UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q/A
--------------------
(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 29, 1996
OR
____ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number:
SAWTEK INC.
(Exact name of registrant as specified in its charter)
Florida 59-1864440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1818 South Highway 441
Apopka, Florida 32703
(Address of principal executive offices)
Telephone Number (407) 886-8860
(Registrant's telephone number, including area code)
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 ______
-----
As of January 15, 1997, there were 20,241,856 shares of the
Registrant's Common Stock outstanding, par value $.0005.
<PAGE>
Sawtek Inc.
TABLE OF CONTENTS
Part I. Financial Information Page Number
- ------- --------------------- -----------
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of December 31, 1996
and September 30, 1996 ....................................... 3
Consolidated Statements of Income (Loss) for the three
months ended December 31, 1996 and 1995....................... 4
Consolidated Statements of Cash Flows for the three months
ended December 31, 1996 and 1995 ............................. 5
Notes to Consolidated Financial Statements.................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 7
Part II. Other Information
- -------- ------------------
Item 1. Legal Proceedings ................................... 12
Item 2. Changes in Securities ............................... 12
Item 3. Defaults Upon Senior Securities ..................... 12
Item 4. Submission of Matters to a Vote of Security Holders . 12
Item 5. Other Information ................................... 12
Item 6. Exhibits and Reports on Form 8-K .................... 12
Signatures ............................................................ 13
Exhibit Index ......................................................... 13
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (unaudited)
<TABLE>
SAWTEK INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, September 30,
1996 1996
---- ----
(unaudited)
(dollars in thousands, except per share data)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $31,436 $ 27,743
Accounts receivable net of allowance for doubtful accounts and returns of
$883 at December 31, 1996 and $654 at September 30, 1996 7,738 7,938
Inventories 5,947 6,509
Deferred income taxes 1,255 1,266
Other current assets 533 528
------ -------
Total current assets 46,909 43,984
Other assets 165 186
Property, plant and equipment, net 34,381 30,424
------ ------
Total assets $81,455 $74,594
====== ======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 3,151 $ 1,801
Accrued wages and benefits 1,506 3,109
Other accrued liabilities 1,693 1,068
Current maturities of long-term debt 1,376 1,363
Income taxes payable 1,867 844
------ ------
Total current liabilities 9,593 8,185
Long-term debt, less current maturities 3,668 3,786
Deferred income taxes 2,108 998
Shareholders' equity:
Common stock; $.0005 par value; 40,000,000 authorized shares; issued and
outstanding shares 20,197,872 at December 31, 1996 and 19,854,102 at
September 30, 1996 10 10
Capital surplus 53,198 53,000
Unearned ESOP compensation (1,367) (1,367)
Retained earnings 14,245 9,982
------ ------
Total shareholders' equity 66,086 61,625
------ ------
Total liabilities and shareholders' equity $81,455 $74,594
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
SAWTEK INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) - unaudited
<CAPTION>
Three Months Ended December 31,
1996 1995
---- ----
(in thousands, except per share data)
<S> <C> <C>
Net sales $18,502 $10,809
Cost of sales 8,678 5,092
------ ------
Gross profit 9,824 5,717
Operating expenses:
Selling expenses 1,246 774
General & administrative expenses 1,134 1,068
ESOP compensation expense 196 5,540
Research & development expenses 681 418
------ ------
Total operating expenses 3,257 7,800
------ ------
Operating income (loss) 6,567 (2,083)
Interest expense 41 138
Other (income) expense (355) 6
------ ------
Income (loss) before taxes 6,881 (2,227)
Income taxes 2,618 954
------ ------
Net income (loss) $ 4,263 $(3,181)
====== ======
Net income (loss) per share $ 0.20 $ (.18)
====== ======
Shares used in computing net income (loss) per share 21,358 17,272
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
SAWTEK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<CAPTION>
Three Months Ended December 31,
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Operating activities:
Net income (loss) $ 4,263 $ (3,181)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 819 312
Deferred income taxes 1,120 108
ESOP allocation -0- 5,540
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 200 354
Inventories 562 (873)
Other current assets (5) (74)
Increase (decrease) in liabilities:
Accounts payable 1,350 1,849
Accrued liabilities (978) (525)
Income taxes payable 1,023 96
------ ------
Net cash provided by operating activities 8,354 3,606
Investing activities:
Purchase of property, plant and equipment, net (4,754) (6,424)
Increase in Industrial Revenue Bond assets -0- 1,257
------ ------
Net cash used in investing activities (4,754) (5,167)
Financing activities:
Proceeds from long-term debt -0- 3,000
Principal payments on long-term debt (105) (1,760)
Net proceeds from sale of common stock 198 55
Purchase of common stock -0- (158)
------ ------
Net cash provided by financing activities 93 1,137
------ ------
Increase (decrease) in cash and cash equivalents 3,693 (424)
Cash and cash equivalents at beginning of period 27,743 2,819
------ ------
Cash and cash equivalents at end of period $31,436 $ 2,395
====== ======
Interest paid $ 56 $ 67
Income taxes paid $ 475 $ 750
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
SAWTEK INC.
