___________________________________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 1-5129
MOOG INC.
(Exact name of registrant as specified in its charter)
New York State 16-0757636
___________________________________________________________________________
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
East Aurora, New York 14052-0018
___________________________________________________________________________
(Address of principal executive offices) (Zip code)
Telephone number including area code: (716) 652-2000
___________________________________________________________________________
Former name, former address and former fiscal year, if changed since last
report
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 [ ]
The number of shares outstanding of each class of common stock as of
February 3, 1997 were:
Class A Common Stock, $1.00 par value 5,404,345 shares
Class B Common Stock, $1.00 par value 1,586,275 shares
MOOG INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION 3-12
Item 1. Consolidated Condensed Balance Sheets
December 31, 1996 and September 30,
1996 3
Consolidated Condensed Statements of
Operations Three Months Ended
December 31, 1996 and 1995 4
Consolidated Condensed Statements of
Cash Flows Three Months Ended
December 31, 1996 and 1995 5
Notes to Consolidated Condensed
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION 13
SIGNATURES 14
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
MOOG INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
Unaudited Audited
As of As of
December 31, September 30,
1996 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 11,743 $ 9,639
Receivables 152,684 155,972
Inventories (note 3) 107,176 99,318
Deferred income taxes 19,389 19,708
Prepaid expenses and other current assets 8,996 2,939
_______ _______
TOTAL CURRENT ASSETS 299,988 287,576
PROPERTY, PLANT AND EQUIPMENT, net 137,563 131,371
INTANGIBLE ASSETS, net (note 2) 52,908 16,024
OTHER ASSETS 14,624 14,587
_______ _______
TOTAL ASSETS $505,083 $449,558
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 3,386 $ 3,420
Current installments of long-term debt 16,916 10,491
Accounts payable 21,971 21,597
Accrued salaries, wages and commissions 21,578 24,504
Contract loss reserves 8,752 10,966
Accrued interest 3,909 6,160
Other accrued liabilities 15,800 14,208
Customer advances 6,715 8,259
_______ _______
TOTAL CURRENT LIABILITIES 99,027 99,605
LONG-TERM DEBT, excluding current installments
Senior debt 129,927 77,351
Senior subordinated notes 120,000 120,000
OTHER LONG-TERM LIABILITIES 47,774 47,859
_______ _______
TOTAL LIABILITIES 396,728 344,815
_______ _______
SHAREHOLDERS' EQUITY (note 4)
Preferred stock 100 100
Common stock 9,134 9,134
Other shareholders' equity 99,121 95,509
_______ _______
TOTAL SHAREHOLDERS' EQUITY 108,355 104,743
_______ _______
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $505,083 $449,558
======= =======
See accompanying Notes to Consolidated Condensed Financial Statements.
MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands except per share data)
Three Months Ended
December 31,
1996 1995
NET SALES $ 103,850 $ 93,233
OTHER INCOME 519 518
_________ _________
104,369 93,751
_________ _________
COSTS AND EXPENSES
Cost of sales 70,799 64,707
Research and development 4,201 4,005
Selling, general and administrative 19,519 17,814
Interest 5,357 3,957
Other expenses 267 42
_________ _________
100,143 90,525
_________ _________
EARNINGS BEFORE INCOME TAXES 4,226 3,226
INCOME TAXES 1,267 876
_________ _________
NET EARNINGS $ 2,959 $ 2,350
========= =========
NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.41 $ 0.30
========= =========
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING (note 5) 7,221,611 7,727,213
========= =========
See accompanying Notes to Consolidated Condensed Financial
Statements.
MOOG INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
Three Months Ended
December 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 2,959 $ 2,350
Adjustments to reconcile net earnings
to net cash provided (used) by operating
activities:
Depreciation and amortization 5,169 4,709
Other (7,313) (9,903)
______ ______
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 815 (2,844)
______ ______
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses (note 2) (48,589) (5,012)
Purchase of property, plant and equipment (3,656) (2,441)
Other 250 91
______ ______
NET CASH USED BY INVESTING ACTIVITIES (51,995) (7,362)
______ ______
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from notes payable 74 2,463
Net proceeds from revolving lines of credit 52,000 9,091
Proceeds from issuance of long-term debt 4,188 -
Payments on long-term debt (2,589) (1,155)
Other (410) 12
______ ______
NET CASH PROVIDED BY FINANCING ACTIVITIES 53,263 10,411
______ ______
Effect of exchange rate changes on cash 21 (33)
______ ______
INCREASE IN CASH AND CASH EQUIVALENTS 2,104 172
Cash and cash equivalents at beginning of period 9,639 7,576
______ ______
CASH AND CASH EQUIVALENTS AT END OF PERIOD $11,743 $ 7,748
______ ______
CASH PAID FOR:
Interest $ 7,472 $ 2,604
Income taxes 1,208 853
See accompanying Notes to Consolidated Condensed Financial Statements.
