-----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, Fljy4Cjqu9O+hc5lhQALF16Cj3+SpF5pp+xbSKiOAnY9NjIXllefedOrd0e5/Y6M /jgwYPnIkBooLika3/zPAw== 0000009779-98-000016.txt : 19980406 0000009779-98-000016.hdr.sgml : 19980406 ACCESSION NUMBER: 0000009779-98-000016 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971228 FILED AS OF DATE: 19980403 SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAIRCHILD CORP CENTRAL INDEX KEY: 0000009779 STANDARD INDUSTRIAL CLASSIFICATION: BOLTS, NUTS, SCREWS, RIVETS & WASHERS [3452] IRS NUMBER: 340728587 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-06560 FILM NUMBER: 98587443 BUSINESS ADDRESS: STREET 1: 45025 AVIATION DR STREET 2: STE 400 CITY: DULLAS STATE: VA ZIP: 20166 BUSINESS PHONE: 7034785800 FORMER COMPANY: FORMER CONFORMED NAME: BANNER INDUSTRIES INC /DE/ DATE OF NAME CHANGE: 19901118 10-Q/A 1 25 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 28, 1997 Commission File Number 1-6560 THE FAIRCHILD CORPORATION (Exact name of Registrant as specified in its charter) Delaware 34-0728587 (State or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or organization) 45025 Aviation Drive, Suite 400 Dulles, VA 20166 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (703) 478-5800 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Title of Class March 2, 1998 Class A Common Stock, $0.10 Par Value 18,150,227 Class B Common Stock, $0.10 Par Value 2,624,716 AMENDMENT: The purpose of this amendment is to provide restated financial information and additional disclosure for (i) Part I, "Financial Information", and (ii) Part II, Item 6, "Exhibits and Reports on Form 8-K", as a result of the Company's adoption of a formal plan to discontinue Fairchild Technologies in February 1998. THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES INDEX Page PART 1. FINANCIAL INFORMATION Item 1.Condensed Consolidated Balance Sheets as of December 28, 1997 (Unaudited) and June 30, 1997 3 Consolidated Statements of Earnings for the Three and Six Months ended December 28, 1997 and December 29, 1996 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows for the Six Months ended December 28, 1997 and December 29, 1996 (Unaudited) 6 Notes to Condensed Consolidated Financial Statements (Unaudited) 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 13 PART II. OTHER INFORMATION Item 1. Legal Information 19 Item 4. Submission of Matters to Vote of Security Holders 19 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 20 * For purposes of Part 1 and this Form 10-Q, the term "Company" means The Fairchild Corporation, and its subsidiaries, unless otherwise indicated. For purposes of Part II, the term "Company" means The Fairchild Corporation, unless otherwise indicated. PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 1997 and December 28, 1997 (Unaudited) (In thousands) ASSETS
June 30, December 28, 1997 (*) 1997 CURRENT ASSETS: Cash and cash equivalents, $4,830 and $30,687 restricted $ 18,779 $ 38,907 Short-term investments 25,647 8,487 Accounts receivable-trade, less 151,361 160,995 allowances of $6,905 and $7,892 Inventories: Finished goods 292,441 329,492 Work-in-process 20,357 20,998 Raw materials 10,567 11,476 323,365 361,966 Net current assets of discontinued 18,525 27,778 operations Prepaid expenses and other current 34,490 53,259 assets Total Current Assets 572,167 651,392 Property, plant and equipment, net of accumulated depreciation of $126,990 and 121,918 126,198 $131,646 Net assets held for sale 26,147 26,447 Net noncurrent assets of discontinued 14,495 12,069 operations Cost in excess of net assets acquired (Goodwill), less accumulated amortization of $36,672 154,129 160,150 and $39,287 Investments and advances, affiliated 55,678 21,829 companies Prepaid pension assets 59,742 59,282 Deferred loan costs 9,252 11,742 Long-term investments 4,120 6,843 Other assets 35,018 46,784 Total Assets $1,052,666 $1,122,736 *Condensed from audited financial statements The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS December 28, 1997 (Unaudited) and June 30, 1997 (In thousands) LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 28, 1997 (*) 1997 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Bank notes payable and current maturities of long-term debt $ 47,322 $ 92,348 Accounts payable 75,522 70,739 Other accrued liabilities 97,318 76,816 Income taxes 5,863 16,163 Total Current Liabilities 226,025 256,066 LONG-TERM LIABILITES: Long-term debt, less current 416,922 371,610 maturities Other long-term liabilities 23,622 29,050 Retiree health care liabilities 43,351 42,366 Noncurrent income taxes 42,013 47,388 Minority interest in subsidiaries 68,309 70,327 TOTAL LIABILITIES 820,242 816,807 STOCKHOLDERS' EQUITY: Class A common stock, 10 cents par value; authorized 40,000 shares, 23,289 (20,234 in June) shares issued and 17,047 (13,992 in June) shares 2,023 2,329 outstanding Class B common stock, 10 cents par value;. authorized 20,000 shares, 2,625 (2,632 in June) shares issued and outstanding 263 263 Paid-in capital 71,015 124,575 Retained earnings 209,949 230,841 Cumulative translation adjustment 939 (633) Net unrealized holding gain (loss) on (46) 273 available-for-sale securities Treasury Stock, at cost, 6,242 shares (51,719) (51,719) of Class A Common Stock TOTAL STOCKHOLDERS' EQUITY 232,424 305,929 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,052,666 $1,122,736 *Condensed from audited financial statements The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED STATEMENTS OF EARNINGS (Unaudited) For The Three (3) and Six (6) Months Ended December 29, 1996 and December 28, 1997 (In thousands, except per share data)
For the Three Months Ended 12/29/96 12/28/97 12/29/96 12/28/97 REVENUE: Net sales $152,461 $208,616 $290,705 $402,978 Other income (expense), net 536 49 779 4,604 152,997 208,665 291,484 407,582 COSTS AND EXPENSES: Cost of goods sold 115,676 151,794 216,828 299,827 Selling, general & administrative 32,475 42,211 63,796 78,871 Research and development 22 48 45 97 Amortization of goodwill 1,108 1,387 2,220 2,606 149,281 195,440 282,889 381,401 OPERATING INCOME 3,716 13,225 8,595 26,181 Interest expense 11,469 15,683 26,129 28,658 Interest income (1,566) (524) (3,754) (914) Net interest expense 9,903 15,159 22,375 27,744 Investment income (loss), net 1,836 (7,077) 1,461 (5,180) Equity in earnings (loss) of affiliates 398 429 2,709 2,121 Minority interest (776) (742) (1,561) (1,875) Loss from continuing (4,729) (9,324) (11,171) (6,497) operations before taxes Income tax benefit (3,430) (4,719) (6,509) (3,121) Loss from continuing (1,299) (4,605) (4,662) (3,376) operations Earnings from discontinued operations, net (1,678) (1,945) (2,933) (2,682) Gain on disposal of discontinued operations, net - 29,974 - 29,974 Extraordinary items, net - (3,024) - (3,024) NET EARNINGS (LOSS) $ (2,977) $20,400 $(7,595)$20,892 Earnings Per Share: Loss from continuing operations $ (0.08) $(0.27) $(0.28)$ (0.20) Earnings from discontinued operations, net (0.10) (0.11) (0.18) (0.16) Gain on disposal of discontinued operations, net - 1.75 - 1.78 Extraordinary items, net - (0.18) - (0.18) Net earnings (loss) $ (0.18) $ 1.19 $(0.46) $ 1.24 Weighted average shares 16,551 17,088 16,489 16,864 outstanding The accompanying notes to summarized financial information are an integral part of these statements.
