<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1997
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRIUMPH GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 51-0347963
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
</TABLE>
FOUR GLENHARDIE CORPORATE CENTER
1255 DRUMMERS LANE, SUITE 200
WAYNE, PENNSYLVANIA 19087
(610) 975-0420
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
RICHARD C. ILL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TRIUMPH GROUP, INC.
FOUR GLENHARDIE CORPORATE CENTER
1255 DRUMMERS LANE, SUITE 200
WAYNE, PENNSYLVANIA 19087
(610) 975-0420
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
Edward D. Slevin, Esquire George P. Stamas, Esquire
Gerald J. Guarcini, Esquire John B. Watkins, Esquire
Ballard Spahr Andrews & Ingersoll Wilmer, Cutler & Pickering
1735 Market Street, 51st Floor 100 Light Street
Philadelphia, Pennsylvania 19103 Baltimore, Maryland 21202
(215) 665-8500 (410) 986-2800
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (1) OFFERING PRICE(1)
<S> <C> <C> <C>
Common Stock, par value
$.001 per share 2,557,500 shares $32.60 $83,374,500
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, par value
$.001 per share $25,265
</TABLE>
- ------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended, on
the basis of the average of the high and low prices of Triumph Group, Inc.
Common Stock on October 31, 1997, as reported on the NYSE.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
NOVEMBER 4, 1997
2,325,000 SHARES
[LOGO]
TRIUMPH GROUP, INC.
COMMON STOCK
---------
Of the 2,325,000 shares of Common Stock, par value $.001 per share ("Common
Stock"), of Triumph Group, Inc. (the "Company") offered hereby, 2,000,845 shares
are being sold by the Company and 324,155 shares will be sold by World Equity
Partners, L.P. (the "Selling Stockholder") subsequent to the exercise of its
warrant. See "Principal and Selling Stockholders." The Company's Common Stock is
traded on the New York Stock Exchange ("NYSE") under the symbol "TGI." On
November 3, 1997, the closing price of the Common Stock on the NYSE was $33.25
per share. See "Price Range of Common Stock."
--------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSION COMPANY(1) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(2)................ $ $ $ $
</TABLE>
(1) Before deducting estimated expenses of $400,000 payable by the Company.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
232,500 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public as shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
--------------
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to the
right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of BT Alex. Brown Incorporated, Baltimore, Maryland, on or about November ,
1997.
BT ALEX. BROWN SBC WARBURG DILLON READ INC.
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1997
<PAGE>
[PHOTOS]
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF COMMON STOCK PRIOR TO THE PRICING OF
THIS OFFERING FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, THE
PURCHASE OF COMMON STOCK FOLLOWING THE PRICING OF THIS OFFERING TO COVER A
SYNDICATE SHORT POSITION IN THE COMMON STOCK OR FOR THE PURPOSE OF MAINTAINING
THE PRICE OF THE COMMON STOCK AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE AUDITED AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES INCORPORATED BY REFERENCE HEREIN. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT
OPTION WILL NOT BE EXERCISED. UNLESS THE CONTEXT INDICATES OR REQUIRES
OTHERWISE, AS USED IN THIS PROSPECTUS, REFERENCES TO "THE COMPANY" INCLUDE
TRIUMPH GROUP, INC. AND ITS DIRECT AND INDIRECT SUBSIDIARIES AND THE OPERATING
DIVISIONS OF SUCH SUBSIDIARIES. THE COMPANY CONDUCTS ITS OPERATIONS THROUGH ITS
WHOLLY OWNED SUBSIDIARY, TRIUMPH GROUP HOLDINGS, INC. AND ITS DIRECT AND
INDIRECT SUBSIDIARIES.
THE COMPANY
The Company designs, engineers, manufactures, repairs and overhauls aviation
components such as mechanical and electromechanical control systems, aircraft
and engine accessories, auxiliary power units ("APUs"), avionics and aircraft
instruments. The Company serves a broad spectrum of the aviation industry,
including commercial airlines and air cargo carriers, as well as original
equipment manufacturers of aircraft and aircraft components ("OEMs"), on a
worldwide basis.