MOOG INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
(dollars in thousands)
1. Basis of Presentation
In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements fairly present the
financial position of Moog Inc. as of December 31, 1996 and the
results of its operations and cash flows for the three months
ended December 31, 1996 and 1995. The results of operations for
the three month period ended December 31, 1996 are not
necessarily indicative of the results expected for the full year.
2. Acquisitions
On October 26, 1996, the Company acquired the assets of and
assumed certain liabilities related to the industrial hydraulic
servocontrols business (the U.S. Industrial Hydraulics Business)
of International Motion Control Inc., (IMC), an unrelated third
party. The purchase price was $48,600. The U.S. Industrial
Hydraulics Business, which operated under the name Moog Controls
Inc., was spun off by the Company in February 1988. The
acquisition has been accounted for under the purchase method, and
accordingly, the operating results for the U.S. Industrial
Hydraulics Business have been included in the Consolidated
Condensed Statement of Operation since the date of acquisition.
The acquisition was principally financed with proceeds from the
Company's U.S. Revolving Credit and Term Loan Facility. The
acquisition resulted in intangible assets of approximately
$37,700, the majority of which are being amortized over 30 years.
In a related transaction, the Company acquired a manufacturing
facility which IMC originally intended for use by the U.S.
Industrial Hydraulics Business. This purchase was principally
financed through industrial revenue bonds. The Company has
reached an agreement to sell the building to a third party. The
sale is expected to be consummated during the second quarter and
will result in no gain or loss.
3. Inventories
Inventories are stated at the lower of cost or market using the
first-in, first-out (FIFO) method of valuation. Inventories are
comprised of the following:
December 31, September 30,
1996 1996
Raw materials and purchased parts $ 33,016 $ 30,609
Work in process 61,069 55,789
Finished goods 13,091 12,920
_______ _______
$107,176 $ 99,318
_______ _______
4. Shareholders' Equity
The changes in shareholders' equity for the three months ended December 31,
1996 are summarized as follows:
Number of Shares
Class A Class B
Preferred Common Common
Amount Shares Stock Stock
PREFERRED STOCK
Beginning and end of period $ 100 100,000
COMMON STOCK
Beginning and end of period 9,134 6,629,245 2,504,878
ADDITIONAL PAID-IN CAPITAL
Beginning of period 47,611
Issuance of Treasury shares at
less than cost (9)
______
End of period 47,602
RETAINED EARNINGS
Beginning of period 74,825
Net earnings 2,959
Preferred stock dividends (2)
______
End of period 77,782
TREASURY STOCK
Beginning of period (31,803) (5,114) (1,219,050) (936,603)
Treasury stock issued 330 5,350 18,000
Treasury shares acquired (250) (11,200)
_______ _________ _______
End of period (31,723) (1,224,900) (918,603)
EQUITY ADJUSTMENTS
Beginning of period 5,377
Foreign currency translation 542
_______
End of period 5,919
LOAN TO SAVINGS AND STOCK
OWNERSHIP PLAN (SSOP)
Beginning of period (501)
Payments received on loan
to SSOP 42
_______
End of period (459)
TOTAL SHAREHOLDERS'
EQUITY $108,355 94,886 5,404,345 1,586,275
_______ ______ _________ _________
5. Per Share Data
Average common and common equivalent shares outstanding include
237,568 common equivalent shares related to stock options for the
three months ended December 31, 1996. There were no common
equivalent shares included in the calculation for the same period
in the prior year.
6. Accounting Changes
During the first quarter of fiscal 1997, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of" and SFAS No.123, "Accounting for
Stock-Based Compensation."
The Company's previous policy on impairment was not materially
different than that prescribed by SFAS No. 121. The adoption of
SFAS No. 121 on October 1, 1996 did not require any impairment to
be recognized for the quarter ended December 31, 1996.
As permitted by SFAS No. 123, the Company will continue to apply
its current accounting policy under Accounting Principles Board
Opinion No. 25 with respect to stock-based compensation. The
adoption of SFAS No. 123 on October 1, 1996 had no effect on the
Company's consolidated financial position or results of
operations for the quarter ended December 31, 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
In connection with the Company's strategy of enhancing
market share and improving manufacturing and engineering
capabilities and utilization, on October 26, 1996, the Company
acquired the assets of and assumed certain liabilities related to
the industrial hydraulic servocontrols business (the U.S.
Industrial Hydraulics Business) of International Motion Control
Inc., (IMC), an unrelated third party. The purchase price for
the U.S. Industrial Hydraulics Business was $48.6 million. The
U.S. Industrial Hydraulics Business, which operated under the
name Moog Controls Inc., was spun off by the Company in February
1988. The acquisition was accounted for under the purchase
method, and accordingly, the operating results for the U.S.
Industrial Hydraulics Business are included in the Consolidated
Condensed Statement of Operations from the date of acquisition.
The acquisition was principally financed with proceeds from the
Company's U.S. Revolving Credit and Term Loan Facility. The
acquisition resulted in intangible assets of approximately $37.7
million, the majority of which are being amortized over 30 years.