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For The Six (6) Months Ended December 28, 1997 and December 29, 1996 (In thousands)
For the Six Months Ended 12/29/96 12/28/97 Cash flows from operating activities: Net earnings (loss) $ (7,595) $ 20,892 Depreciation and amortization 10,075 11,632 Accretion of discount on long-term 2,235 1,686 liabilities Net gain on the sale of discontinued -- (29,974) operations Extraordinary items, net of cash -- 3,024 payments Distributed earnings of affiliates, 1,906 344 net Minority interest 1,561 1,875 Changes in assets and liabilities (59,895) (96,975) Non-cash changes and working capital (2,137) (4,349) changes of discontinued operations Net cash used for operating (53,850) (91,845) activities Cash flows from investing activities: Purchase of property, plant and (4,781) (15,964) equipment Net proceeds received from (used for) (2,361) 5,786 investments Acquisition of subsidiaries, net of -- (11,774) cash acquired Net proceeds from the sale of 173,719 84,733 discontinued operations Changes in net assets held for sale (936) (324) Other, net 21 179 Investing activities of discontinued (452) (3,119) operations Net cash provided by investing 165,210 59,517 activities Cash flows from financing activities: Proceeds from issuance of debt 40,473 143,712 Debt repayments and repurchase of (93,495) (145,130) debentures, net Issuance of Class A common stock 859 53,921 Financing activities of discontinued (745) -- operations Net cash provided by (used for) (52,908) 52,503 financing activities Effect of exchange rate changes on 222 (688) cash Net increase in cash and cash 58,674 19,487 equivalents Cash and cash equivalents, beginning 39,649 19,420 of the year Cash and cash equivalents, end of the period $98,323 $38,907 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
THE FAIRCHILD CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands, except per share data) 1. FINANCIAL STATMENTS The consolidated balance sheet as of December 28, 1997 and the consolidated statements of earnings and cash flows for the three and six months ended December 29, 1996 and December 28, 1997 have been prepared by the Company, without audit. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at December 28, 1997, and for all periods presented, have been made. The balance sheet at June 30, 1997 was condensed from the audited financial statements as of that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 1997 Form 10-K and Banner Aerospace, Inc.'s March 31, 1997 Form 10-K. The results of operations for the period ended December 28, 1997 are not necessarily indicative of the operating results for the full year. Certain amounts in prior years' quarterly financial statements have been reclassified to conform to the current presentation. 2. BUSINESS COMBINATIONS The Company's acquisitions described in this section have been accounted for using the purchase method. The respective purchase price is assigned to the net assets acquired based on the fair value of such assets and liabilities at the respective acquisition dates. In December 1997, the Company acquired AS+C GmbH, Aviation Supply + Consulting ("AS&C") in a business combination accounted for as a purchase. The total cost of the acquisition was $13,245, which exceeded the fair value of the net assets of AS&C by approximately $7,350, which is preliminarily being allocated as goodwill and amortized using the straight- line method over 40 years. The Company purchased AS&C with cash borrowed. AS&C is an aerospace parts, logistics, and distribution company primarily servicing the European OEM market. In February 1997, the Company completed a transaction (the "Simmonds Acquisition") pursuant to which the Company acquired common shares and convertible debt representing an 84.2% interest, on a fully diluted basis, of Simmonds S.A. ("Simmonds"). The Company initiated a tender offer to purchase the remaining shares and convertible debt held by the public. By June 30, 1997, the Company had purchased, or placed sufficient cash in escrow to purchase, all the remaining shares and convertible debt of Simmonds. The total purchase price of Simmonds, including the assumption of debt, was approximately $62,000, which the Company funded with available cash and borrowings. The Company recorded approximately $13,750 in goodwill as a result of this acquisition, which will be amortized using the straight-line method over 40 years. Simmonds is one of Europe's leading manufacturers and distributors of aerospace and automotive fasteners. In January 1997, Banner Aerospace, Inc. ("Banner"), a majority-owned subsidiary of the Company, acquired PB Herndon Company ("PB Herndon") in a business combination accounted for as a purchase. The total cost of the acquisition was $16,000, including the assumption of $1,300 in debt, which exceeded the fair value of the net assets of PB Herndon by approximately $3,500, which is being amortized using the straight-line method over 40 years. The Company purchased PB Herndon with available cash. PB Herndon is a distributor of specialty fastener lines and similar aerospace related components. On June 30, 1997, the Company sold all the patents of Fairchild Scandinavian Bellyloading Company ("SBC") to Teleflex Incorporated ("Teleflex") for $5,000, and immediately thereafter sold all the stock of SBC to a wholly owned subsidiary of Teleflex for $2,000. The Company may also receive additional proceeds of up to $7,000 based on future net sales of SBC's patented products and services. 3. DISCONTINUED OPERATIONS On November 20, 1997, Shared Technologies Fairchild Inc. ("STFI"), a corporation in which the Company owned approximately 42% of the outstanding common stock, entered into a merger agreement with Intermedia Communications Inc. ("Intermedia") pursuant to which holders of STFI common stock will receive $15.00 per share in cash (the "STFI Merger"). The Company was paid approximately $85,000 in cash (before tax and selling expenses) in exchange for preferred stock of STFI owned by the Company, and expects to receive an additional $93,000 in cash (before tax and selling expenses) in the first three months of 1998 in exchange for the 6,225,000 shares of common stock of STFI owned by the Company. In the quarter ended December 28, 1997, the Company recorded a $29,974 gain, net of tax, on disposal of discontinued operations, from the proceeds received for the preferred stock of STFI. The results of STFI have been accounted for as discontinued operations. Earnings from discontinued operations includes the Company's equity in earnings of $622 and $1,095 from the STFI investments during the six months ended December 28, 1997 and December 29, 1996, respectively. See Note 11 for the discontinuance of Fairchild Technologies. 4. EQUITY SECURITIES On December 19, 1997, the Company completed a secondary offering of public securities. The offering consisted of an issuance of 3,000,000 shares of the Company's Class A Common Stock at $20.00 per share (the "Offering"). The Company had 17,047,167 shares of Class A common stock and 2,624,716 shares of Class B common stock outstanding at December 28, 1997. Class A common stock is traded on both the New York and Pacific Stock Exchanges. There is no public market for the Class B common stock. Shares of Class A common stock are entitled to one vote per share and cannot be exchanged for shares of Class B common stock. Shares of Class B common stock are entitled to ten votes per share and can be exchanged, at any time, for shares of Class A common stock on a share-for-share basis. For the six months ended December 28, 1997, 47,084 shares of Class A Common Stock were issued as a result of the exercise of stock options, and shareholders converted 7,800 shares of Class B common stock into Class A common stock. 5. CREDIT AGREEMENT On December 19, 1997, immediately following the Offering, the Company restructured its FHC and RHI Credit Agreements by entering into a new credit facility to provide the Company with a $300,000 senior secured credit facility (the "Facility") consisting of (i) a $75,000 revolving loan with a letter of credit sub-facility of $30,000 and a $10,000 swing loan sub-facility, and (ii) a $225,000 term loan. Advances made under the Facility will generally bear interest at a rate of, at the Company's option, either (i) 2% over the Citibank N.A. base rate, or (ii) 3% over the Eurodollar Rate ("LIBOR") for the first nine months following closing, and is subject to change based upon the Company's financial performance thereafter. The Facility is subject to a non-use commitment fee of 1/2% of the aggregate unused availability for the first nine months post-closing and is subject to change based upon the Company's financial performance thereafter. Outstanding letters of credit are subject to fees equivalent to the LIBOR margin rate. A borrowing base is calculated monthly to determine the amounts available under the Facility. The borrowing base is determined monthly based upon (i) the EBITDA of the Company's Aerospace Fastener business, as adjusted, and (ii) specified percentages of various marketable securities and cash equivalents. The Facility will mature on June 18, 2004. The term loan is subject to mandatory prepayment requirements and optional prepayments. The revolving loan is subject to mandatory prepayment requirements and optional commitment reductions. On December 28, 1997, the Company was in compliance with all the covenants under its credit agreements. The Company recognized an extraordinary loss of $3,024, net of tax, to write-off the remaining deferred loan fees associated with early extinguishment of FHC and RHI Credit Agreements. In August 1997, the Company entered into a delayed-start swap interest rate lock hedge agreement (the "FHC Hedge Agreement") to reduce its exposure to increases in interest rates on variable rate debt. In December 1997, the Company amended the FHC Hedge Agreement. Beginning on February 17, 1998, the FHC Hedge Agreement will provide interest rate protection on $100,000 of variable rate debt for ten years, with interest being calculated based on a fixed LIBOR rate of 6.715%. On January 14, 1998, the FHC Hedge Agreement was further amended to provide interest rate protection with interest being calculated based on a fixed LIBOR rate of 6.24% from February 17, 1998 to February 17, 2003. On February 17, 2003, the bank will have a one-time option to either (i) elect to cancel the ten-year agreement; or (ii) do nothing and proceed with the transaction, using a fixed LIBOR rate of 6.715% for the period February 17, 2003 to February 19, 2008. No costs were incurred as a result of these transactions. On November 25, 1997, Banner amended its credit agreement to increase its revolving credit facility by $50,000. 6. RESTRICTED CASH The Company had restricted cash of approximately $4,839 and $30,687 on June 30, 1997 and December 28, 1997, respectively, all of which is maintained as collateral for certain debt facilities. 7. SUMMARIZED STATEMENT OF EARNINGS INFORMATION The following table presents summarized historical financial information, on a combined 100% basis, of the Company's principal investments, which are accounted for using the equity method.
