Printer Friendly


    CHULA VISTA, Calif., May 27 /PRNewswire/ -- Rohr Inc. (NYSE: RHR) announced today its third quarter operating results.  At the same time, Rohr announced that it was taking charges to income for the third quarter and previous periods totaling $261.9 million after the effect of taxes.  The principal factor in the charges was the Company's decision, in light of current industry conditions, to adopt changes in its application of accounting principles relating to long- term programs and contracts.  The Company also adopted the provisions of two new Financial Accounting Standards that relate to post- retirement benefits other than pensions, and to income taxes.  The charges also include provisions for restructuring and other costs. Lastly, in compliance with SFAS No. 87, the Company recorded a separate charge of $13.3 million to shareholders' equity to reflect the current funding status of its retirement plan.
    The charges to income and the effect on shareholders' equity, net of tax benefits, break down as follows:
    Impact of Changes in Applying
     Accounting Principles:
     through July 31, 1992               $219.7
     in Fiscal 1993                        22.5
    Adoption of SFAS Nos. 106 and 109       4.3
    Provisions for Restructuring and
     Other Costs                           15.4
    Total Charges to Income               261.9
    Adjustment - Underfunded Pension       13.3
    Total Reduction of Equity            $275.2
    These accounting changes do not affect current cash flow or the Company's ability to meet its contractual obligations to its customers or to make timely payments to its suppliers.  Prior to adopting the accounting changes described above, the Company obtained waivers from its lenders to remain in compliance with its financial covenants while obtaining final documentation.
     The Company will file its Form 10-Q for the quarterly period ended May 2, 1993, on or before June 4, 1993.
    Accounting Changes
    In the third quarter of 1993, Rohr changed certain elements of its application of accounting principles relating to long-term programs and contracts, effective as of August 1, 1992.  These changes applied more stringent restrictions on the Company's program and contract estimates, which will generally reduce the number of production units and spares used in the calculation of overall profit margins.  In addition, certain costs previously carried in inventory for amortization over future deliveries will now be expensed.  These costs include certain pre-production costs -- consisting primarily of engineering and tooling expenses in excess of negotiated contractual values -- that are now expensed as identified.  In addition, general and administrative costs that were previously capitalized are now expensed as incurred.
    James J. Kerley, chairman of Rohr's board of directors, said: "Following a thorough review of its accounting policies, the Company concluded there was a need, particularly in light of the current aerospace environment, to have our accounting principles more closely reflect near-term program economics."
    Kerley said while the previous methods of applying the Company's accounting principles were in accordance with generally accepted accounting principles (GAAP), the changed policies are preferable and more conservative.  The application of these policies produces program and contract estimates that are based on shorter delivery periods, allowing a better matching of operating cash flows and operating income.
    Rohr also adopted, effective August 1, 1992, Statement of Financial Accounting Standards (SFAS) No. 106 - "Employers' Accounting For Post-Retirement Benefits Other Than Pensions."  This standard requires companies to accrue the expected cost of providing health care benefits to retired employees and their dependents during the employees' service period.  The cumulative effect of this change for the periods through July 31, 1992, net of taxes, was $4.3 million.  The effect of this change on the nine months ended May 2, 1993 was not material.
    Effective August 1, 1992, the Company also adopted SFAS No. 109 - "Accounting for Income Taxes."  The effect of adopting this standard in itself was not material.  However, under this standard, the Company recorded a substantial deferred tax asset as a result of its adoption of the other changes in accounting principles and other charges as discussed above.  The realization of the deferred tax asset is dependent upon future taxable income.
    The cumulative effect of all the accounting changes for the periods through July 31, 1992, net of taxes, was a charge against income of $224.0 million.  In accordance with applicable accounting standards, this charge was retroactively recorded on August 1, 1992, the first day of Rohr's 1993 fiscal year.  The accounting changes also affect results for the first nine months of the current fiscal year.  The effect of these changes on the three months and nine months ended May 2, 1993 was to decrease income, net of taxes, by $4.4 million, and $22.5 million, net of taxes, respectively.