According to 1996 U.S. Department of Commerce statistics, the annual
worldwide market for aircraft, including components, is approximately $56.7
billion. This market is expected to grow at an annual rate of 5% to 6% through
2000. AVIATION WEEK AND SPACE TECHNOLOGY has stated that the global airline
industry spends at least $20 billion annually to maintain its aircraft. Both the
aircraft component production and component repair industries are highly
fragmented, each consisting of a limited number of well-capitalized companies,
which offer a broad range of products and services, and a large number of
smaller, specialized companies. The aviation industry has been consolidating at
an increasing pace in recent years, and it is expected that such consolidation
will continue for the foreseeable future.
The Company believes that there are a number of significant trends affecting
the demand for its products and services. In addition to increased air transit
and aircraft in service, these trends include (i) increased outsourcing of the
manufacture and maintenance of aircraft components, assemblies and subassemblies
by aircraft operators and OEMs, (ii) reductions by customers in the number of
approved suppliers and vendors of aviation products and services, (iii) reduced
supply of surplus aircraft, (iv) increased emphasis on component traceability
and (v) more stringent maintenance and safety requirements.
COMPETITIVE ADVANTAGES
The Company believes that it is well positioned to take advantage of these
trends due to:
BROAD ARRAY OF PRODUCTS AND SERVICES. The Company offers to the aviation
industry a consolidated point of purchase for a broad array of aviation products
and services. The Company designs, engineers and manufactures aircraft
components to fulfill the particular needs and requirements of its customers. In
certain cases, principally at Triumph Controls, Inc. ("TCI"), a subsidiary of
the Company, the Company owns the proprietary right to these designs and,
accordingly, the customer generally relies on the Company to provide service on
such aircraft components at every stage of their useful lives, including the
repair and overhaul or replacement of such components. In addition, the Company
manufactures aviation components according to its customers' specifications. The
Company also performs repair and overhaul services for customers on various
aviation components manufactured by third parties. The Company offers to
maintain and manage inventories of aircraft components and other products for
certain of its customers. In certain instances, the Company's customers require
it to maintain and manage their inventories.
GOVERNMENT CERTIFICATIONS. The Company operates 12 repair stations
certified by the United States Federal Aviation Administration (the "FAA") and
has been granted licenses from the FAA and certain foreign regulatory
authorities to perform repair and overhaul services on broad classifications of
3
<PAGE>
aircraft instruments and accessories. Without such broad certifications and
licenses, which are often expensive and time-consuming to obtain and involve
extensive audit procedures, other companies are precluded from offering these
products and services, thereby constituting a significant barrier to entry. In
addition, the Company holds two exclusive licenses issued by the FAA which
permit the Company to design, engineer, repair, test and release into service,
without FAA approval, certain products to its own specifications for certain
aircraft components and therefore to compete directly with OEMs with respect to
such components. These licenses, known as SFAR 36 certifications, enable the
Company to offer, on a proprietary basis, certain repaired parts to its
customers at a lower cost than other companies that must purchase replacement
parts from third parties. The Company also employs three Designated Engineering
Representatives ("DERs") who are certified to act on behalf of the FAA to
develop, substantiate and approve repairs on components for certain of the
Company's operating divisions and subsidiaries.
EMPHASIS ON QUALITY CONTROL. The Company incurs significant expenses to
maintain the most stringent quality control of its products and services. In
addition to domestic and foreign governmental regulations, OEMs, commercial
airlines and other customers require that the Company satisfy certain
requirements relating to the quality of its products and services. The Company
performs testing and certification procedures on all of the products that it
designs, engineers, manufactures, repairs and overhauls, and maintains detailed
records to ensure traceability of the production of and service on each aircraft
component. The expense required to institute and maintain the Company's quality
control procedures represents a barrier to entry to other companies.
BROAD CUSTOMER BASE. Due to the Company's broad array of products and
services and its emphasis on quality control and timely delivery, the Company's
customers include virtually all of the world's major commercial airlines and an
increasing number of the most widely recognized air cargo carriers. The Company
expects that its customer base will continue to strengthen and broaden with
increased cross-selling efforts by the Company of its related products and
services.
ESTABLISHED INDUSTRY PRESENCE. The operating divisions and subsidiaries in
the Company's Aviation Group have substantial experience in the aviation
industry. These entities are characterized by experienced management and
highly-skilled employees. Because of its established industry presence, the
Company enjoys strong customer relations, name recognition and repeat business.
COMPANY STRATEGY
The Company intends to grow its aviation business through:
EXPANSION OF PRODUCTS AND SERVICES. The Company will continue to introduce
new aviation products and services to take advantage of the growing aviation
industry and the increasing demand for aviation products and services. In an
effort to expand its existing array of products and services and to capture
additional repair and overhaul business, the Company plans to expand, as
appropriate, its program for the distribution and inventory management of third
party aircraft components. The Company will also expand its assembly and
subassembly capabilities on certain aircraft components. By broadening its
products and services, the Company intends to further expand its position as a
consolidated point of purchase to the aviation industry, capitalizing on the
increasing trend toward outsourcing and the reduction by aircraft operators and
OEMs of the number of approved suppliers and vendors.
ACQUISITIONS. The Company expects to continue its growth through
acquisitions of other companies, assets or product lines that add to or
complement the Company's existing aviation products and services. The Company
has successfully completed six acquisitions since October 1995, three of which
were completed since the Company's initial public offering. Because of the
fragmented nature of much of the market for aircraft products and services, the
Company believes that many additional acquisition opportunities exist in the
aviation industry. The Company intends to further capitalize on the
consolidation trend in the aviation industry and, therefore, the Company is
currently evaluating acquisition opportunities.
4
<PAGE>
EXPANDED OPERATING CAPACITY. The Company plans to increase its operating
capacity to meet the expected increased growth and demand in the aviation
industry. The Company will increase its capital expenditures, including
expenditures for additional equipment and skilled labor, to support this
increased capacity. The Company intends to continue to invest in state of the
art machinery to increase its operating efficiencies and improve operating
margins.
INCREASED INTERNATIONAL MARKETING. The Company will continue to take
advantage of the expanding international market for aviation products and
services as worldwide air travel escalates and foreign nations, particularly
China and other countries in Asia, purchase used aircraft that require more
frequent repair and maintenance. The Company currently supplies products and
services to virtually every major commercial airline in the world and retains
independent sales representatives in a number of foreign countries. The Company
intends to build on its existing international presence through continued market
penetration and, as appropriate opportunities arise, foreign acquisitions.
CAPITALIZING ON GROUP AFFILIATION. Utilizing the group affiliation of the
Company's operating divisions and subsidiaries, the Company plans to increase
cross-selling of related capabilities to its customers. The Company's operating
divisions and subsidiaries will continue to share independent sales
representatives and jointly bid on projects where appropriate, while still
maintaining their individual identities.
RECENT ACQUISITIONS
The Company has completed three acquisitions since its initial public
offering in October 1996:
On April 30, 1997, the Company acquired J.D. Chapdelaine Co. ("JDC
Company"), located in Ft. Lauderdale, Florida and Georgetown, Texas. JDC Company
repairs, overhauls, exchanges and sells instrumentation for the aviation
industry.
On September 2, 1997, the Company acquired Hydro-Mill Co. ("Hydro-Mill"),
based in Chatsworth, California. Hydro-Mill manufactures, repairs and overhauls
precision machine parts and assemblies for the aircraft industry, serving a
broad range of OEMs and commercial airlines and air cargo carriers with aircraft
parts and assemblies and overhaul and repair services.
On October 29, 1997, the Company acquired Stolper-Fabralloy Company, LLC
("Stolper"), which fabricates precision sheet metal turbomachinery components
for OEMs serving both commercial and military markets. It manufactures hot
section components for small propulsion jet engines and APUs and combustion
system components for power generation equipment manufacturers. Stolper operates
two FAA-certified repair stations located in Brookfield, Wisconsin and Phoenix,
Arizona.
On a combined basis, the Company believes that the annual operating revenue
for these three companies will be approximately $69.0 million.