Six Months Ended December 29 December 28, 1996 1997 Net sales $52,239 $48,841 Gross profit 20,096 18,191 Earnings from continuing operations 5,036 8,132 Net earnings 5,036 8,132
The Company owns approximately 31.9% of Nacanco Paketleme common stock. The Company recorded equity earnings of $1,571 and $2,584 from this investment for the six months ended December 29, 1996 and December 28, 1997, respectively. 8. MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES On December 28, 1997, the Company had $70,327 of minority interest, of which $69,700 represents Banner. Minority shareholders hold approximately 36% of Banner's outstanding common stock. 9. EARNINGS PER SHARE Effective December 28, 1997, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). This statement replaces the previously reported primary and fully diluted earnings (loss) per share with basic and diluted earnings (loss) per share. Unlike primary earnings (loss) per share, basic earnings (loss) per share excludes any diluted effects of options. Diluted earnings (loss) per share is very similar to the previously reported fully diluted earnings (loss) per share. All earnings (loss) per share have been restated to conform to the requirements of SFAS 128. The computation of diluted loss per share for the three-month and six- month periods ended December 28, 1997 and December 29, 1996 excluded the effect of incremental common shares attributable to the potential exercise of common stock options outstanding and warrants outstanding, because their effect was antidilutive. These shares could potentially dilute basic earnings (loss) per share in the future. The Company entered into an agreement subsequent to December 28, 1997, which, upon consummation, would increase the number of outstanding shares (see Note 11). 10. CONTINGENCIES Government Claims The Corporate Administrative Contracting Officer (the "ACO"), based upon the advice of the United States Defense Contract Audit Agency, has made a determination that Fairchild Industries, Inc. ("FII"), a former subsidiary of the Company, did not comply with Federal Acquisition Regulations and Cost Accounting Standards in accounting for (i) the 1985 reversion to FII of certain assets of terminated defined benefit pension plans, and (ii) pension costs upon the closing of segments of FII's business. The ACO has directed FII to prepare cost impact proposals relating to such plan terminations and segment closings and, following receipt of such cost impact proposals, may seek adjustments to contract prices. The ACO alleges that substantial amounts will be due if such adjustments are made, however, an estimate of the possible loss or range of loss from the ACO's assertion cannot be made. The Company believes it has properly accounted for the asset reversions in accordance with applicable accounting standards. The Company has held discussions with the government to attempt to resolve these pension accounting issues. Environmental Matters The Company's operations are subject to stringent Government imposed environmental laws and regulations concerning, among other things, the discharge of materials into the environment and the generation, handling, storage, transportation and disposal of waste and hazardous materials. To date, such laws and regulations have not had a material effect on the financial condition, results of operations, or net cash flows of the Company, although the Company has expended, and can be expected to expend in the future, significant amounts for investigation of environmental conditions and installation of environmental control facilities, remediation of environmental conditions and other similar matters, particularly in the Aerospace Fasteners segment. In connection with its plans to dispose of certain real estate, the Company must investigate environmental conditions and may be required to take certain corrective action prior or pursuant to any such disposition. In addition, management has identified several areas of potential contamination at or from other facilities owned, or previously owned, by the Company, that may require the Company either to take corrective action or to contribute to a clean-up. The Company is also a defendant in certain lawsuits and proceedings seeking to require the Company to pay for investigation or remediation of environmental matters and has been alleged to be a potentially responsible party at various "Superfund" sites. Management of the Company believes that it has recorded adequate reserves in its financial statements to complete such investigation and take any necessary corrective actions or make any necessary contributions. No amounts have been recorded as due from third parties, including insurers, or set off against, any liability of the Company, unless such parties are contractually obligated to contribute and are not disputing such liability. As of December 28, 1997, the consolidated total recorded liabilities of the Company for environmental matters approximated $7,500, which represented the estimated probable exposures for these matters. It is reasonably possible that the Company's total exposure for these matters could be approximately $12,300 on an undiscounted basis. Other Matters The Company is involved in various other claims and lawsuits incidental to its business, some of which involve substantial amounts. The Company, either on its own or through its insurance carriers, is contesting these matters. In the opinion of management, the ultimate resolution of the legal proceedings, including those aforementioned, will not have a material adverse effect on the financial condition, or future results of operations or net cash flows of the Company. 11. SUBSEQUENT EVENTS On January 13, 1998, certain subsidiaries (the "Selling Subsidiaries"), of Banner Aerospace, Inc. ("Banner", a majority-owned subsidiary of the Registrant), completed the disposition of substantially all of the assets and certain liabilities of the Selling Subsidiaries to two wholly-owned subsidiaries of AlliedSignal Inc. (the "Buyers"), in exchange for unregistered shares of AlliedSignal Inc. common stock with an aggregate value equal to $369,000 (the "Banner Hardware Group Disposition"). The purchase price received by the Selling Subsidiaries was based on the consolidated net worth as reflected on an estimated closing date balance sheet for the assets (and liabilities) conveyed by the Selling Subsidiaries to the Buyers. Such estimated closing date balance sheet is subject to review by the parties, and the purchase price will be adjusted (up or down) based on the net worth as reflected on the final closing date balance sheet. The assets transferred to the Buyers consists primarily of Banner's hardware group, which includes the distribution of bearings, nuts, bolts, screws, rivets and other type of fasteners, and its PacAero unit. Approximately $196,000 of the common stock received from the Buyers was used to repay outstanding term loans of Banner's subsidiaries and related fees. Banner effected the Banner Hardware Group Disposition to concentrate its efforts on the rotables and jet engine businesses and because the Banner Hardware Group Disposition presented a unique opportunity to realize a significant return on the disposition of the hardware group. On February 3, 1998, with the proceeds of the Offering, term loan borrowings under the Facility, and the after tax proceeds the Company has already received from the STFI Merger (collectively, the "Refinancing"), the Company refinanced substantially all of its existing indebtedness (other than indebtedness of Banner), consisting of (i) $63,000 to redeem the 11 7/8% Senior Debentures due 1999; (ii) $117,600 to redeem the 12% Intermediate Debentures due 2001; (iii) $35,856 to redeem the 13 1/8% Subordinated Debentures due 2006; (iv) $25,063 to redeem the 13% Junior Subordinated Debentures due 2007; and (v) accrued interest of $10,562. On March 2, 1998, the Company consummated the acquisition of Edwards and Lock Management Corporation, doing business as Special-T Fasteners ("Special-T"), in a business combination to be accounted for as a purchase. The purchase price for the acquisition was $46,500, of which $23,500 was paid in shares of Class A Common Stock of the Company and the remainder was paid in cash. The purchase price is subject to certain post-closing adjustments. Special-T is a distributor of aerospace fasteners. Special-T distributes precision fasteners worldwide, utilized primarily in the aerospace industry, to both government and commercial manufacturers. For the Company's fiscal years 1995, 1996, and 1997, and for the first six months of fiscal 1998, Fairchild Technologies ("Technologies") had operating losses of approximately $1.5 million, $1.5 million, $3.6 million, and $5 million, respectively. In addition, as a result