    Results of Operations
    Sales for the three months and nine months ending May 2, 1993, were $296.8 million and $922.8 million, respectively, as compared with $298.8 million and $930.4 million for the same periods of the previous year.  An operating loss of $23.4 million was reported for the quarter ended May 2, 1993, as compared to an operating loss of $31.4 million for the same period in the previous year.  Third quarter operating results, before taxes, for fiscal 1993 were negatively affected by $7.1 million due to the changes in accounting principles and by $25.0 million net provisions for restructuring and other costs.  In addition, third quarter results were negatively impacted by a reduction in anticipated sales and by increased costs associated with certain programs.
    Cash flows from operating activities were $81.1 million for the three months ended May 2, 1993.  This was an unusually high amount and included several large payments to Rohr for tooling, engineering changes and similar non-recurring items as well as the payment of certain amounts that had been deferred pending aircraft certification.  Cash flows from operating activities for the nine months ended May 2, 1993, were a positive $45.5 million.
    Adjusting to the Industry Downturn
    While the economies of the United States, Japan and Europe have been expanding slowly this year, airline passenger traffic revenues continue to be disappointing.  Following record operating losses, the airlines have placed significant numbers of their existing fleet in temporary storage.  The airlines have also rescheduled or canceled a significant number of new aircraft orders and options from the aircraft manufacturing industry.  As a result, Rohr's commercial customers have reduced their aircraft production rates and commercial airlines have reduced their spares inventory levels.  Due to these reduced schedules, cash flows estimated by the Company at the time it bid on several programs will be significantly delayed and, in some cases, never realized in full.  These developments require Rohr to continue to reduce costs in order to match the size of its operations to its current and expected business.  The Company has closed its plant in Auburn, Washington, and will close its Hagerstown, Maryland facility, and has deferred completing a new facility in Arkansas. The Company has also reduced planned capital expenditures in fiscal 1993 to approximately $30 million from $40 million and has reduced its workforce from a peak of 12,000 in fiscal 1989 to 7,450 at May 2, 1993.  It plans to continue its cost and workforce reduction efforts in the future.
    "To address the challenges presented by the rapidly changing aerospace industry, we will maintain our focus on improving efficiencies and reducing costs," said Robert H. Rau, who was elected Rohr's president and chief executive officer in April.  "I have faced these down-sizing issues before and I believe the Rohr team will successfully meet these challenges.  We will enhance our franchise by reinforcing our relationships and value to our customers."
    The Company's principal financing agreements contain covenants, the most significant of which relate to the Company's tangible net worth, fixed-charge coverage ratio and debt-to-tangible-net-worth ratio.  Prior to adopting the accounting changes described above, the Company obtained waivers from its lenders to remain in compliance with its financial covenants while obtaining final documentation.
    As part of its strategy to match its capital structure more appropriately to the long-term nature of its program financing requirements, Rohr replaced certain short-term and uncommitted financing arrangements with longer term agreements during the first two quarters of fiscal 1993.  Continuing with this strategy, Rohr intends to file, in June, a registration statement with the Securities and Exchange Commission covering a public offering of debt securities.  The proceeds will be used primarily to replace certain of the Company's outstanding indebtedness.  The increased liquidity obtained by this offering will provide the Company with financial flexibility and capacity to continue to meet customer obligations, to invest in technological and capital improvements and to participate in key new program developments.  Existing cash resources and lending agreements are sufficient to meet liquidity requirements should the Company be delayed in completing the new debt offering.  The offering will be made only by means of a prospectus.
    The Company's firm backlog, which includes the sales price of all undelivered units covered by customers' orders for which the Company has production authorization, was approximately $1.4 billion as of May 2, 1993, compared to $1.9 billion at the end of last year's third quarter.  Approximately 88 percent of the Company's firm backlog is for commercial and business aircraft equipment.  The Company has an additional $2.3 billion in anticipated backlog, which represents existing contracts with options that are expected to be exercised and delivered within seven years based on current market conditions.  The anticipated backlog at the end of last year's third quarter was $2.3 billion.
    Rohr designs, integrates, manufactures and supports engine nacelle systems and components for commercial, military and business aircraft.  The Company also manufactures solid rocket motor casings and nozzles for the Titan IV launch vehicle.  Rohr, headquartered in Chula Vista, has facilities in the United States and Europe.
