 Other current liabilities 174,438 187,875 20,638 21,863 195,076 209,738 ---------- ----------- --------- ----------- ----------- ---------- Total current liabilities 212,957 271,230 66,127 43,366 279,084 314,596 ---------- ----------- --------- ----------- ----------- ---------- Long-term debt 246,977 233,853 - - 246,977 233,853 Other long-term liabilities 95,610 91,879 - - 95,610 91,879 Minority interest 4,225 2,438 - - 4,225 2,438 Stockholders' equity 697,668 689,504 40,194 36,264 697,668 689,504 ---------- ----------- --------- ----------- ----------- ---------- Total liabilities and stockholders' equity $1,257,437 $ 1,288,904 $ 106,321 $ 79,630 $ 1,323,564 $1,332,270 ========== =========== ========= =========== =========== ==========
* Consolidated balances reflecteliminations of intercompany transactions. 12 15 RAYCHEM CORPORATION Condensed Consolidating Statements of Cash Flows (in thousands)
SIX MONTHS ENDED DECEMBER 31 (UNAUDITED) ----------------------------------------------------------- CORE BUSINESS RAYNET CONSOLIDATED --------------- -------------- --------------- 1993 1992 1993 1992 1993 1992 ---- ---- ---- ---- ---- ---- Net cash provided by (used in) operating activities $ 55,139 $ 48,030 $ (69,317) $ (26,267) $ (14,178) $ 21,763 -------- -------- --------- --------- --------- -------- Cash flows from investing activities: Investment in property, plant and equipment (45,895) (31,452) (5,393) (4,082) (51,288) (35,534) Disposition of property, plant and equipment 7,735 2,197 - - 7,735 2,197 -------- -------- --------- --------- --------- -------- Net cash used in investing activities (38,160) (29,255) (5,393) (4,082) (43,553) (33,337) -------- -------- --------- --------- --------- -------- Cash flows from financing activities: Proceeds from (payment of) debt (1,378) 4,398 - - (1,378) 4,398 Proceeds from (payment of) intercompany loans (48,962) (29,715) 48,962 29,715 - - Common Stock issued under employee benefit plans 17,639 20,703 - - 17,639 20,703 Repayments of stockholder notes receivable 160 2,437 - - 160 2,437 Cash dividends (6,767) (6,495) - - (6,767) (6,495) -------- -------- --------- --------- --------- -------- Net cash provided by (used in) financing activities (39,308) (8,672) 48,962 29,715 9,654 21,043 -------- -------- --------- --------- --------- -------- Effect of exchange rate changes on cash and cash equivalents (2,131) (3,844) (49) 41 (2,180) (3,803) -------- -------- --------- --------- --------- -------- Increase (decrease) in cash and cash equivalents $(24,460) $ 6,259 $ (25,797) $ (593) $ (50,257) $ 5,666 ======== ======= ========= ========= ========= ========
13 16 RAYCHEM CORPORATION PART II - OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS A tentative ruling has been entered in the company's favor for $9 million in its action against the company's insurers arising out of the settlement of a class action securities suit on December 16, 1991. The matter is subject to further judicial proceedings before final judgment is rendered by the United States District Court. The company disclosed information about this lawsuit in its annual report on Form 10-K for the year ended June 30, 1993. On December 23, 1993, the company and Thomas and Betts Corporation settled all claims and counterclaims in the company's lawsuit for patent infringement filed in the United States District Court, Northern District of California on August 25, 1992. The settlement is subject to court approval and entry of consent judgment. The company disclosed information about this lawsuit in its annual report on Form 10-K for the year ended June 30, 1993. On November 30, 1993, the company filed a complaint in the United States District Court, Northern District of California, against PSI Telecommunications, Inc. for patent infringement. On January 21, 1994, PSI Telecommunications, Inc. answered the complaint and filed a counterclaim against the company for declaratory judgment that the patent is invalid and not infringed, and amended its complaint and counterclaim on February 4, 1994. No monetary damages have been alleged. The company believes the counterclaim is without merit. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On October 27, 1993, the company held its Annual Meeting of the Stockholders. In addition to electing directors and ratifying the designation of independent accountants for 1994, the stockholders approved (by a vote of 26,197,487 in favor, 4,433,590 opposed and 211,823 abstentions) amendments to the company's Amended and Restated 1984 Employee Stock Purchase Plan and 1985 Supplemental Employee Stock Purchase Plan to increase by 700,000 shares the aggregate number of shares issuable under the two plans. The stockholders approved (by a vote of 19,361,928 in favor, 11,013,126 opposed and 218,866 abstentions) an amendment to the 1990 Incentive Plan to increase by 1,700,000 shares the aggregate number of shares issuable under the plan. The stockholders also approved (by a vote of 32,414,117 in favor, 1,638,434 opposed and 268,636 abstentions) an amendment to the Directors Stock Option Plan to eliminate the cumulative limit on the number of options granted under the plan. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Index to Exhibits None. (b) Reports on Form 8-K None. 14 17 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. RAYCHEM CORPORATION (Registrant) Date: February 11, 1994 /s/ RAYMOND J. SIMS Raymond J. Sims Senior Vice President and Chief Financial Officer (Principal Financial Officer) /s/ DEIDRA D. BARSOTTI Deidra D. Barsotti Vice President and Corporate Controller (Principal Accounting Officer) 15 -----END PRIVACY-ENHANCED MESSAGE-----