of the downturn in the Asian markets, Technologies has experienced delivery deferrals, reduction in new orders, lower margins and increased price competition. In response, in February, 1998, the Company adopted a formal plan to enhance the opportunities for disposition of Technologies, while improving the ability of Technologies to operate more efficiently. The plan includes a reduction in production capacity and headcount at Technologies, and the pursuit of potential vertical and horizontal integration with peers and competitors of the two divisions that constitute Technologies, or the inclusion of those divisions in the Spin-Off. If the Company elects to include Technologies in the Spin-Off, the Company believes that it would be required to contribute substantial additional resources to allow Technologies the liquidity necessary to sustain and grow both the Fairchild Technologies' operating divisions. In connection with the adoption of such plan, the Company will take an after-tax reserve of approximately $22 million in discontinued operations in the third fiscal quarter ending March 29, 1998, of which $14 million (net of income tax benefit of $4 million) relates to an estimated loss on the disposal of certain assets of Technologies, and $8 million relates to a provision for expected operating losses over the next twelve months at Technologies. While the Company believes that $22 million is a sufficient charge for the expected losses in connection with the disposition of Technologies, there can be no assurance that the reserve is adequate. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The Fairchild Corporation (the "Company") was incorporated in October 1969, under the laws of the State of Delaware. On November 15, 1990, the Company changed its name from Banner Industries, Inc. to The Fairchild Corporation. RHI Holdings, Inc. ("RHI") is a direct subsidiary of the Company. RHI is the 100% owner of Fairchild Holding Corp. ("FHC") and the majority owner of Banner Aerospace, Inc. ("Banner"). The Company's principal operations are conducted through RHI and FHC. The Company holds a significant equity interest in Nacanco Paketleme ("Nacanco"), and, during the period covered by this report, held a significant equity interest in Shared Technologies Fairchild Inc. ("STFI"). (See Note 11 to Financial Statements, Subsequent Events, as to the disposition of the Company's interest in STFI.) The following discussion and analysis provide information which management believes is relevant to assessment and understanding of the Company's consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and notes thereto. CAUTIONARY STATEMENT Certain statements in the financial discussion and analysis by management contain forward-looking information that involves risk and uncertainty, including current trend information, projections for deliveries, backlog, and other trend projections. Actual future results may differ materially depending on a variety of factors, including product demand; performance issues with key suppliers; customer satisfaction and qualification issues; labor disputes; governmental export and import policies; worldwide political stability and economic growth; legal proceedings; business combinations; investment risks; and acts of nature. RECENT DEVELOPMENTS The Company has effected a series of transactions designed to: (i) reduce its total indebtedness and annual interest expense; (ii) increase the number of publicly held shares of Class A Common Stock; and (iii) increase the Company's operating and financial flexibility. On November 20, 1997, STFI, a corporation of which the Company owns approximately 42% of the outstanding common stock, entered into a merger agreement with Intermedia Communications, Inc. ("Intermedia") pursuant to which holders of STFI common stock will receive $15.00 per share in cash. The Company was paid approximately $85 million in cash (before tax and selling expenses) in exchange for preferred stock of STFI owned by the Company, and expects to receive an additional $93 million in cash (before tax and selling expenses) in the first three months of 1998 in exchange for the 6,225,000 shares of common stock of STFI owned by the Company. The Intermedia transaction replaces an earlier merger agreement with the Tel- Save Holdings, Inc. under which the Company would have received consideration primarily in common stock of Tel-Save Holdings, Inc. Consummation of the STFI Merger is subject to certain conditions. On December 19, 1997, the Company completed a secondary offering of public securities. The offering consisted of an issuance of 3,000,000 shares of the Company's Class A Common Stock at $20.00 per share (the "Offering"). On December 19, 1997, immediately following the Offering, the Company restructured its FHC and RHI Credit Agreements by entering into a new six- and-a-half-year credit facility to provide the Company with a $300 million senior secured credit facility (the "Facility") consisting of (i) a $75 million revolving loan with a letter of credit sub-facility of $30 million and a $10 million swing loan sub-facility, and (ii) a $225 million term loan. On January 13, 1998, certain subsidiaries of Banner (the "Selling Subsidiaries") completed the disposition of substantially all of the assets and certain liabilities of the Selling Subsidiaries to two wholly-owned subsidiaries of AlliedSignal Inc. (the "Buyers"), in exchange for unregistered shares of AlliedSignal Inc. common stock with an aggregate value equal to $369 million (the "Banner Hardware Group Disposition"). The purchase price received by the Selling Subsidiaries was based on the consolidated net worth as reflected on an estimated closing date balance sheet for the assets (and liabilities) conveyed by the Selling Subsidiaries to the Buyers. Such estimated closing date balance sheet is subject to review by the parties, and the purchase price will be adjusted (up or down) based on the net worth as reflected on the final Closing Date Balance Sheet. The assets transferred to the Buyers consists primarily of Banner's hardware group, which includes the distribution of bearings, nuts, bolts, screws, rivets and other type of fasteners, and its PacAero Unit. Approximately $196 million of the common stock received from the Buyers was used to repay outstanding term loans of Banner's subsidiaries and related fees. Banner effected the Banner Hardware Group Disposition to concentrate its efforts on the rotables and jet engine businesses and because the Banner Hardware Group Disposition presented a unique opportunity to realize a significant return on the disposition of the hardware group. On March 2, 1998, the Company consummated the acquisition of Special- T, from the stockholders of Special-T, pursuant to an agreement and plan of merger dated as of January 28, 1998 as amended on February 20, 1998 and March 2, 1998. The purchase price for the acquisition was $46.5 million, of which $23.5 million was paid in shares of Class A Common Stock of the Company and the remainder was paid in cash. The purchase price is subject to certain post-closing adjustments. Special-T is a distributor of aerospace fasteners. On February 3, 1998, with the proceeds of the Offering, term loan borrowings under the Facility, and the after tax proceeds the Company has already received from the STFI Merger (collectively, the "Refinancing"), the Company refinanced substantially all of its existing indebtedness (other than indebtedness of Banner), consisting of (i) $63.0 million to redeem the 11 7/8% Senior Debentures due 1999; (ii) $117.6 million to redeem the 12% Intermediate Debentures due 2001; (iii) $35.9 million to redeem the 13 1/8% Subordinated Debentures due 2006; (iv) $25.1 million to redeem the 13% Junior Subordinated Debentures due 2007; and (vi) accrued interest of $10.6 million. On November 28, 1997, the Company acquired AS+C GmbH, Aviation Supply + Consulting ("AS&C") in a business combination accounted for as a purchase. The total cost of the acquisition was $13,245, which exceeded the fair value of the net assets of AS&C by approximately $7,350, which is preliminarily being allocated as goodwill and amortized using the straight- line method over 40 years. The Company purchased AS&C with cash borrowed. AS&C is an aerospace parts, logistics, and distribution company primarily servicing the European OEM market. RESULTS OF OPERATIONS The Company currently reports in two principal business segments: Aerospace Fasteners and Aerospace Distribution. The results of Gas Springs and SBC (for the prior year period) are included in the Corporate and Other classification. The following table illustrates the historical sales and operating income of the Company's operations for the three months and six ended December 28, 1997 and December 29, 1996, respectively.