In a related transaction, the Company acquired a
manufacturing facility which IMC originally intended for use by
the U.S. Industrial Hydraulics Business. The Company has reached
an agreement to sell the building to a third party. The sale is
expected to be consummated during the second quarter and will
result in no gain or loss.
Effective October 1, 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and SFAS No. 123, "Accounting for Stock-Based
Compensation." The adoption of these standards had no effect on
the Company's consolidated financial position or results of
operations for the three months ended December 31, 1996.
For the three months ended December 31, 1996, the Company
generated net earnings of $3.0 million ($.41 per share) on net
sales of $103.9 million, compared with $2.4 million ($.30 per
share) on net sales of $93.2 million in the comparable period of
the prior year.
Segment Operating Review
Three Months Ended
(dollars in thousands) December 31,
1996 1995
Sales:
Domestic Controls:
Segment $ 74,739 $ 66,992
Intersegment (2,256) (3,403)
________ ________
72,483 $ 63,589
======== ========
International Controls:
Segment 33,184 33,160
Intersegment (1,817) (3,516)
________ ________
31,367 29,644
________ ________
$103,850 $ 93,233
======= ========
Operating profit:
Domestic Controls $ 9,510 $ 7,831
International Controls 2,490 2,272
Eliminations (216) (507)
________ ________
$ 11,784 $ 9,596
======== =======
Net earnings:
Domestic Controls $ 2,427 $ 1,897
International Controls 690 753
Eliminations (158) (300)
________ ________
$ 2,959 $ 2,350
======== ========
Backlog:
Domestic Controls $ 217,595 $ 197,100
International Controls 43,749 44,695
________ ________
$ 261,344 $ 241,795
======== ========
Domestic Controls
Domestic Controls net sales increased by 14.0% to $72.5
million as compared with the same period in the prior year. The
Domestic Controls segment, which operates predominantly in North
American aerospace markets, continues to benefit from its
strategy of generating a greater share of its revenues from
commercial markets. Increased production rates in both the
commercial aircraft and communication-related satellite and space
propulsion product lines more than offset volume declines in
military aircraft controls. In addition, the aforementioned
acquisition of the U.S. Industrial Hydraulics Business added
approximately $4.5 million to Domestic Controls first quarter
revenues.
Operating income for the Domestic Controls segment was $9.5
million (12.7% of segment sales) in the first quarter of fiscal
1997, up 21.4% from fiscal 1996 results of $7.8 million (11.7% of
segment sales). The increase is directly attributable to
increased sales in the commercial aircraft and communication-
related satellite product lines, a favorable product mix in
military aircraft controls and the acquisition of the U.S.
Industrial Hydraulics Business, which contributed approximately
$.6 million in incremental profits in the first quarter.
Although sales declines were experienced within the military
aircraft product line, a greater percentage of its revenues was
generated from higher margin production programs and aftermarket
products as compared to a year ago. Higher operating income
resulting from these factors was tempered by increased selling
efforts within the commercial aircraft product line related to
sales opportunities in the commercial sector.
Backlog consists of that portion of open orders for which
sales are expected to be recognized over the next twelve months.
Backlog for the Domestic Controls segment was $217.6 million at
December 31, 1996 as compared to $205.5 million at September 30,
1996 and $197.1 million at December 31, 1995. The increase from
a year ago is due to growth in orders in the military aircraft
and communication-related satellite product lines and the
acquisition of the U.S. Industrial Hydraulics Business.
International Controls
Net sales in the International Controls segment increased
5.8% to $31.4 million in the first quarter of fiscal 1997 despite
unfavorable currency movements. The increase was due principally
to incremental revenues resulting from the December 1995
acquisition of the industrial servovalve product line of Ultra
Hydraulics Limited and increased demand for industrial hydraulics
in certain Pacific Rim countries and military and commercial
aircraft controls in Europe. These increases were partially
offset by marginally lower industrial hydraulic sales in Germany.
International Controls first quarter operating income
increased 9.6% to $2.5 million (7.5% of segment sales) as
compared to $2.3 million (6.9% of segment sales) a year ago. The
aforementioned sales gains in the Pacific Rim, in European
military and commercial aircraft controls and from the Ultra
acquisition were partially offset by unfavorable changes in
product mix in Germany, specifically, a shift away from higher
margin industrial hydraulic products.
Backlog at December 31, 1996 for the International Controls
segment was $43.7 million compared to $37.8 million at September
30, 1996 and $44.7 million at December 31, 1995. The decline
from a year ago was primarily attributable to lower relative
currency values in certain European and Pacific Rim countries.
Non-Operating Review
Interest expense increased by $1.4 million to $5.4 million
as compared to the first quarter of fiscal 1996 due, in part, to
additional indebtedness outstanding in the current quarter in
connection with the aforementioned acquisition of the U.S.
Industrial Hydraulics Business. In addition, a portion of the
current quarter increase is due to a recapitalization initiated
by the Company in May 1996, which included the issuance of $120
million Senior Subordinated Notes and the repayment of certain
existing indebtedness. The recapitalization enhanced the
Company's long-term capital base and provided additional senior
debt capacity to fund growth while having the effect of
increasing the Company's average interest rate.
The effective tax rate for the quarter ended December 31,
1996 was 30.0% compared to 27.2% in the same quarter last year.
The current quarter rate reflects anticipated benefits resulting
from distributions of earnings from the Company's German
subsidiary and tax incentives associated with U.S. export sales.
Financial Condition and Liquidity
Cash provided by operating activities was $.8 million in the
first quarter of fiscal 1997 compared to cash used of $2.8
million in the same period a year ago. The increase in cash
provided is due to increased earnings and improved working
capital management.
Current installments of long-term debt increased from
September 30, 1996 by $6.4 million to $16.9 million at December
31, 1996. The increase is due primarily to the aforementioned
purchase of a building from IMC using the proceeds from
industrial revenue bonds. The Company has reached an agreement to
sell the building to a third party. The sale is expected to be
consummated during the second quarter, at which time the proceeds
from the sale will be used to pay-off the related indebtedness.
Long-term senior debt increased from September 30, 1996 by
$52.6 million to $129.9 million at December 31, 1996 primarily
due to the acquisition of the U.S. Industrial Hydraulics
Business, which was principally financed with proceeds from the
Company's U.S. Revolving Credit and Term Loan Facility. The
percentage of long-term debt to capitalization at December 31,
1996 was 69.8% as compared to 65.3% at September 30, 1996.
Unused lines of credit at December 31, 1996 were $68.9
million, along with cash and cash equivalents of $11.7 million.
Management believes that Moog's credit facilities and cash flow
from operations will continue to be sufficient to meet its
operating needs.
Working capital at December 31, 1996 was $201.0 million
compared with $188.0 million at September 30, 1996. The current
ratio was 3.03 at December 31, 1996 compared to 2.89 at September
30, 1996. The principal factor contributing to the increase in
working capital was the acquisition of the U.S. Industrial
Hydraulics Business. Current assets increased by $12.4 million
primarily due to inventory obtained through the acquisition and
an increase in other current assets resulting from the
aforementioned purchase of a building from IMC. The building has
been classified as an asset held for sale in anticipation of its
sale to a third party in the second quarter. Current liabilities
remained consistent with September 30, 1996. The previously
mentioned increase in current installments of long-term debt was
offset by decreases in accrued payroll costs and interest
resulting from the timing of payments of such accruals.
Property, plant and equipment increased $6.2 million to
$137.6 million at December 31, 1996 primarily due to the
acquisition of the U.S. Industrial Hydraulics Business. Capital
expenditures for the first quarter of fiscal 1997 were $3.7
million compared to $2.4 million last year, and depreciation and
amortization were $5.2 million and $4.7 million, respectively,
for the same periods. Capital expenditures for fiscal 1997
should approximate $15 million.
Intangible assets increased $36.9 million from September 30,
1996 primarily due to goodwill resulting from the current quarter
acquisition of the U.S. Industrial Hydraulics Business offset by
current quarter amortization.
Cautionary Statement
Information included or incorporated by reference which are
not historical facts are forward looking statements. Such
forward looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. The forward looking statements involve a number of risks
and uncertainties, including but not limited to, contracting with
various governments, changes in economic conditions, demand for
the Company's products, pricing pressures, intense competition in
the industries in which the Company operates, the need for the
Company to keep pace with technological developments and timely
response to changes in customer needs, and other factors
identified in the Company's Securities and Exchange Commission
filings.
Outlook
The Company believes the Domestic Controls segment is well
positioned to benefit from the rapid growth forecasted in the
commercial aircraft and communication-related satellite markets
and continues its strategy of generating a greater share of its
revenues from commercial markets. Government/Military revenues
remain stable and the Company is positioned to benefit from
increased sales of more profitable aftermarket products. While
its integration continues, the recently acquired U.S. Industrial
Hydraulics Business made a positive contribution to first quarter
earnings.
Synergies resulting from the integration of the U.S.
Industrial Hydraulics Business will also benefit the
International Controls segment, as will on-going cost reduction
initiatives. While the European operations experienced lower
industrial hydraulic sales in the first quarter, stronger sales
of military and commercial aircraft controls in Europe and
industrial hydraulic products in the Pacific Rim region more than
offset this decline. The Company believes its operating
performance will continue to benefit from the International
Controls segment's geographic and product line diversity.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security
Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit 10 (xiii) - Amendment No. 5 to the
Revolving and Term Loan Agreement dated
October 26, 1996.
Exhibit 27 - Financial data schedule.
b. Reports on Form 8-K.
The Company filed a report on Form 8-K dated
October 28, 1996 reporting pursuant to items
5 and 7.
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.
Moog Inc.
___________________________________
(Registrant)
Date: February 10, 1997 By /S/Robert R. Banta
Robert R. Banta
Executive Vice President
Chief Financial Officer
(Principal Financial Officer)
Date: February 10, 1997 By /S/Donald R. Fishback
Donald R. Fishback
Controller
(Principal Accounting Officer)
Exhibit 10(xiii)
CONSENT AND FIFTH AMENDMENT TO REVOLVING AND TERM LOAN AGREEMENT
THIS AGREEMENT is made as of the 26th day of October,
1996 among the banks identified in Exhibit A attached to and made
a part of this Agreement (collectively the "Banks" and
individually a "Bank"), Marine Midland Bank, a New York banking
corporation having its chief executive office at One Marine
Midland Center, Buffalo, New York 14203, ("Marine"), as agent for
the Banks, and Moog Inc., a New York business corporation having
its chief executive office at Jamison Road and Seneca Street,
East Aurora, New York 14052-0018, (the "Borrower").
WHEREAS, the Banks, Marine as agent for the Banks and
Borrower previously entered into a Revolving and Term Loan
Agreement dated June 15, 1994, a First Amendment to Revolving and
Term Loan Agreement dated as of November 14, 1995, a Consent and
Second Amendment to Revolving and Term Loan Agreement dated as of
March 22, 1996, a Consent and Third Amendment to Revolving and
Term Loan Agreement dated as of May 13, 1996 and a Fourth
Amendment to Revolving and Term Loan Agreement dated as of
June 18, 1996 (as so amended, the "Loan Agreement"); and
WHEREAS, the Banks, Marine as agent for the Banks and
the Borrower now desire to amend certain terms of the Loan
Agreement; and
WHEREAS, the Banks and Marine as agent for the Banks
now desire to give their consent under the Loan Agreement to the
taking of certain actions by the Borrower;
NOW, THEREFORE, effective on the date described in
Section 5(a) of this Agreement, the Banks, Marine as agent for
the Banks and the Borrower agree as follows:
1. DEFINITIONS. Each word or expression used, but
not defined, in this Agreement shall have the meaning given it in
the Loan Agreement.
2. AMENDMENTS.
a. Section 6(d) of the Loan Agreement shall be
amended to read in its entirety as follows:
d. Senior Debt to Net Capital Base Ratio.
Maintain at the end of each fiscal quarter of the
Borrower the Senior Debt to Net Capital Base Ratio so
that it does not exceed the following applicable
percentage: (i) for any fiscal quarter ending on or
before September 30, 1998, 102% and (ii) for any such
fiscal quarter ending thereafter, 80%;
b. Subsection (i) of Section 6(e) of the Loan
Agreement shall be amended in its entirety to read as follows:
(i) EBITDA of the Borrower (A) for the fiscal year of
the Borrower ending on September 30, 1995 less the
aggregate amount of all capital expenditures of the
Borrower and all Subsidiaries for such fiscal year so
that it is not less than 200% of the required interest
payments on all Indebtedness of the Borrower and all
Subsidiaries for such fiscal year, (B) for the fiscal
years of the Borrower ending on September 30, 1996 and
September 30, 1997 so that it is not less than 250% of
the required interest payments on all Indebtedness of
the Borrower and all Subsidiaries for each such fiscal
year and (C) for each fiscal year of the Borrower
ending thereafter so that it is not less than 275% of
the required interest payments on all Indebtedness of
the Borrower and all Subsidiaries for such fiscal year
and
c. Section 6(t) of the Loan Agreement shall be
amended to read in its entirety as follows:
t. Interest Rate Protection. Execute and
deliver or cause to be executed and delivered
agreements, in form and substance satisfactory to the
Agent, with financial institutions satisfactory to the
Required Banks providing, when aggregated with similar
protections previously delivered, interest rate
protections with respect to (i) at least $60,000,000
for a period of at least two years and deliver evidence
satisfactory to the Agent of the existence thereof no
later than July 15, 1994 and (ii) at least $60,000,000
at all times during the period from October 15, 1996
through September 30, 1999, in such time increments as
the Borrower may select, and deliver evidence
satisfactory to the Agent of the existence thereof
within fifteen days of entering into each such
agreement; and
d. Subsection (iii) of Section 7(i) of the Loan
Agreement shall be amended to read in its entirety as follows:
(iii) acquire all or substantially all of the assets or
stock of any other Person, or assets constituting all
or substantially all of a division or product line of
any other Person, other than pursuant to a Permitted
Acquisition,
e. Section 7(j-1) of the Loan Agreement shall be
amended to read in its entirety as follows:
j-1. Capital Expenditures. Make (whether by means
of any purchase or other acquisition of any asset, by
means of any capital lease or otherwise) capital
expenditures, other than for any Permitted Acquisition,
exceeding in the aggregate for the Borrower and all
Subsidiaries during any fiscal year of the Borrower the
following applicable amount: (i) during the fiscal
year of the Borrower ending on September 30, 1996,
$14,000,000 and (ii) during any fiscal year of the
Borrower ending thereafter, $15,000,000;
f. Section 12(rr-1) of the Loan Agreement shall be
amended to read in its entirety as follows:
rr-1. Permitted Acquisition. "Permitted
Acquisition" means (i) the Permitted Special
Acquisition or (ii) any other acquisition by the
Borrower or any Subsidiary of all or substantially all
of the assets or stock of any other Person, or assets
constituting all or substantially all of a division or
product line of any other Person, so long as
(A) neither immediately prior to contracting for such
other acquisition shall there exist, nor as a direct or
indirect result of the consummation of any such other
acquisition shall there occur, any Event of Default or
Default, (B) the aggregate consideration paid (whether
by means of transfer of assets, assumption of
liabilities or otherwise) by the Borrower and all
Subsidiaries in connection with all such other
acquisitions during the term of this Agreement does not
exceed $2,000,000 and (C) with respect to any assets or
stock of any Person acquired directly or indirectly
pursuant to any such other acquisition, all collateral
requirements of the Required Banks are satisfied.