Notes to Consolidated Financial Statements - December 31, 1996 (unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information in response to the requirements of Article 10 of
Regulation S-X. Accordingly, they do not contain all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation of
the Company's financial condition as of December 31, 1996, and the results of
its operations, and its cash flows for the three months ended December 31, 1996
and 1995. These financial statements should be read in conjunction with the
Company's audited financial statements as of September 30, 1996, including the
notes thereto, and the other information set forth therein included in the
Company's most recent annual report on Form 10-K for the year ended September
30, 1996 (File No. 000-28276), which was filed with the Securities and Exchange
Commission (the "SEC") on November 8, 1996. The following discussion may contain
forward looking statements which are subject to the risk factors set forth in
"Risks and Uncertainties" in Item 2 of this Form 10-Q.
The Company maintains its records on a fiscal year ending on September 30 of
each year and all references to a year refer to the fiscal year ending on that
date.
The Company's first, second and third quarters end on the Sunday closest to the
last day of the last month of such quarter, which was December 29, 1996, for the
first quarter of 1997. However, for convenience, the financial statements are
dated as of December 31, 1996.
Operating results for the three months ended December 31, 1996 are not
necessarily indicative of the operating results that may be expected for the
year ending September 30, 1997.
2. Earnings (loss) Per Share
-------------------------
Earnings (loss) per share ("EPS") is computed based on the weighted average
number of common shares, common stock options (using the treasury stock method)
and all ESOP shares outstanding. In accordance with Securities and Exchange
Commission staff accounting bulletins, common and common equivalent shares
issued by the Company at prices below the public offering price during the
period beginning one year prior to the filing date of the initial public
offering on April 29, 1996, have been included in the calculation as if they
were outstanding for all periods prior to the offering (using the treasury stock
method and the initial public offering price).
3. Inventories - Inventories are composed of the following:
-----------
<TABLE>
December 31, 1996 September 30, 1996
----------------- ------------------
(in thousands)
<S> <C> <C>
Raw Material..................... $ 2,034 $ 1,976
Work in Process.................. 1,951 2,341
Finished Goods................... 1,962 2,192
------ ------
Total......................... $ 5,947 $ 6,509
====== ======
</TABLE>
6
<PAGE>
4. Property, Plant and Equipment - Property, plant and equipment are composed
-----------------------------
of the following:
<TABLE>
December 31, 1996 September 30, 1996
----------------- ------------------
(in thousands)
<S> <C> <C>
Land and Improvements............... $ 671 $ 671
Buildings........................... 9,829 9,829
Production and Test Equipment....... 21,943 21,459
Computer Equipment.................. 2,793 2,734
Furniture and Fixtures.............. 1,556 1,533
Construction in Progress............ 8,542 4,774
------ ------
45,334 41,000
Less Accumulated Depreciation.. 10,953 10,576
------ ------
Total................. $34,381 $30,424
====== ======
</TABLE>
5. Shareholders' Equity
--------------------
The consolidated changes in shareholders' equity for the three months ended
December 31, 1996 are as follows:
<TABLE>
(in thousands)
<CAPTION>
Common Stock Unearned
------------- Capital ESOP Retained
Shares Amount Surplus Compensation Earnings
------ ------ ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1996 19,854 $ 10 $53,000 $(1,367) $ 9,982
Net income 4,263
Sale of common stock 344 198
------- --- ------ ------ ------
Balance at December 31, 1996 20,198 $ 10 $53,198 $(1,367) $14,245
====== === ====== ====== ======
</TABLE>
Item 2. Management's discussion and analysis of financial condition and results
of operations
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto included elsewhere
in this Form 10-Q. Except for the historical information contained herein, the
discussion in this Form 10-Q contains certain forward-looking statements that
involve risks and uncertainties, such as statements of the Company's plans,
objectives, expectations and intentions. The cautionary statements made herein
should be read as being applicable to all related forward-looking statements
wherever they appear. The Company's actual results could differ materially from
those discussed here. Factors that could cause or contribute to such differences
include those discussed in "Risks and Uncertainties," as well as those discussed
elsewhere herein.
7
<PAGE>
Overview
- --------
The Company was incorporated in 1979 to design, develop, manufacture and market
a broad range of electronic components based on surface acoustic wave ("SAW")
technology used in telecommunications, data communications, video transmission,
military and space systems and other markets. The Company's focus has been on
the high-end performance spectrum of the market, and its primary products are
SAW bandpass filters, resonators, delay lines, oscillators and SAW-based
sub-systems. Initially, the Company's products were concentrated in the military
and space systems market. The Company has since shifted its attention to
commercial markets which account for 86% of net sales in the first quarter of
1997. The Company has also experienced significant growth in its international
markets over the last five years, with international sales having more than
doubled to approximately 45% of net sales.
The Company derives revenue from high-volume commercial production components,
military/industrial production components and engineering services and products.
Non-recurring engineering ("NRE") revenue is included in net sales and relates
to the design and development of custom devices and delivery of prototype parts.
In all cases, revenue is recognized when the parts or services have been
completed and units, including prototypes, have been shipped.