ADDITIONAL BUSINESSES
The Company's Metals Group consists of three operating divisions and one
subsidiary, all with substantial experience in the metals industry. These
businesses include a leading producer of electrogalvanized steel products, a
steel service center specializing in flat rolled steel products and a leading
manufacturer of fuel tanks and hydraulic reservoirs. These entities supply
products to several hundred manufacturers and other customers in the computer,
electronics and agricultural industries on a regional and national basis. In
addition, the Company operates a business engaged in the erection of structural
frameworks for buildings and bridges in the midwestern United States. The
Company's Metals Group is a significant contributor to the Company's financial
strength and has consistently generated profits and positive cash flows for the
Company. The Company believes that it competes successfully in this established
market on the basis of price, quality and reliability of service.
5
<PAGE>
COMPANY ORGANIZATION
The Company was incorporated in Delaware in 1993 and its executive offices
are located at Four Glenhardie Corporate Center, 1255 Drummers Lane, Suite 200,
Wayne, Pennsylvania 19087-1565, and its telephone number is (610) 975-0420.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company......................................... 2,000,845 shares
The Selling Stockholder............................. 324,155 shares
Common Stock to be outstanding after this offering...... 12,074,588 shares(1)
Use of Proceeds......................................... For the repayment of indebtedness.
See "Use of Proceeds."
NYSE symbol............................................. TGI
</TABLE>
- ------------------------
(1) Includes 3,727,962 shares of Class D Common Stock, par value $.001 per share
("Class D Common Stock"), held by Citicorp Venture Capital, Ltd. ("CVC");
excludes 241,513 shares of Common Stock issuable upon exercise of
outstanding stock options held by certain employees of the Company at
September 30, 1997 and 325,845 shares of Common Stock issuable upon exercise
of certain warrants. See "Principal and Selling Stockholders."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED MARCH 31, SEPTEMBER 30,
--------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1995 1996(1) 1997(1)(5) 1996(1)(5) 1997(5)
--------- --------- ----------- ----------- ---------
OPERATING DATA:
AVIATION GROUP
Net sales............................................. $ 70,714 $ 100,166 $ 167,731 $ 76,570 $ 102,773
Group operating income, before corporate expense(2)... 8,778 14,095 27,505 12,604 16,862
METALS GROUP
Net sales............................................. 93,451 86,608 82,747 42,530 44,229
Group operating income, before corporate expense(2)... 6,379 4,638 4,473 1,396 2,700
Combined operating income, before gain on sale of assets
and corporate expense................................. 15,157 18,733 31,978 14,000 19,562
Gain on sale of assets.................................. -- -- -- -- 1,250
Corporate expense(3).................................... 1,606 2,522 4,371 2,152 2,233
--------- --------- ----------- ----------- ---------
Operating income........................................ 13,551 16,211 27,607 11,848 18,579
Interest expense........................................ 6,589 7,318 6,591 4,404 1,879
--------- --------- ----------- ----------- ---------
Income from continuing operations, before income taxes
and extraordinary item................................ 6,962 8,893 21,016 7,444 16,700
--------- --------- ----------- ----------- ---------
--------- --------- ----------- ----------- ---------
Income from continuing operations, before extraordinary
item.................................................. 4,364 5,194 12,555 4,439 10,187
Income (loss) from discontinued operations.............. (2,852) 4,496 -- -- --
--------- ---------
Net income.............................................. $ 1,512 $ 9,690 $ 11,077 $ 2,961 $ 10,797
--------- --------- ----------- ----------- ---------
--------- --------- ----------- ----------- ---------
Earnings per share(4):
Income from continuing operations, before
extraordinary item(4)............................... $ 0.68 $ 0.80 $ 1.50 $ 0.65 $ 0.97
Shares used in computing earnings per share(4)........ 7,268 7,369 8,648 7,386 10,508
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------
<S> <C> <C>
PRO FORMA
ACTUAL AS ADJUSTED(6)
--------- --------------
BALANCE SHEET DATA:
Working capital....................................................................... $ 81,293 $ 81,293
Total assets.......................................................................... 241,521 241,521
Long-term debt, including current portion............................................. 66,740 37,543
Total stockholders' equity............................................................ $ 102,210 $ 165,012
</TABLE>
- ------------------------
(1) The operating results of Air Lab, Inc. ("Air Lab"), TCI and Advanced
Materials Technologies, Inc. ("AMTI") are included since October 2, 1995,
January 1, 1996 and July 31, 1996, respectively. The combined operations of
Air Lab, TCI and AMTI contributed $11.0 million and $62.7 million to the
Aviation Group's net sales and $2.3 million and $15.4 million to the
Aviation Group's operating income, before corporate expense, for the fiscal
years ended March 31, 1996 and 1997, respectively.
(2) Operating income, before corporate expense, is presented by group to assist
the investor in evaluating each of the group's results of operations before
financing and corporate expenses.
(3) Corporate expenses primarily consist of compensation, rent and costs
related to the operation of the Company's corporate office and other general
expenses of the Company including professional fees.
7
<PAGE>
(4) Earnings per share information represents the Company's per share data and
weighted average Common Stock outstanding, restated to give retroactive
effect to the 65-for-one stock split effected immediately prior to the
Company's initial public offering, the dilutive effects of warrants, stock
issued during the period commencing 12 months prior to the Company's initial
public offering at prices below the public offering price, the conversion of
all of the Company's capital stock and junior subordinated promissory notes
("JSDs") immediately prior to the Company's initial public offering, the
exchange of capital stock and JSDs immediately prior to the Company's
initial public offering into shares of Common Stock and shares of Class D
Common Stock and an adjustment for the interest on the JSDs net of tax
expense. Primary and fully diluted earnings per share are the same.
(5) The operating results of AMTI, JDC Company and Hydro-Mill are included
since August 1, 1996, May 1, 1997 and September 1, 1997, respectively. The
combined operations of AMTI, JDC Company and Hydro-Mill contributed $4.5
million and $19.9 million to the Aviation Group's net sales and $1.0 million
and $4.0 to the Aviation Group's operating income, before corporate expense,
for the six months ended September 30, 1996 and 1997, respectively.
(6) Adjusted to reflect the consummation of the Stolper acquisition and the
sale of shares offered by the Company hereby at an assumed offering price of
$33.25 per share and the application of the net proceeds therefrom as
described in "Use of Proceeds."
8
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES
OF COMMON STOCK OFFERED BY THIS PROSPECTUS.
DEPENDENCE ON AVIATION INDUSTRY. A substantial percentage of the Company's
gross profit and operating income is derived from its Aviation Group. The
Company's aviation operations are focused on designing, engineering and
manufacturing aircraft components on new aircraft and performing repair and
overhaul services on existing aircraft and aircraft components; therefore, the
Company's business is directly affected by economic factors and other trends
that affect its customers in the aviation industry, including a possible
decrease in outsourcing by aircraft operators and OEMs or projected market
growth that may not materialize or be sustainable. When such economic and other
factors adversely affect the aviation industry, they tend to reduce the overall
customer demand for the Company's products and services, thereby decreasing the
Company's operating income. There can be no assurance that economic and other
factors that might affect the aviation industry will not have an adverse impact
on the Company's results of operations. See "Business--Industry Overview and
Trends."
CAPITAL REQUIREMENTS AND INTEGRATION OF ACQUIRED BUSINESSES. A key element
of the Company's strategy has been, and continues to be, internal growth and
growth through the acquisition of additional companies engaged in the aviation
industry. In order to grow internally, the Company will be required to make
significant capital expenditures. The Company's ability to grow by acquisition
is dependent upon, and may be limited by, the availability of suitable
acquisition candidates and capital, and by certain restrictions contained in the
Company's revolving credit facility (the "Credit Facility") and its other
financing arrangements. Growth by acquisition involves risks that could
adversely affect the Company's operating results, including difficulties in
integrating the operations and personnel of acquired companies, the potential
amortization of acquired intangible assets and the potential loss of key
employees of acquired companies. The Company recently acquired three companies,
JDC Company, Hydro-Mill and Stolper, and there can be no assurance that these
acquired companies will be successfully integrated into the Company. There can
be no assurance that the Company will be able to obtain the capital necessary to
pursue its internal growth and acquisition strategy, consummate acquisitions on
satisfactory terms or, if any such acquisitions are consummated, satisfactorily
integrate such acquired businesses into the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Business--Company Strategy."