g. Section 12(tt) shall be amended to read in its
entirety as follows:
tt. Permitted Indebtedness. "Permitted
Indebtedness" means any Indebtedness (including any
related to any Contingent Obligation) of the Borrower
or of any Subsidiary (i) to any Lending Entity pursuant
to this Agreement, (ii) constituting unsecured normal
trade debt incurred upon customary terms in the
ordinary course of its business, (iii) resulting from
the endorsement in the ordinary course of its business
of any check or other negotiable instrument for
deposition or collection, (iv) to the extent incurred
to pay, or to defer the payment of, the purchase price
of any equipment used in the ordinary course of its
business, (v) consisting of Indebtedness only of any
Foreign Subsidiary, (vi) to any Sharing Creditor to the
extent described in clause (ii) of Section 12(ttt) of
this Agreement, (vii) Indebtedness of the Borrower, in
an amount not to exceed $15,000,000, pursuant to that
certain Credit Facility for Eurocredits dated
September 18, 1996 between the Borrower and
Landesgirokasse offentliche Bank und Landessparkasse or
(viii) identified as "Permitted Indebtedness" in
Exhibit A attached to and made a part of this
Agreement.
3. CONSENTS. Section 5(a) of the Loan Agreement
provides that "[t]he proceeds of each subsequent Revolving Loan
will be used only for working capital and other cash needs
arising in the ordinary course of business (not including any
corporate or other acquisition other than pursuant to a Permitted
Acquisition". Section 7(b) of the Loan Agreement provides that
"the Borrower shall not, without the prior written consent of the
Required Banks . . . assume or have any Indebtedness ... (ii)
pursuant to any Contingent Obligation, except ... for Permitted
Indebtedness". Section 7(d) of the Loan Agreement provides that
"the Borrower shall not, without prior written consent of the
Required Banks . . . cause or permit ... any of its Assets to be
subject to any Lien, except for Permitted Liens". Section 7(i)
of the Loan Agreement, as amended by this Agreement, provides
that "the Borrower shall not, without the prior written consent
of the Required Banks . . . (iii) acquire all or substantially
all of the assets . . . of any other Person . . other than
pursuant to a Permitted Acquisition". In addition,
Section 7(j)-1) of the Loan Agreement, as amended by this
Agreement, provides that "the Borrower shall not, without the
prior written consent of the Required Banks . . . [m]ake
. . . capital expenditures exceeding . . . during any fiscal year
of the Borrower . . . $15,000,000". The Borrower has requested
the Required Banks to consent, and by this Agreement the Required
Banks consent, to (i) the acquisition by the Borrower of (A) the
assets and business of Moog Controls Inc. ("MCI") and certain
assets of IMC Controls GmbH pursuant to the terms of that certain
Asset Purchase Agreement dated as of September 22, 1996 by and
between the Borrower, MCI, International Motion Control Inc.,
Enidine Holding L.P. and Enidine Holding, Inc. (the "Asset
Purchase Agreement") for a purchase price of $48,600,000 (the
"MCI Assets") and (B) the real property and improvements commonly
known as 7 Sterling Drive, Orchard Park, New York pursuant to the
terms of that certain Real Estate Purchase Agreement dated as of
September 22, 1996 by and between the Borrower and MCI (as
amended by that certain letter agreement dated as of
September 22, 1996 by and between Borrower and MCI) (the "Real
Estate Purchase Agreement") for a purchase price of $5,850,000
(the "MCI Real Property") (the acquisition of the MCI Assets and
the MCI Real Property is collectively referred to herein as the
"MCI Acquisition"), (ii) the use by the Borrower of proceeds of
any subsequent Revolving Loan to pay for the purchase of the MCI
Assets and (iii) either (A) the use by the Borrower of the
proceeds of any subsequent Revolving Loan to pay for the purchase
of the MCI Real Property or (B) the assumption by the Borrower of
Indebtedness of MCI, the principal amount of which does not
exceed $5,850,000, governed by those certain financing
arrangements of MCI described in that certain Lease Agreement
dated as of January 1, 1996 between the Erie County Industrial
Development Agency and MCI in connection with the purchase of the
MCI Real Property and the Borrower's permitting the existing
liens and encumbrances on the MCI Real Property created by such
financing arrangements to remain.