Net sales increased 71% from the first three months of 1996 to the first three
months of 1997. The growth in net sales is mainly attributable to growth in the
wireless communications market to which the Company supplies SAW bandpass
filters for cellular telephone basestations and, to a lesser extent, for
handheld subscriber telephones. The Company has a broad product line of SAW
filters and other components with average selling prices generally in the range
of $5 to $300 for many high performance wireless applications.
For the three months ended December 31, 1996, net sales to the Company's top ten
customers accounted for approximately 76% of net sales with the top three
customers accounting for 44%. The Company expects that sales of its products to
a limited number of customers will account for a high percentage of its net
sales in the foreseeable future.
In 1991, the Company established an Employee Stock Ownership Plan ("ESOP"). At
that time, the Company borrowed $4.0 million from its commercial bank and loaned
it to the ESOP to finance the purchase of 8,888,880 shares of the Company's
common stock. The unpaid balance of this loan, $1.367 million as of December 31,
1996, matures in 1998 and is payable in quarterly installments of approximately
$195,000. These ESOP shares are accounted for in accordance with the American
Institute of Certified Public Accountants (AICPA) Statement of Position ("SOP")
76-3, which uses cost as the basis for valuing shares as they are released and
allocated to participants' accounts. In 1994, the Company borrowed an additional
$1.7 million and loaned it to the ESOP to finance the purchase of an additional
1,610,600 shares of common stock. In 1996, the Company repaid the 1994 loan and
allocated all of the related shares to participants' accounts. These shares were
accounted for in accordance with the AICPA's SOP 93-6, which uses fair market
value as the basis of valuing shares. The impact of this was a charge to ESOP
compensation expense of $12.9 million reflected in the financial results for
1996. Of the $12.9 million, $11.3 million was a one-time, non-cash charge
amounting to $0.59 per share for the full year of 1996 and $4.8 million or $0.28
per share for three months ending December 31, 1995.
Management does not believe that inflation has had a material impact on
operating costs and earnings of the Company.
8
<PAGE>
Results of Operations
- ---------------------
The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's statement of operations to
total net sales:
<TABLE>
Three Months Ended
December 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 46.9 47.1
----- -----
Gross profit 53.1 52.9
Operating expenses:
Selling expenses 6.7 7.2
General & administrative expenses 6.1 9.9
ESOP compensation expense 1.1 51.2
Research & development expenses 3.7 3.9
----- -----
Total operating expenses 17.6 72.2
----- -----
Operating income (loss) 35.5 (19.3)
Interest expense .2 1.3
Other (income) expense (1.9) 0.0
----- -----
Income (loss) before income taxes 37.2 (20.6)
Income taxes 14.2 8.8
----- -----
Net income (loss) 23.0% (29.4)%
===== =====
</TABLE>
Comparison of Three Months Ended December 31, 1995 and 1996
- -----------------------------------------------------------
Net Sales. Net sales increased 71% from $10.8 million in the quarter ended
December 31, 1995 to $18.5 million in the quarter ended December 31, 1996. The
increase for the period was a result of increased product shipments to the
wireless communication market, specifically sales of high volume filters for
basestation applications and for PCS-CDMA subscriber handsets. International
sales decreased from approximately 48% of net sales in the three-month period
ended December 31, 1995 to 45% of net sales for the three months ended December
31, 1996. The percentage decrease in international sales was due to increasing
domestic sales, specifically sales of bandpass filters for subscriber handsets.
Sales for military and space systems were approximately 11% of net sales in the
three months ended December 31, 1995 compared to approximately 14% of net sales
for the three months ended December 31, 1996.
Gross Margin. Gross margin increased slightly from 52.9% in the three months
ended December 31, 1995 to 53.1% in the three months ended December 31, 1996.
The Company continued to shift production to high-volume components which have
somewhat lower gross margins. However, the new Costa Rica facility is operating
at favorable gross margins, which offset the slightly lower margins from the
high-volume components. The Company anticipates that its gross profit margins
may decline in the future due to increased production of lower margin subscriber
filters and competitive price pressure.
9
<PAGE>
Selling Expenses. Selling expenses increased in the first quarter of 1997
compared to the same period in 1996, but decreased as a percentage of net sales
from the corresponding period. The decrease as a percentage of net sales was a
result of the Company's expanding net sales with substantially the same number
of sales and marketing personnel in 1997 as in 1996. As a result, selling
expenses remained relatively constant with advertising and commission expenses
paid to outside sales representatives as the only components that increased
significantly with the higher sales level. The Company anticipates that selling
expenses will increase as new employees are added to support its sales and
marketing effort in 1997 and as commissions are incurred.
General and Administrative Expenses. General and administrative expenses
remained essentially flat at approximately $1.1 million for the quarter ended
December 31, 1996 from the year-ago quarter. However, these costs decreased as a
percentage of sales from 10% for the first quarter of 1996 to 6% in 1997 as the
Company was able to increase its sales without incurring significant additional
administrative expenses.
ESOP Compensation Expense. For the first quarter of 1997, the Company recorded a
charge of $196,000 for ESOP compensation compared to $5.4 million for the same
period in fiscal 1996. The expense for the first quarter of 1996 included a $4.8
million non-recurring, non-cash charge related to the release and allocation of
all shares accounted for on a market-value basis. The Company will incur ESOP
compensation expense of approximately $782,000 for 1997 and approximately
$585,000 in 1998.