(In thousands) Three Months Ended Six Months Ended December December December 29, December 29, 1996 1997 1996 1997 Sales by Segment: Aerospace Fasteners $ 56,494 $ 91,014 $ 111,541 $167,861 Aerospace Distribution 96,985 119,614 181,092 242,528 Corporate and Other 2,839 1,362 4,647 2,724 Eliminations (a) (3,857) (3,374) (6,575) (10,135) Total Sales $152,461 $208,616 $ 290,705 $ 402,978 Operating Income by Segment: Aerospace Fasteners $ 2,156 $ 6,382 $ 4,264 $ 8,892 Aerospace Distribution 6,072 7,714 12,053 17,085 Corporate and Other (4,512) (871) (7,722) 204 Total Operating Income $ 3,716 $ 13,225 $ 8,595 $ 26,181 (a) Represents intersegment sales from the Aerospace Fasteners segment to the Aerospace Distribution segment.
CONSOLIDATED RESULTS Net sales of $208.6 million in the second quarter of Fiscal 1998 improved significantly by $56.2 million, or 37%, compared to sales of $152.5 million in the second quarter of Fiscal 1997. Net Sales of $403.0 million in the Fiscal 1998 six-month period improved by $112.3 million, or 39%, compared to sales of $290.7 million in the first six months of Fiscal 1997. Sales growth was stimulated by the resurgent commercial aerospace industry, together with the effects that recent acquisitions contributed in the current periods. Gross Margin as a percentage of sales was 24.1% and 27.2% in the second quarter of Fiscal 1997 and 1998, respectively, and 25.4% and 25.6% in the six-month period of Fiscal 1997 and 1998, respectively. The increased margin in the Fiscal 1998 periods is attributable to improving efficiencies associated with increased production performances contributed by an improving skills base in the work force, and a reduction in the payment of overtime within the Aerospace Fasteners segment, and a change in product mix and decreased price competition in the Aerospace Distribution segment. Selling, General & Administrative expense as a percentage of sales was 21.3% and 20.2% in the second quarter of Fiscal 1997 and 1998, respectively, and 21.9% and 19.6% in the six-month period of Fiscal 1997 and 1998, respectively. The improvement in the Fiscal 1998 periods is attributable primarily to administrative efficiencies relative to increasing sales. Other income increased $3.8 million in the current six-month period, compared to the prior year six-month period, due primarily to the sale of air rights over a portion of the property the Company owns and is developing in Farmingdale, New York. Operating income of $13.2 million in the second quarter of Fiscal 1998 increased $9.5 million, compared to operating income of $3.7 million in the second quarter of Fiscal 1997. Operating income of $26.2 million in the six months period ended December 28, 1997, improved by $17.6 million, compared to the six month period ended December 29, 1996. The increase in operating income was due to the improved results provided by the Company's aerospace operations. Investment income (loss), net, decreased by $8.9 million in the second quarter and $6.6 million in the first six months of Fiscal 1998, due to recognizing unrealized losses on the fair market adjustments of trading securities in the Fiscal 1998 periods while recording unrealized gains from trading securities in the Fiscal 1997 periods. The Company's portfolio of trading securities is small, varied, and subject to fluctuations in market value. Trading securities are marked to market value in the statement of earnings. Equity in earnings of affiliates increased slightly in the second quarter and six months of Fiscal 1998, compared to the first quarter of Fiscal 1997, due to improved earnings by Nacanco. Income taxes included a $3.1 million tax benefit in the first six months of Fiscal 1998, on pre-tax losses of $6.5 million. The tax benefit was higher than the statutory rate due primarily to larger losses generated by domestic operations. Included in earnings from discontinued operations is the result of Fairchild Technologies and the Company's equity in earnings of STFI, both of which were lower in the Fiscal 1998 periods. The discontinued operations results are affected by the operations of Fairchild Technologies Division ("The Division"), which may fluctuate because of industry cyclicality, the volume and timing of orders, the timing of new product shipments, customer's capital spending, and pricing changes by The Division and its competition. The Division has experienced a reduction of its backlog, and margin compression during the past six months, which combined with the existing cost base, may impact future earnings from the Division. The $30.0 million after-tax gain on disposal of discontinued operations in the Fiscal 1998 periods, includes the Company's disposition of its preferred stock positions as a result of the STFI Merger. The extraordinary loss, net, in the Fiscal 1998 periods includes the write-off of deferred loan fees associated with the early extinguishment of the FHC and RHI credit facilities which were replaced as part of the Refinancing. Net earnings of $20.9 million in the first six months ended December 28, 1997, improved by $28.5 million compared to the $7.6 million net loss recorded in the six months ended December 29, 1996. This improvement is attributable to a $17.6 million increase in operating income; and the $30.0 million gain on the disposition of discontinued operations, offset partially by a $6.6 million decrease in investment income and the $3.0 million extraordinary loss. SEGMENT RESULTS: AEROSPACE FASTENERS SEGMENT Sales in the Aerospace Fasteners segment increased by $34.5 million in the second quarter and $56.3 million for the Fiscal 1998 six-month period, reflecting significant growth in the commercial aerospace industry combined with the effect of the Simmonds acquisition. New orders have continued to exceed reported sales, resulting in a backlog of $207 million at December 28, 1997, up from $196 million at June 30, 1997. Excluding sales contributed by acquisitions, sales increased 22% and 19% for the three and six months ended December 28, 1997, respectively, compared to the same periods in the prior year. Operating income improved by $4.2 million, or 196%, in the second quarter and $4.6 million, or 109%, in the Fiscal 1998 six-month period, compared to the Fiscal 1997 periods. Acquisitions and marketing changes were contributors to this improvement. Excluding the results provided by acquisitions, operating income increased by 116% in the second quarter and 11% for