COMPETITION. There are numerous competitors of the Company in both the
aviation services and metals processing and distribution industries. Competition
in the aviation industry comes from three primary sources: major commercial
airlines, many of which operate their own maintenance and overhaul units, OEMs,
which manufacture, repair and overhaul their own components, and other
independent service companies. The Company's principal competitors in the metals
industry include national and regional steel mills, other steel service centers,
steel erection companies and pre-engineered building manufacturers. Certain of
the Company's competitors in both aviation and metals have substantially greater
financial and other resources than the Company. There can be no assurance that
competitive pressures in either industry will not materially adversely affect
the Company's business, financial condition or results of operations. See
"Business--Competition."
GOVERNMENT REGULATION AND INDUSTRY OVERSIGHT. The aviation industry is
highly regulated in the United States by the FAA and in other countries by
similar agencies. The Company must be certified by the FAA and, in some cases,
by individual OEMs in order to engineer and service parts and components used in
specific aircraft models. If material authorizations or approvals were revoked
or suspended, the operations of the Company would be adversely affected. New and
more stringent government regulations may be adopted, or industry oversight
heightened, in the future and any such new regulations, if enacted, or any
industry oversight, if heightened, may have an adverse impact on the Company.
See "Business--Government Regulation."
9
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FLUCTUATIONS IN OPERATING RESULTS. The Company's overall operating results
are affected by many factors, including the timing of orders from large
customers and the timing of expenditures to manufacture parts and purchase
inventory in anticipation of future sales of products and services. A large
portion of the Company's operating expenses are relatively fixed. Because
several operating divisions and subsidiaries of the Company typically do not
obtain long-term purchase orders or commitments from their customers, they must
anticipate the future volume of orders based upon the historic purchasing
patterns of customers and upon their discussions with customers as to their
future requirements. Cancellations, reductions or delays in orders by a customer
or group of customers could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE OF CERTAIN BUSINESSES ON KEY CUSTOMERS. One customer of the
Company, The Boeing Company ("Boeing")(including McDonnell Douglas, which has
been recently acquired by Boeing), accounted for more than 10%, and one other
customer accounted for more than 5%, of the Company's consolidated revenues
during the 12 months ended September 30, 1997, and the loss of either of these
customers could have a material adverse effect on the Company. In addition,
certain of the Company's operating divisions and subsidiaries have significant
customers, the loss of which could have an adverse effect on such businesses.
LIMITED AVAILABILITY OF RAW MATERIALS. Recently, the Company has
experienced extended lead times for delivery of aircraft-quality aluminum sheet
and extrusions. Such extended lead times may affect the Company's ability to
meet its customers' demands on a timely basis. There can be no assurance that
the Company will be able to purchase sufficient aircraft-quality aluminum sheet
and extrusions or other raw materials to meet the demands of its customers in
the future or that such aircraft-quality aluminum sheet and extrusions or other
raw materials will be available on satisfactory terms or reasonable prices or
that such limited availability will not have a material adverse effect on the
Company.
TECHNOLOGICAL DEVELOPMENTS. The aviation industry is constantly undergoing
development and change, and accordingly, it is likely that new products,
equipment and methods of repair and overhaul service will be introduced in the
future. In order to keep pace with any new developments, the Company may need to
expend significant capital to purchase new equipment and machines or to train
its employees in the new methods of production and service. There can be no
assurance that the Company will be successful in developing new products or,
that such capital expenditures will not have a material adverse effect on the
Company.
RISKS REGARDING THE COMPANY'S INVENTORY. The Company offers to maintain and
manage inventories of aircraft components and other products for certain of its
customers. In addition, certain of the Company's customers require the Company
to maintain and manage their inventories. If this inventory is not used by the
Company, because the Company ceases to supply such customers with the related
products or services or because such components or other products become
obsolete, the Company will not realize any income to offset the expenses
incurred by the Company to acquire and maintain such inventory.