Research and Development Expenses. Research and development expenses increased
$263,000 in the quarter ended December 31, 1996 compared to the quarter ended
December 31, 1995. These expenses increased due to additional personnel and
expanded research and development efforts, but increased at a slower rate than
the sales increase. The Company anticipates that research and development
expenses will continue to increase in total dollars as personnel and programs
are added. A significant portion of the Company's development activities is
conducted in connection with the design and development of custom devices, which
is paid for by customers and classified as NRE items. The revenue generated from
these items is included in net sales and the cost is reflected in cost of sales
rather than in research and development expenses.
Interest Expense. Interest expense decreased from $138,000 in the first three
months of 1996 to $41,000 in the first three months of 1997, as the Company
repaid its credit line with a portion of the proceeds from the IPO in May, 1996.
Other Income and Expense. Other income and expense primarily represents interest
income and non-operating expenses. Other income increased due to interest earned
on the remaining proceeds of the Company's IPO and positive cash flow for the
quarter.
Income Tax Expense. The provision for income taxes as a percentage of income
before income taxes was 38% for the first three months of 1997. For the quarter
ended December 31, 1995, the Company incurred a non-deductible, non-cash charge
for ESOP compensation expense. Had it not been for this charge, the tax
provision would have been approximately 37% for the quarter. The Company expects
that its effective tax rate will remain at approximately 36% to 39% during 1997.
10
<PAGE>
Risks and Uncertainties
- -----------------------
General Risks and Uncertainties. Except for historical information contained
herein, this Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that are subject to
risks and uncertainties, including fluctuations in quarterly results, backlog,
capacity limitations, order rescheduling or cancellation, limited sources of
supply, dependence on continuing demand for wireless communication services,
dependence on a limited number of customers, technological change, competition,
risks associated with international operations, variation in production yield,
change in economic conditions of the various markets the Company serves, as well
as the other risks detailed in the Company's Form 10-K filed with the Securities
and Exchange Commission on November 8, 1996.
Liquidity and Capital Resources
- -------------------------------
The Company has financed its operations to date through cash generated from
operations, bank borrowings, lease financing, the private sale of securities,
and its May 1, 1996 initial public offering. The Company requires capital
principally for equipment, expansion of its primary facility, financing of
accounts receivable and inventory, investment in product development activities
and new technologies and for its operations in Costa Rica. For the three months
ended December 31, 1996, the Company generated net cash from operating
activities of $8.4 million, consisting primarily of net income of $4.3 million,
$.8 million of depreciation and amortization, $1.1 million in deferred taxes and
$1.4 million of increases in other current liabilities.
The Company has a revolving credit agreement totaling $15.0 million from
SunTrust Bank, Central Florida, N.A. available through January 1998. There were
no balances outstanding on this credit line at December 31, 1996.
The Company made capital expenditures of approximately $4.8 million during the
quarter ended December 31, 1996. The Company intends to spend approximately $23
million in 1997 on capital equipment and facilities.
The Company believes that its present cash position, together with its credit
facility and funds expected to be generated from operations, will be sufficient
to meet its projected working capital and other cash requirements through the
next 12 months. Thereafter, the Company may require additional equity or debt
financing to address its working capital needs or to provide funding for capital
expenditures. There can be no assurance that events in the future will not
require the Company to seek additional capital sooner or, if so required, that
it will be available on terms acceptable to the Company, if at all.
11
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings. The Company is not subject to any legal
proceedings that, if adversely determined, would cause a material
adverse effect on the Company's financial condition, business or
results of operations.
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) Exhibit 10.1 - First Amendment to Amended and Restated Loan and
Security Agreement dated December 9th, 1996 between the Company
and SunTrust Bank, Central Florida, N.A. ("Suntrust").
(b) Exhibit 11.1 - Statement regarding computations of earnings per
share.
(c) Exhibit 27 - Financial Data Schedule.
(d) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three
months ended December 31, 1996.
12
<PAGE>
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.
Dated: January 21, 1997
SAWTEK INC.
(Registrant)
/S/ Steven P. Miller
Steven P. Miller
Chairman, President & Chief Executive Officer
/S/ Raymond A. Link
Raymond A. Link
Vice President Finance, Chief Financial Officer
(Principal Financial Officer)
EXHIBIT INDEX
- -------------
10.1 First amendment to Amended and Restated Loan and Security Agreement
dated December 9, 1996 between the Company and SunTrust Bank, Central
Florida, N.A. ("Suntrust").