the six months of Fiscal 1998, compared to the same periods in the prior year. The Company anticipates that productivity efficiencies will further improve operating income in the coming months. AEROSPACE DISTRIBUTION SEGMENT Aerospace Distribution sales were up $22.6 million, or 23% in the second quarter and $61.4 million, or 34%, in the first six months of Fiscal 1998, compared to the corresponding periods of the prior year. The improvement in the Fiscal 1998 periods is due to increased sales to commercial airlines, original equipment manufacturers, and other distributors as well as increased sales of turbine parts and engine management services. In addition, incremental sales provided by PB Herndon also contributed to the increase. Operating income was up $1.6 million, or 27%, in the second quarter and $5.0 million, or 42% for the first six months of Fiscal 1998, compared to the same period of the prior year, due primarily to the increase in sales and the related economies of scale. This segment has benefited from the extended service lives of existing aircraft, growth from acquisitions and internal growth, which has increased its overall market share. CORPORATE AND OTHER The Corporate and Other classification includes the Gas Springs Division and corporate activities. The results of SBC, which was sold at Fiscal 1997 year-end, are included in the prior period results. The group reported a decrease in sales of $1.4 million, in the second quarter and $1.9 million, or 41%, in the first six months of Fiscal 1998, as compared to the same periods in Fiscal 1997, due primarily to exclusion of SBC's results in the current periods. The operating loss decreased by $3.6 million in the second quarter and $7.9 million in the first six months of Fiscal 1998, compared to the Fiscal 1997 periods, as a result of an increase in other income and a decline in legal expenses. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased by $19.5 million from $19.4 million at June 30, 1997 to $38.9 million at December 28, 1997. Cash received form the STFI Merger and the Offering was partially offset by cash used for operations of $93.9 million, net capital expenditures, including acquisitions of $30.9 million. The Company's principal cash requirements include debt service, capital expenditures, acquisitions, and payment of other liabilities. Other liabilities that require the use of cash include post-employment benefits for retirees, environmental investigation and remediation obligations, and litigation settlements and related costs. The Company maintains credit agreements with a consortium of banks, which provide a term loan and revolving credit facilities to the Company, and a separate revolving credit facility and term loans to Banner. The Company anticipates that existing capital resources, cash generated from operations, and cash from borrowings and asset sales will be adequate to maintain the Company's current level of operations. With the proceeds of the Offering, borrowings under the Facility and the after tax proceeds the Company has already received from the STFI Merger, the Company refinanced substantially all of its existing indebtedness (other than indebtedness at Banner), consisting of the 11 7/8% Senior Debentures due 1999, the 12% Intermediate Debentures due 2001, the 13 1/8% Subordinated Debentures due 2006, the 13% Junior Subordinated debentures due 2007 and its existing bank indebtedness. The Refinancing reduced the Company's total net indebtedness by approximately $132 million and reduced the Company's annual interest expense, on a pro forma basis, by approximately $21 million. The completion of the STFI Merger will reduce the Company's annual interest expense by approximately $3 million. In addition, a portion of the proceeds from the Banner Hardware Group Disposition were used to repay all of Banner's outstanding bank indebtedness, which will further reduce the Company's annual interest expense by an additional $14 million. The increase in the Company's shareholders' equity is expected to be approximately $40 million resulting a projected gain of $90 million to be recorded at the closing of the Banner Hardware Group Disposition, and an estimated tax provision of $39 million and a minority interest effect of $20 million. The operating income of the subsidiaries included in the Banner Hardware Group Disposition was $6.1 million and $14.1 million for the three and six months ended December 28, 1997, respectively. Whereas the Company will no longer benefit from the operations of the disposed Banner subsidiaries it expects to benefit from lower interest expense and dividends paid on the AlliedSignal stock. For the Company's fiscal years 1995, 1996, and 1997, and for the first six months of fiscal 1998, Fairchild Technologies ("Technologies") had operating losses of approximately $1.5 million, $1.5 million, $3.6 million, and $5 million, respectively. In addition, as a result of the downturn in the Asian markets, Technologies has experienced delivery deferrals, reduction in new orders, lower margins and increased price competition. In response, in February, 1998, the Company adopted a formal plan to enhance the opportunities for disposition of Technologies, while improving the ability of Technologies to operate more efficiently. The plan includes a reduction in production capacity and headcount at Technologies, and the pursuit of potential vertical and horizontal integration with peers and competitors of the two divisions that constitute Technologies, or the inclusion of those divisions in the Spin-Off. If the Company elects to include Technologies in the Spin-Off, the Company believes that it would be required to contribute substantial additional resources to allow Technologies the liquidity necessary to sustain and grow both the Fairchild Technologies' operating divisions. In connection with the adoption of such plan, the Company will take an after-tax reserve of approximately $22 million in discontinued operations in the third fiscal quarter ending March 29, 1998, of which $14 million (net of income tax benefit of $4 million) relates to an estimated loss on the disposal of certain assets of Technologies, and $8 million relates to a provision for expected operating losses over the next twelve months at Technologies. While the Company believes that $22 million is a sufficient charge for the expected losses in connection with the disposition of Technologies, there can be no assurance