4. PREREQUISITES TO LOANS. The obligation of any
Bank to make any Loan after the effective date of this Agreement
shall be conditioned upon the following:
a. No Default. (i) There not existing at the time
such Loan is to be made any Event of Default or Default and
(ii) such Bank not believing in good faith that any Event of
Default or Default so exists;
b. Representations and Warranties. (i) Each
representation and warranty made in the Loan Agreement, as
amended by this Agreement, being true and correct as of all times
during the period beginning on the effective date of this
Agreement and ending at the time such Loan is to be made and as
of the time such Loan is to be made, except to the extent updated
in a certificate executed by a Designated Officer and a
Designated Financial Officer and received by each Lending Entity
before the time such Loan is to be made, (ii) each other
representation and warranty made to any Lending Entity by or on
behalf of the Borrower or any Subsidiary before the time such
Loan is to be made being true and correct as of the date thereof,
except to the extent updated in a certificate executed by a
Designated Officer and a Designated Financial Officer and
received by each Lending Entity before the time such Loan is to
be made, (iii) each financial statement provided to any Lending
Entity by or on behalf of the Borrower or any Subsidiary before
the time such Loan is to be made having fairly represented the
financial information that it purports to reflect as of the date
thereof and (iv) such Bank not believing in good faith that
(A) any such representation or warranty, except to the extent so
updated, was or is other than true and correct as of any time or
date of determination of the truth and correctness thereof or
(B) any such financial statement did not so fairly represent such
information as of the date thereof;
c. Proceedings. Such Bank being satisfied as to each
corporate or other proceeding of the Borrower and any Subsidiary
in connection with any transaction contemplated by the Loan
Agreement, as amended by this Agreement; and
d. Receipt by Banks. The receipt by each Bank at or
before the time such Loan is to be made of the following, in form
and substance satisfactory to each Lending Entity:
(i) If such Loan is the first Revolving Loan after the
effective date of this Agreement, a certificate executed by a
Designated Officer and a Designated Financial Officer updating
each representation and warranty previously made in or pursuant
to the Loan Agreement and stating that (A) there did not occur or
exist at any time during the period beginning on the date of the
Loan Agreement and ending at the time such Loan is to be made and
there does not exist at the time such Loan is to be made any
Event of Default or Default and (B) each representation and
warranty made in the Loan Agreement, as amended by this
Agreement, was true and correct as of all times during the period
beginning on the date of the Loan Agreement and ending at the
time such Loan is to be made and is true and correct as of the
time such Loan is to be made, except to the extent updated in a
certificate executed by a Designated Officer and a Designated
Financial Officer and received by each Lending Entity before the
time such Loan is to be made;
(ii) If such Loan is the first Revolving Loan after the
date of this Agreement, evidence of the taking and the
continuation in full force and effect, at the time such Revolving
Loan is to be made, of each corporate or other action of the
Borrower or any other Person necessary to authorize the obtaining
of all Loans by the Borrower and the execution, delivery and
performance of each Loan Document and the imposition or creation
of each security interest, mortgage and other lien and
encumbrance imposed or created pursuant to any Loan Document;
(iii) If such Loan is the first Revolving Loan after
the date of this Agreement, evidence of the closing of the MCI
Acquisition in accordance with the terms of the Asset Purchase
Agreement and the Real Estate Purchase Agreement including the
expiration of the related waiting period therefor under
Hart-Scott-Rodino and any other applicable Law and the receipt of
any necessary governmental and other third party approvals and
consents, together with copies of each other document related to
the MCI Acquisition;
(iv) If such Loan is the first Revolving Loan after the
date of this Agreement, confirmation that the MCI Assets and the
MCI Real Property are being acquired free and clear of all liens
and encumbrances except the extent to which, if any, the MCI Real
Property remains subject to existing liens and encumbrances as a
result of the assumption of Indebtedness described in
clause (iii) of the last sentence of Section 3 of this Agreement;
(v) If such Loan is the first Revolving Loan after the
date of this Agreement, Collateral Assignments, appropriately
completed and duly executed by the Borrower, with respect to the
patents and licensed technology acquired by the Borrower pursuant
to the MCI Acquisition;
(vi) If such Loan is the first Revolving Loan after the
date of this Agreement, a Negative Pledge Agreement, together
with an Environmental Indemnity Agreement, each appropriately
completed and duly executed by the Borrower with respect to the
MCI Real Property;
(vii) If such Loan is the first Revolving Loan after
the date of this Agreement, evidence (A) that no asset subject to
any Lien pursuant to any Loan Document is at the time such Loan
is to be made subject to any other Lien, except for Permitted
Liens, and (B) of the making of each recording and filing, and of
the taking of each other action, deemed necessary or desirable by
the Agent at the sole option of the Agent to perfect or otherwise
protect any such Lien;
(viii) If such Loan is the first Revolving Loan after
the date of this Agreement, evidence that each requirement
contained in any Loan Document with respect to insurance is being
met at the time such Loan is to be made;
(ix) If such Loan is the first Revolving Loan after the
date of this Agreement, an opinion of Phillips, Lytle, Hitchcock,
Blaine & Huber, counsel to the Borrower;
(x) If such Loan is the first Revolving Loan after the
date of this Agreement, such financial, business and other
information regarding the Borrower, MCI and each such Person's
Subsidiaries and Affiliates as any of the Lender Entities shall
have reasonably requested;
(xi) If such Loan is the first Revolving Loan after the
effective date of this Agreement, payment on the effective date
of this Agreement of modification fee to the Agent, for the
ratable benefit of each Bank, equal to such Bank's Pro Rata Share
of $100,000;
(xii) Each additional agreement, instrument and other
writing, including, but not limited to, (A) each agreement,
instrument and other writing intended to be filed or recorded
with any Governmental Authority to perfect or otherwise preserve
or protect the priority of any Lien created or imposed pursuant
to any Loan Document and (B) if such Loan is not the first
Revolving Loan after the effective date of this Agreement, each
item referred to in any of clauses (i) through (xiii) of this
Section 4d, referred to in any of clauses (i) through (xviii) of
Section 4(d) of the Loan Agreement, required by any Loan Document
or reasonably deemed necessary or desirable by the Required
Banks; and
(xiii) Payment of all costs and expenses payable
pursuant to the first sentence of Section 9(a) of the Loan
Agreement at or before the time such Loan is to be made.
