Fairchild Industries Inc. has emerged from a stormy and unprofitable year and now is poised for brighter and prosperous times, Chairman Emanuel Fthenakis told shareholders at company's annual meeting yesterday.
"In 1986, we'll be profitable and we'll be self-sufficient from a cash standpoint," Fthenakis said at his first annual meeting since he took over as chairman last January.
Fthenakis acknowledged that 1985 was a troublesome year. The Chantilly, Va., company incurred a $167 million loss for the year, after selling off some of the corporate jewels -- including its 50 percent share in American Satellite Corp. -- to offset losses in some of the company's troubled operations, particularly its aircraft-manufacturing business. As a result, its assets dropped from $920.4 million to $702.2 million.
"We had a lot of stormy weather last year, but we emerged out of that storm . . . extremely strong," Fthenakis said. "I have great confidence we can rebuild this company into a great company."
As a sign of the turnaround, Fthenakis pointed to Fairchild's first-quarter earnings, which were released yesterday. Profits for the first three months of the year were $7.2 million (30 cents a share), compared with a net loss of $11 million ($1.05) for the same period the previous year. Last year's loss included a $28 million pretax write-off, set aside in a reserve to cover expected losses in manufacturing the controversial T46 jet trainer. Sales for the quarter increased by 25 percent to $230.7 million from $183.8 million.
Equally significant, Fthenakis said, "cash-wise, we were self-sufficient," during the first quarter. "We didn't exercise at all our revolving credit agreement" signed late last year for a three-year, $75 million credit line.
Financial analysts agreed with Fthenakis' optimistic outlook, noting that the company is bound to look good this year because of the massive write-offs taken last year to cover expected losses.
"They are coming back from the dead after taking various hits," said Wolfgan H. Demisch of First Boston Corp. "This year and next year, even if they just went to sleep, they would still generate profits. The question is what will they do for growth beyond that."
Fthenakis said he is optimistic about the company's future, even if the Air Force succeeds in canceling the T46 jet trainer that the company's Fairchild-Republic Long Island plant is developing. The Air Force, citing budget restraints and "numerous management and production deficiencies" and cost overruns in the development of the T46, has asked Congress to stop funding the jet in fiscal 1987.
Fthenakis said Fairchild hoped to persuade Congress to restore the funding. But even if Congress fails to go along, he noted that Fairchild already has set aside $100 million in reserve to cover expected losses after the Air Force said it would not order the second stage of T46 trainers. That reserve would help cushion the company if the T46 is eliminated entirely.
Should that happen, company officials said they would explore ways to try to keep Fairchild-Republic open. Earlier attempts to sell the company to Grumman Corp. failed.
Among other things, Fairchild will try to sell T46 trainers to foreign military services, consider bidding on a new transport plane and also try to persuade the Air Force to shift some of its in-house modernization programs to the Fairchild-Republic plant.
Should efforts fail, Fairchild will begin to wind down all Fairchild-Republic operations by late 1987.
Meanwhile, Fthenakis noted, the Air Force last week began paying Fairchild 75 percent of its monthly $8 million due Fairchild Republic for initial production of the trainer and spare parts for other aircraft. Last year, the Air Force had halved its monthly payments, citing numerous production deficiencies.