that the reserve is adequate. In order to focus its operations on the aerospace industry, the Company is considering distributing (the "Spin-Off") to its shareholders all of the stock of a subsidiary to be formed ("Spin-Co"), which may own substantially all of the Company's non-aerospace assets. Although the Company's ability to effect the Spin-Off is uncertain, the Company may effect a spin-off of certain non-aerospace assets as soon as it is reasonably practicable following receipt of a solvency opinion relating to Spin-Co and all necessary governmental and third party approvals. In order to effect the Spin-Off, approval is required from the board of directors of the Company, however, shareholder approval is not required. The composition of the assets and liabilities to be included in Spin-Co, and accordingly the ability of the Company to consummate the Spin-Off, is contingent, among other things, on obtaining consents and waivers under the Company's New Credit Facility. In addition, the Company may encounter unexpected delays in effecting the Spin-Off, and the Company can make no assurance as to the timing thereof. In addition, prior to the consummation of the Spin-Off, the Company may sell, restructure or otherwise change the assets and liabilities that will be in Spin-Co, or for other reasons elect not to consummate the Spin-Off. Consequently, there can be no assurance that the Spin-Off will occur. In connection with the possible Spin-Off, it is anticipated that the Company will enter into an indemnification agreement pursuant to which Spin- Co will assume and be solely responsible for all known and unknown past, present and future claims and liabilities of any nature relating to the pension matter described under "Legal Proceedings"; certain environmental liabilities currently recorded as $7.5 million, but for which it is reasonably possible the total expense could be $12.3 million on an undiscounted basis; certain retiree medical cost and liabilities related to discontinued operations for which the Company has accrued approximately $31.3 million as of December 28, 1997 (see Note 11 to the Company's Consolidated Financial Statements); and certain tax liabilities. In addition, the Spin-Co would also be responsible for all liabilities relating to the Technologies business and an allocation of corporate expenses. Responsibility for such liabilities would require significant commitments. Should the Spin-Off, as presently contemplated, occur prior to June of 1999, the Spin-Off will be a taxable transaction to shareholders of the Company and could result in a material tax liability to the Company and its shareholders. The amount of the tax to the Company and its shareholders is uncertain, and if the tax is material to the Company, the Company may elect not to consummate the Spin-Off. Because circumstances may change and because provisions of the Internal Revenue Code of 1986, as amended, may be further amended from time to time, the Company may, depending on various factors, restructure or delay the timing of the Spin-Off to minimize the tax consequences thereof to the Company and its shareholders. With the year 2000 approaching, the Company is preparing all of its computer systems to be Year 2000 compliant. Substantially all of the systems within the Aerospace Fasteners segment are currently Year 2000 compliant. The Company expects to replace and upgrade some systems, which are not Year 2000 compliant, within the Aerospace Distribution segment and at Fairchild Technologies. The Company expects all of its systems will be Year 2000 compliant on a timely basis. However, there can be no assurance that the systems of other companies, on which the Company's systems rely, will also be timely converted. Management is currently evaluating the cost of ensuring that all of its systems are Year 2000 compliant. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1997, FASB issued two pronouncements, Statement of Financial Accounting Standards No. 130 ("SFAS 130") "Reporting Comprehensive Income", and Statement of Financial Accounting Standards No. 131 ("SFAS 131") "Disclosures about Segments of an Enterprise and Related Information". SFAS 130 establishes standards for reporting and display of comprehensive income and its components in the financial statements. SFAS 131 supersedes Statement of Financial Accounting Standards No. 14 "Financial Reporting for Segments of a Business Enterprise" and requires that a public company report certain information about its operating segments in annual and interim financial reports. The Company will adopt SFAS 130 and SFAS 131 in Fiscal 1999. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.1 Third Amended and Restated Credit Agreement dated as of December 19, 1997. 10.2 Amendment No. 2 dated as of December 23, 1997, to the Interest Rate Hedge Agreement between Registrant and Citibank, N.A. dated as of August 19, 1997. * 27 Financial Data Schedules. 99.1 Financial statements, related notes thereto, including exhibits, of Banner Aerospace, Inc. for the nine months ended December 31, 1997 (incorporated by reference to the Banner Aerospace Inc. Form 10-Q for the nine months ended December 31, 1997). (b) Reports on Form 8-K: On December 8, 1997, the Company filed a Form 8-K to report on Item 5 and Item 7. The Company filed Shared Technologies Fairchild Inc. financial statements for each of the three years ended December 31, 1996, and for the quarter ended September 30, 1997. Additionally, the Company filed Nacanco Paketleme ("Nacanco") financial statements for the years ended December 31, 1995 and 1996. On December 15, 1997, the Company amended the aforementioned Form 8-K to include consent of Rothstein, Kass & Co, P.C. as related to the STFI financial statements, and to include an unaudited income statement for the year ended December 31, 1994 for Nacanco. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to the signed on its behalf by the undersigned hereunto duly authorized. For THE FAIRCHILD CORPORATION (Registrant) and as its Chief Financial Officer: By: Colin M. Cohen Senior Vice President and Chief Financial Officer Date: April 3, 1998 EX-27 2
5 6-MOS JUN-30-1998 DEC-28-1997 38,907 8,487 168,887 7,892 361,966 651,392 257,844 131,646 1,122,736 256,066 371,610 0 0 2,592 303,337 1,122,736 402,978 407,582 299,827 381,401 0 0 27,744 (6,497) (3,121) (3,376) 27,292 (3,024) 0 20,892 1.24 1.24
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