5. GENERAL.
a. Term. This Agreement shall become effective upon
its execution by the Borrower, the Agent and the Required Banks.
The terms of this Agreement shall be the same as the term of the
Loan Agreement, as amended by this Agreement.
b. Survival; Reliance. Each representation,
warranty, covenant and agreement contained in this Agreement
shall survive the making of each Loan and the execution and
delivery of each Loan Document and shall continue in full force
and effect during the term of this Agreement, except to the
extent modified in accordance with the terms of this Agreement.
Each such representation, warranty, covenant and agreement shall
be presumed to have been relied upon by each Lending Entity.
c. Entire Agreement. This Agreement contains the
entire agreement between each Lending Entity and the Borrower
with respect to the subject matter of this Agreement, and
supersedes each course of dealing or other conduct heretofore
pursued, accepted or acquiesced in, and each oral or written
agreement and representation heretofore made, by or on behalf of
any Lending Entity with respect thereto, whether or not relied or
acted upon. No course of performance or other conduct hereafter
pursued, accepted or acquiesced in, and no oral agreement or
representation hereafter made, by or on behalf of any Lending
Entity, whether or not relied or acted upon, and no usage of
trade, whether or not relied or acted upon, shall modify or
terminate this Agreement or impair or otherwise affect any
indebtedness, liability or obligation of the Borrower pursuant to
this Agreement or any right or remedy of any Lending Entity
pursuant to this Agreement or otherwise. No modification or
termination of this Agreement shall be effective unless made in a
writing duly executed by the Required Banks and specifically
referring to each provision of this Agreement being modified or
to such termination.
d. Governing Law. This Agreement shall be governed
by and construed, interpreted and enforced in accordance with the
internal law of the State of New York, without regard to
principles of conflict of laws.
e. Invalidity. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable Law. If, however, any such
provision shall be prohibited by or invalid under such Law, it
shall be deemed modified to conform to the minimum requirements
of such Law, or, if for any reason it is not deemed so modified,
it shall be prohibited or invalid only to the extent of such
prohibition or invalidity without the remainder thereof or any
other such provision being prohibited or invalid.
f. Headings. In this Agreement, headings of sections
are for convenience of reference only, and are not of substantive
effect.
g. Counterparts. This Agreement may be executed in
any number of counterparts and signature pages, but all of such
counterparts shall together constitute a single agreement.
h. Loan Agreement. As specifically amended by this
Agreement, the Loan Agreement shall remain in full force and
effect. Effective on the effective date of this Agreement,
references in the Loan Agreement to this Agreement shall be
deemed to be references to the Loan Agreement as amended by this
Agreement.
IN WITNESS WHEREOF, each Lending Entity and the
Borrower have caused this Agreement to be duly executed on the
date shown at the beginning of this Agreement.
MARINE MIDLAND BANK
By /S/ Hugh C. McLean
Hugh C. McLean, Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY
By
Title
FLEET BANK
By
Title
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH, SUCCESSOR BY MERGER
TO THE MITSUBISHI BANK, LIMITED
By /S/ Joseph Devor
Joseph Devor, attorney-in-fact
THE SUMITOMO BANK, LIMITED
By
William N. Paty, Vice President and
Manager
By
James Drum, Vice President
BARNETT BANK OF PINELLAS COUNTY
By
Michael S. Crowe, Senior Vice
President
NATIONAL BANK OF CANADA
By
Robert G. Uhrig
By
Michael Woodard
MARINE MIDLAND BANK, AS AGENT
By
Hugh C. McLean, Vice President
MOOG INC.
By
Robert R. Banta, Executive Vice
President
EXHIBIT A
Banks that are a Party to
this Agreement
Marine Midland Bank
Manufacturers and Traders Trust Company
Fleet Bank
The Sumitomo Bank, Limited
The Bank of Tokyo-Mitsubishi, Ltd., New York Branch
Barnett Bank of Pinellas County
National Bank of Canada