11.1 Statement regarding computations of earnings per share.
27 Financial Data Schedule.
13
SAWTEK INC. EXHIBIT 11.1
<TABLE>
STATEMENT REGARDING COMPUTATIONS OF EARNINGS PER SHARE -
as reported on Form 10Q
<CAPTION>
Three months ended
December 31,
---------------------
1996 1995
---- ----
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Weighted average number of shares of Common
Stock outstanding 20,038 14,341
Net effect of dilutive stock options based
on the Treasury stock method using the average
fair market value in effect for the period 1,286 2,879
------ ------
Total shares outstanding for Primary EPS 21,324 17,220
====== ======
FULLY DILUTED EARNINGS PER SHARE
Weighted average number of shares of Common
Stock outstanding 20,038 14,341
Net effect of dilutive stock options based
on the Treasury stock method using the fair
market value at the end of the period 1,320 2,931
------ ------
Total shares outstanding for fully Diluted EPS 21,358 17,272
====== ======
Net income (loss) applicable to common shareholders $ 4,263 $(3,181)
Earnings (loss) per share: Primary $ .20 $( 0.18)
Fully Diluted $ .20 $( 0.18)
</TABLE>
EXHIBIT 10.1
FIRST AMENDMENT TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (the "First Amendment") dated as of the 9th day of December, 1996, is
entered into by and between SAWTEK INC., a Florida corporation, Post Office Box
609501, Orlando, Florida 32860-9501 (the "Borrower") and SUNTRUST BANK, CENTRAL
FLORIDA, NATIONAL ASSOCIATION, f/k/a/ SUN BANK, NATIONAL ASSOCIATION (the
"Bank"), a national banking association, with its principal banking office
located at 200 South Orange Avenue, Orlando, Orange County, Florida.
W I T N E S S E T H:
WHEREAS, the Borrower and the Bank heretofore entered into that certain
Amended and Restated Loan and Security Agreement dated as of November 15, 1995
(the "Loan Agreement") pursuant to which the Bank agreed, among other things, to
lend to the Borrower a line of credit loan in the maximum principal amount of
$11,500,000.00 (the "Line of Credit Loan"), which is scheduled to convert to a
term loan on March 31, 1997; and
WHEREAS, the Borrower has requested the Bank (a) to renew and modify
the Line of Credit Loan by restructuring it to be strictly a revolving line of
credit loan, with interest payable periodically and principal due on maturity,
increasing the maximum principal amount available for borrowing thereunder to
$15,000,000, changing the interest rate applicable to the Line of Credit Loan
and extending the Revolving Period through January 31, 1998, (b) to release all
collateral securing the Line of Credit Loan so that it will be an unsecured
loan, (c) to modify the financial covenants and reporting requirements contained
in the Loan Agreement and (d) to otherwise modify the Loan Agreement; and
WHEREAS, the Bank has agreed to do so subject to the additional
conditions, limitations and requirements as hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual premises
contained herein and for other good and valuable consideration, the receipt and
sufficiency whereof is hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Amendments to Loan Agreement. The Loan Agreement is hereby amended
as follows:
(a) The definitions of "Account", "Account Debtor", "Adjusted Net
Worth", "Cash Flow", "Cash Flow to Current Maturities of Long Term Debt Ratio",
"Chattel Paper", "Collateral", "Current Maturities of Long Term Debt", "Current
Ratio", "Document", "EBITDA", "Equipment", "Existing Security Agreement",
"Funded Debt to EBITDA Ratio", "Income Tax Expense", "Instrument", "Intercompany
Loan", "Intercompany Note", "Interest Expense", "Inventory", "Long Term Debt",
"Maturity Date", "Prime Rate", "Stock", "Term Loan" and "Term Note" are hereby
deleted from the Loan Agreement, together with all references to such terms in
the Loan Agreement.
<PAGE>
(b) The definition of the term "Interest Rate" contained in
Paragraph 1 of the Loan Agreement is hereby deleted in its entirety and in lieu
thereof there is substituted the following:
"'Interest Rate' shall mean the applicable rate of interest to
be borne by the Note (except when the Default Rate is in
effect), which rate shall be the lesser of (a) a rate per
annum equal to LIBOR plus one hundred twenty-five basis points
(1.25%) or (b) the maximum rate allowed by applicable law from
time to time."
(c) The definition of the term "Line of Credit Loan" contained in
Paragraph 1 of the Loan Agreement is hereby deleted in its entirety and in lieu
thereof there is substituted the following:
"'Line of Credit Loan' shall mean the revolving line of credit
loan in the maximum principal amount of $15,000,000.00 extended to the Borrower
by the Bank pursuant to the terms of this Agreement."
(d) The definition of the term "Revolving Period" contained in
Paragraph 1 of the Loan Agreement is hereby deleted in its entirety and in lieu
thereof there is substituted the following:
"'Revolving Period' shall mean the period during the term of
the Line of Credit Loan during which the Borrower shall be
entitled to receive Advances on the Line of Credit Loan, which
period shall commence on the date hereof and end on the
earlier of (a) the occurrence of an Event of Default, (b)
January 31, 1998, or (c) such later date as the Bank, in its
absolute discretion, may agree to in writing."
(e) The definitions of the terms "Interest Payment Date", "Interest
Period", "Interest Rate Determination Date", "LIBOR" and "Permitted Loan Limit",
are hereby added to Paragraph 1 of the Loan Agreement in the proper alphabetical
order, as follows:
"'Interest Payment Date' shall mean the earlier of (i) the end
of each Interest Period, or (ii) quarterly.
Interest Period' shall mean 30, 60, 90 or 120 Days, or any
other period approved by the Bank in its sole and absolute
discretion, as selected by the Borrower from time to time in
accordance with the terms hereof.