                     ROHR INC. AND SUBSIDIARIES
                    ($000 except per share data)
                        Three Months Ended       Nine Months Ended
                        5/2/93      5/3/92      5/2/93      5/3/92
    Sales              $296,781     $298,759   $922,785     $930,449
    Costs and expenses  320,148      330,185    937,183      911,396
    Operating income
     (loss)             (23,367)     (31,426)   (14,398)      19,053
    Interest expense-
     net                 12,618       30,459     35,388       53,566
    Loss before taxes
     on income          (35,985)     (61,885)   (49,786)     (34,513)
    Taxes (benefit) on
     income             (13,784)     (36,700)   (19,070)     (26,710)
    Net loss before
     accounting changes (22,201)     (25,185)   (30,716)      (7,803)
    Effect of accounting
     changes, net of taxes                     (223,950)
    Net loss            (22,201)     (25,185)  (254,666)      (7,803)
    Net loss per average
     share of common stock:
     Before accounting
     changes             ($1.24)      ($1.42)    ($1.72)      ($0.44)
     Effect of
      accounting changes                         (12.52)
    Net loss per average
     share of common
     stock               ($1.24)      ($1.42)   ($14.24)      ($0.44)
    Total common stock
     and equivalents     17,898       17,706     17,889       17,658
    Statistics (percent):
    Operating income
     (loss) to sales       (7.9)       (10.5)      (1.6)         2.1
    Effective tax
     (benefit) rate       (38.3)       (59.3)     (38.3)       (77.4)
    Net income (loss)
     before changes to
     sales                 (7.5)        (8.4)      (3.3)        (0.8)
    Pro forma amounts
     assuming the changes
     in the application
     of accounting
     principles for long-
     term programs and
     contracts are
     Net loss           (22,201)     (40,485)   (30,716)     (38,203)
     Net loss per
      average share
      of common stock     (1.24)       (2.29)     (1.72)       (2.16)
                       ROHR INC. AND SUBSIDIARIES
                     CONDENSED BALANCE SHEETS ($000)
                                       5/02/93      7/31/92
     Cash and short-term investments   $52,581      $21,122
     Accounts receivable               158,935      133,153
     Inventories - net                 436,141      832,977
     Prepaid expenses and
      other current assets              13,172       21,118
     Deferred tax assets                42,278
     Total current assets              703,107    1,008,370
    Property, Plant and Equipment -
     net                               241,012      270,283
    Investment in Leases and
     Other Assets                       85,181       85,305
    Deferred Tax Assets                 57,819
     Total                          $1,087,119   $1,363,958
     Trade accounts and other
      payables                        $184,755     $162,638
     Other accrued liabilities          45,067       97,441
     Short-term debt                                 20,000
     Current portion of
      long-term debt                    52,334       27,517
     Total Current Liabilities         282,156      307,596
     Long-Term Deferred Taxes on
      Income                                         43,458
     Long-Term Debt                    516,831      525,077
     Other Obligations                 106,205       38,961
     Shareholders' Equity              181,927      448,866
      Total                         $1,087,119   $1,363,958
                       ROHR INC. AND SUBSIDIARIES
         Increase (Decrease) in Cash and Short-term Investments
                        Three Months Ended     Nine Months Ended
                        5/2/93      5/3/92     5/2/93       5/3/92
    Net loss          ($22,201)    ($25,185) ($254,666)     ($7,803)
    Depreciation and
     amortization        6,326        7,024     18,974       20,402
    Cumulative effect of
     accounting change,
     net of taxes                              223,950
    Decrease in
     receivables        53,745       37,072     19,218       38,119
    Decrease in
     inventories        63,156       54,496     43,844       14,594
    Other              (19,955)     (27,732)    (5,820)        (640)
    Net cash provided
     by operating
     activities         81,071       45,675     45,500       64,672
     Proceeds from
      sale - leaseback
      transactions                              52,247
     Purchase of
      property, plant
      and equipment     (4,011)     (16,755)   (22,889)     (37,314)
     Other, including
      investment in
      leases             1,248          985     (1,274)       3,491
     Net cash provided
      by (used in)
      activities        (2,763)     (15,770)    28,084      (33,823)
    Financing Activities:
     Issuance of 9.33 pct.
      senior notes                              62,000
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:May 27, 1993

Related Articles
/C O R R E C T I O N -- ROHR/
Rohr Reports First Quarter Results
Rohr Reports Third Quarter Results

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters