Fairchild Industries Inc. yesterday reported an operating loss of $124.3 million for its third quarter, after taking another round of large tax write-offs to cover losses in its airplane manufacturing divisions.
In the latest spate of bad news for the Chantilly, Va., company, Fairchild said it was writing off $152 million for the third quarter, bringing the total amount of write-offs it has taken over the past four quarters to $347.3 million.
The bulk of the current losses were incurred as a result of the company's previously announced decision to reduce its role in its joint venture to make a commuter airplane with Saab-Scania of Sweden. By reducing its role from equal partner to that of a subcontractor, Fairchild has had to write off an additional $102.3 million to the $135 million it had already reserved for losses.
Similarly, the company said it was adding another $40 million in reserves to the $60 million already written off, to cover increased costs the company is incurring in building a new jet trainer, the T46A, for the Air Force.
An additional $10 million write-off was taken after Fairchild revalued the assets of three small businesses, including a small electronics division, to reflect the true market value of these operations.
Largely as a result of these write-offs, the company reported a net loss of $$77.6 million ($5.89 per share) for the third quarter, compared with a $7.5 million (32 cents) profit earned during the same period last year.
The loss would have been greater had it not been from $46.6 million earned by parts of Fairchild's operations that were sold during the third quarter, including its airline seating and consumer hardware units and the company's interests in American Satellite Co. and Space Communications Co.
The $46.6 million profit included the net gain of $18.2 million from the sale of these assets.
These divisions helped cushion the $124.3 million loss from continuing operations -- operations that last year earned $2.6 million.
Third-quarter sales were up to $228.5 million from $183 million a year ago, because of the increase in the aerospace fastener and communications, electronics and space businesses as well as increased deliveries of commerical aircraft.
Fairchild signaled that it may be forced to incur even more write-offs in the future as a result of the development of the Air Force jet trainer.
The Air Force, partly in a move to trim its budget and partly because of concern over Fairchild's future, is moving to cancel the entire project.
Fairchild, however, assuming that Congress will not approve the Air Force's recommendation, is going forward on the assumption that it will approve the purchase of 33 jet trainers -- 11 more than first anticipated. That could result in another $10 million in losses because the cost of producing the jets has grown beyond the contract price at which the Air Force has agreed to buy the trainers, Fairchild said.
Meanwhile, the company is continuing to negotiate with its lenders, which last quarter had agreed to temporarily waive certain provisions in its loan agreements, apparently so the company can avoid defaulting on its loans.
"We are still negotiating, and expect successful completion," said Fairchild's spokesman, William E. Fulwider