'Interest Rate Determination Date' shall mean each date for
calculating LIBOR for purposes of determining the Interest
Rate in respect of an Interest Period, and which shall be the
second Business Day prior to the first Day of the applicable
Interest Period.
<PAGE>
'LIBOR' shall mean the interest rate per annum (in accordance
with the length of the designated Interest Period) in effect
on the Interest Rate Determination Date designated as the
LIBOR rate and published from time to time in the Wall Street
Journal or such substitute publication or interest rate
reporting service as may be designated in writing from time to
time by the Bank to the Borrower; in any such case rounded, if
necessary, to the next higher 1/16 of 1.0%, if the rate is not
such a multiple.
'Permitted Loan Limit' shall mean $15,000,000.00."
(f) Subparagraphs (a), (b), (c) and (d) of paragraph 2 of the Loan
Agreement are hereby deleted in their entirety and, in lieu thereof, the
following is substituted therefor:
"(a) Amount and Terms of the Line of Credit Loan. The Bank
agrees from time to time during the term of the Line of Credit
Loan to lend to the Borrower, upon the Borrower's request, up
to the aggregate principal amount of the Permitted Loan Limit
on the terms and conditions set forth herein. Except as
otherwise set forth in this Agreement, the Borrower shall,
during the Revolving Period, be entitled to receive up to the
amount of the Permitted Loan Limit in one or more Advances.
Advances under the Line of Credit Loan shall be evidenced by
the Line of Credit Note and shall be payable in accordance
with the terms of Paragraph 2(c) hereof. The Borrower shall
not be liable under the Line of Credit Note except with
respect to funds actually advanced to the Borrower by the Bank
pursuant to the terms hereof. The Line of Credit Loan shall be
a revolving loan and, accordingly, during the Revolving
Period, the Borrower may in one or more Advances borrow up to
the Permitted Loan Limit, repay all or any portion thereof,
and reborrow up to such amount, subject to the terms and
conditions set forth herein. After the expiration of the
Revolving Period, the Borrower shall not be entitled to
receive any further Advance under the Line of Credit Loan.
(b) Advances on the Line of Credit Loan. After the date hereof
the Borrower shall be entitled to obtain Advances under the
Line of Credit Loan. The Borrower shall give the Bank written
or telephonic notice of any requested Advance under the Line
of Credit Loan. The Bank shall be under no duty or obligation
<PAGE>
to verify or confirm the authority of the representative of
the Borrower requesting any such Advance as long as said
person identifies himself/herself as an employee or repre-
sentative of the Borrower. Such notice (the "Notice of
Borrowing") shall specify (i) the proposed date of the Advance
(which shall be a Banking Day), (ii) the amount thereof, (iii)
the requested Interest Period and (iv) that on the date of the
Notice of Borrowing there has been no material adverse change
in the financial condition of the Borrower from that set forth
on the most recent financial statements furnished to the Bank
as provided herein. Each Advance under the Line of Credit Loan
shall be in the minimum principal amount of $10,000.00 or, if
less, the remaining amount available under the Line of Credit
Loan. The Bank shall make each Advance under the Line of
Credit Loan on the date proposed by the Borrower (which may be
the same Banking Day if such request is made by the Borrower
and is received by the Bank prior to 12:00 NOON (Orlando,
Florida time), otherwise no earlier than the following Banking
Day) by crediting the amount of each such Advance requested by
the Borrower to the general deposit account of the Borrower
maintained with the Bank. Each request for an Advance shall be
deemed to restate and verify all representations of the
Borrower made herein as of the date of such request.
Loans or Advances which are unpaid upon the
expiration of the Interest Period applicable thereto and with
respect to which the Borrower has not advised the Bank in
writing (a "Notice of Selection of Interest Period") as
provided in paragraph 2(d) hereof and received by the Bank
within the times provided in paragraph 2(d) prior to the
expiration of such Interest Period of the Interest Period to
be applicable to such Loans or Advances after the current
Interest Period expires shall, effective as of the first Day
after the expiration of such Interest Period, be continued for
an Interest Period of identical length to that just expired.
Thereafter, subject to the limitations set forth in paragraph
2(d) hereof, the Borrower may, by giving the Bank an
appropriate Notice of Selection of Interest Period, together
with the requested Interest Period, elect to change the
Interest Period applicable to such Loan or Advance at a date
designated by the Borrower, which date shall be (i) no earlier
than a date two (2) Banking Days after the receipt by the Bank
of such Notice of Selection of Interest Period and (ii)
immediately following the expiration of an existing Interest
Period.
<PAGE>
(c) Interest on the Line of Credit Note. The Line of Credit
Note shall bear interest from the date thereof through
maturity (whether by acceleration or otherwise) on the unpaid
principal balance thereof from time to time outstanding at the
Interest Rate. From and after the Due Date, interest shall
accrue on the unpaid principal balance of the Line of Credit
Note and on all accrued but unpaid interest thereon, or on
such defaulted payment, from the Due Date at the Default
Rate. such interest shall continue to accrue until the date of
payment in full of all principal and accrued but unpaid
interest on such defaulted payment, if applicable.
(d) Payment of the Line of Credit Note. Accrued
interest only on the Line of Credit Note, at the Interest
Rate, shall be payable on each Interest Payment Date, upon any
permitted prepayment of the Loan (to the extent accrued on the
amount being prepaid) and at maturity. The Bank will endeavor
to notify Borrower of interest due prior to any Interest
Payment Date. The entire outstanding principal balance,
together with all accrued but unpaid interest, shall be due
and payable upon the expiration of the Revolving Period.
For each Loan or Advance under the Loan, the Borrower shall
deliver to the Bank a written notice (or facsimile
transmission, immediately confirmed by telephone and further
confirmed by sending the original notice to the Bank so that
the same is received by the Bank no later than three (3)
Banking Days after the date of the facsimile transmission) (a
"Notice of Selection of Interest Period"), no later than 11:00
a.m. Orlando, Florida time, on the Interest Rate Determination
Date, which Notice of Selection of Interest Period shall be in
such form as may be acceptable to the Bank in its sole and
absolute discretion and shall specify (i) the amount of the
Advance for which an Interest Period is being selected, (ii)
the requested Interest Period and (iii) that on the date of
the Notice of Selection of Interest Period, there has been no
material adverse change in the financial condition of the
Borrower from that set forth on the most recent annual
financial statements furnished to the Bank.
The Bank shall incur no liability to the Borrower in acting
upon any telephonic notice referred to above or for
otherwise acting under this paragraph (d) and upon selection
of an Interest period in accordance with this Agreement
pursuant to any telephonic notice, the Borrower shall have
effected Loans hereunder. Each Notice of Selection of Interest
Period shall be irrevocable by the Borrower on or after the
related Interest Rate Determination Date and the Borrower
shall be bound to continue such Advance in accordance
therewith."
<PAGE>
(g) Paragraph 4 of the Loan Agreement is hereby deleted in its
entirety and, in lieu thereof, the following is substituted therefor:
"4. Special provisions Governing LIBOR. Notwithstanding
other provisions of this Agreement, the following provisions
shall govern with respect to LIBOR as to the matters covered:
(a) Determination of Interest Period. By giving
notice as set forth in paragraphs 2(b) and (d) the
Borrower shall have the option, subject to the
other provisions of this paragraph 4, to specify the
Interest Period commencing on any such date, provided,
that:
(i) in the case of immediately successive Interest
Periods, each successive Interest Period shall
commence on the Day on which the next preceding
Interest Period expires;
(ii) if any Interest Period would otherwise expire
on a Day which is not a Banking Day, that
Interest Period shall be extended to expire
on the next succeeding Banking Day; provided,
that if any such Interest Period would otherwise
expire on a Day which is not a Banking Day but is a
Day of the month after which no further Banking
Day occurs in that month, that Interest Period shall
expire on the next preceding Banking Day; and
(iii) any Interest Period which begins on the last
Banking Day of a calendar month (or on a Day for
which there is no numerically corresponding
Day in the calendar month at the end of such
Interest Period) shall end on the last Banking Day
of a calendar month.
(b) Determination of Interest Rate. As soon as
practicable after 11:00 A.M. Orlando, Florida time, on
the Interest Rate Determination Date, Bank shall
determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties)
the Interest Rate which shall apply to the Advance for
which an Interest Rate is then being determined for the
applicable Interest Period and shall promptly give notice
thereof (in writing or by telephone confirmed in writing)
to the Borrower."
(h) Subparagraphs 6(b) (iii) and (iv) of the Loan Agreement
are hereby deleted in their entirety and, in lieu thereof, the following is
substituted therefor:
<PAGE>
"(iii) quarterly, as soon as possible and in any event
within thirty (30) Days after the end of each quarter of
Borrower's fiscal year, (1) a Covenant Compliance
Certificate confirming the Borrower's compliance with all
financial covenants and ratios, in form and substance
satisfactory to the Bank and certified to the Bank by the
Chief Financial Officer of the Borrower;
(iv) as soon as available, copies of all such financial
statements, proxy statements, notices, and reports as it
shall send to all stockholders and of all Form 10Q and Form
10K reports (with exhibits) and all registration statements
(with exhibits) and all other reports which it is or may be
required to file with the Securities and Exchange
Commission or any governmental body or agency succeeding to
the functions of such Commission;
(v) promptly upon receipt thereof, a copy of each other report
submitted to the Borrower by independent accountants in
connection with any annual, interim or special audit made by
them of the books of the borrower; and
(vi) with reasonable promptness, such other data, financial
information or reports as the Bank may request from time to
time."
(i) Subparagraphs 6(s) (i), (ii), (iii) and (iv) of the Loan
Agreement are hereby deleted in their entirety and, in lieu thereof, the
following is substituted therefor:
"(i) Minimum Tangible Net Worth. The Borrower's Tangible
Net Worth shall equal or exceed $50,000,000.
(ii) Total Liabilities to Tangible Net Worth Ratio. The
ratio of Borrower's Total Liabilities to its Tangible Net
Worth shall not exceed 1.0:1."
(j) Subparagraph 6(t) of the Loan Agreement is hereby deleted
in its entirety and, in lieu thereof, the following is substituted therefor:
"(t) Subordination of Affiliate Loans. All loans,
commissions or fees owed to Affiliates of the Borrower shall,
at all times, be subordinate to the Loan and all other
Obligations of the Borrower to the Bank and the Borrower shall
cause its Affiliates from time to time, to execute and deliver
to the Bank subordination agreements in form and content
satisfactory to the Bank; provided, however, so long as no
Default exists or has occurred, the Bank may pay (but not
prepay) current principal and interest on such loans to such
Affiliates."
<PAGE>
(k) Subparagraph 7(b) of the Loan Agreement is hereby deleted
in its entirety and, in lieu thereof, the following is substituted therefor:
"(b) RESERVED."
(l) Subparagraph 7(e) of the Loan Agreement is hereby deleted
in its entirety and, in lieu thereof, the following is substituted therefor:
"(e) Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of any of its assets or properties, tangible
or intangible, whether now owned or hereafter acquired, in
excess of $500,000.00, either in a single case or in the
aggregate, to any Person; provided, however, so long as no
default has occurred, the Borrower may (i) replace its
equipment due to obsolescence or repair, and (ii) sell its
inventory in the normal course of its business."
(m) Subparagraph 7(g) of the Loan Agreement is hereby deleted
in its entirety and, in lieu thereof, the following is substituted therefor:
"(g) Additional Indebtedness. Except for the Existing
Loans, incur, create, assume or permit or suffer to exist any
indebtedness or liability for borrowed money, any indebtedness
evidenced by notes, bonds, debentures, or similar obligations
or any conditional sales or title retention agreement or
capitalized lease, in excess of an aggregate of $500,000.00 in
any fiscal year without the prior written consent of the
Bank."
(n) Subparagraph 7(o) of the Loan Agreement is hereby deleted
in its entirety and, in lieu thereof, the following is substituted therefor:
"(o) Subsidiaries. Form any additional Subsidiaries
other than those set forth on Exhibit D, attached hereto; or
loan or advance to, or guarantee or endorse or otherwise be or
become contingently liable, directly or indirectly, in
connection with the obligations of, or make any capital
contribution to or otherwise invest in, Subsidiaries in excess
of $15,000,000.00 in the aggregate, without prior written
notice to and written consent from the Bank."
2. Payment and Elimination of the Term Loan. As of the date of
execution of this First Amendment, the Borrower shall repay in full the
outstanding principal balance and all accrued but unpaid interest due to the
Bank on the Term Loan from its own funds and the Term Loan shall be eliminated
from the Loan Agreement.
3. Representations and Warranties. The Borrower hereby reaffirms all of
the representations and warranties contained in the Loan Agreement as though
made and given in connection with the execution and delivery of this First
Amendment and further certifies that all such representations and warranties are
true and correct on and as of the date hereof.
<PAGE>
4. Ratification. Except for any modification of and/or amendment to the
Loan Agreement as herein provided, no other term, condition or provision of the
Loan Agreement shall be considered to be altered or amended, and this First
Amendment shall not be considered a novation. The Borrower agrees that the
amounts extended by the Bank to the Borrower hereunder are absolutely and
unconditionally due and owing to the Bank, and are not subject to any claims,
counterclaims, defenses or other rights of offset whatsoever.
5. Complete Agreement. This First Amendment constitutes the
complete agreement between the parties hereto and incorporates all prior
discussions, agreements and representations made in regard to the matters set
forth herein.
6. Capitalized Terms. Capitalized terms used in this First Amendment
shall have the meanings assigned to them in the Loan Agreement unless otherwise
indicated or the context hereof clearly dictates otherwise.
7. Conflict with Agreement. In the event of conflict between the
terms of the Loan Agreement and the terms of any of the other loan documents
executed in connection therewith the terms of the Loan Agreement shall govern
in all instances.
IN WITNESS WHEREOF, the Bank and the Borrower have caused this First
Amendment to be executed by their respective duly authorized officers as of the
day and year first above written.
Signed, sealed and delivered in SAWTEK INC.
the presence of:
/s/Kathleen Sinnott By:/s/Raymond A. Link
Raymond A. Link,
Print Name: Kathleen Sinnott Vice President-Finance/
Chief Financial Officer
/s/KC Hoppe
Print Name: KC Hoppe
SUNTRUST BANK, CENTRAL
FLORIDA, NATIONAL ASSOCIATION,
f/k/a SUN BANK, NATIONAL
ASSOCIATION
_________________________________ By:______________________________
Print Name:_______________________ Name:____________________________
Title:___________________________
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<LEGEND>
(Replace this text with the legend)
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<CIK> 0001009675
<NAME> Sawtek Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 31,436
<SECURITIES> 0
<RECEIVABLES> 8,621
<ALLOWANCES> 883
<INVENTORY> 5,947
<CURRENT-ASSETS> 46,909
<PP&E> 45,334
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<TOTAL-ASSETS> 81,455
<CURRENT-LIABILITIES> 9,593
<BONDS> 3,668
0
0
<COMMON> 10
<OTHER-SE> 66,076
<TOTAL-LIABILITY-AND-EQUITY> 81,455
<SALES> 18,502
<TOTAL-REVENUES> 18,502
<CGS> 8,678
<TOTAL-COSTS> 8,678
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<INCOME-TAX> 2,618
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