RELIANCE ON SKILLED PERSONNEL. From time to time, certain of the Company's
operating divisions and subsidiaries have experienced difficulties in attracting
and retaining skilled personnel to design, engineer, manufacture, repair and
overhaul sophisticated aircraft components. The ability of the Company to
operate successfully could be jeopardized if the Company is unable to attract
and retain a sufficient number of skilled personnel.
EXISTENCE OF COLLECTIVE BARGAINING AGREEMENTS. Several of the Company's
subsidiaries are parties to collective bargaining agreements with labor unions.
None of these collective bargaining agreements will expire in the next 12
months. Under those agreements, the Company currently employs approximately 228
full-time employees, and from time to time employs up to an additional 150
temporary
10
<PAGE>
employees for its steel erection business, all of whom are members of labor
unions. Currently, approximately 11% of the Company's permanent employees are
represented by labor unions and approximately 15% of the Aviation Group's
revenues and 88% of the Metals Group's revenues are derived from the operating
divisions and subsidiaries a portion of whose employees are unionized. The
Company's inability to negotiate acceptable contracts with these unions could
result in strikes by the affected workers and increased operating costs as a
result of higher wages or benefits paid to union members. If the unionized
workers were to engage in a strike or other work stoppage, or other employees
were to become unionized, the Company could experience a significant disruption
of its operations and higher ongoing labor costs, which could have an adverse
effect on the Company's business and results of operations. The Company is
currently contesting the election of a union for certain employees at one of the
Company's operating divisions in the Metals Group. There can be no assurance
that the Company will be successful with respect to its contest and, if the
Company is unsuccessful, the Company may experience increased labor costs which
may have a material adverse effect on such division of the Company.
PRODUCT LIABILITY; CLAIMS EXPOSURE. The Company's overall operations expose
it to potential liability for personal injury or death as a result of the
failure of an aircraft component that has been serviced by the Company, the
failure of an aircraft component designed or manufactured by the Company or the
irregularity of metal products processed or distributed by the Company. While
the Company believes that its liability insurance is adequate to protect it from
such liabilities and while no material claims have been made against the
Company, no assurance can be given that claims will not arise in the future or
that such insurance coverage will be adequate. Additionally, there can be no
assurance that insurance coverage can be maintained in the future at an
acceptable cost. Any such liability not covered by insurance or for which third
party indemnification is not available could have a material adverse effect on
the financial condition of the Company. See "Business--Legal Proceedings."
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES. The Company's business
operations and facilities are subject to a number of federal, state and local
environmental laws and regulations. Although management believes that the
Company's operations and facilities are in material compliance with such laws
and regulations, there can be no assurance that future changes in such laws,
regulations or interpretations thereof or the nature of the Company's operations
will not require the Company to make significant additional capital expenditures
to ensure compliance in the future. Certain of Company's facilities have been or
are currently the subject of environmental remediation activities, the cost of
which is subject to indemnification provided by IKON Office Solutions, Inc.,
formerly Alco Standard Corporation ("IKON"), from whom the Company originally
purchased its business. One of these facilities is connected with a site
included in the National Priorities List of Superfund sites maintained by the
United States Environmental Protection Agency ("EPA"). Another of these
facilities is located on a site included in the EPA's database of potential
Superfund sites. The IKON indemnification covers both (i) the costs and claims
associated with all of these environmental remediation activities and
liabilities and (ii) the cost of unidentified liabilities that arise from
conditions or activities existing at facilities prior to their acquisition from
IKON and that are identified before July 22, 2000. Certain other facilities
acquired and operated by the Company or one of its subsidiaries, including a
leased facility located on an EPA National Priorities List site, are under
active investigation for environmental contamination by federal or state
agencies when acquired, and continue to be under such investigation. The Company
is indemnified by prior operators and/or present owners of the facilities for
liabilities which the Company incurs as a result of these investigations and the
environmental contamination found which pre-dates the Company's acquisition of
these facilities. Two Company facilities also have been the subject of notices
from a citizen group alleging failure to notify and file reports with
appropriate agencies regarding the presence of certain hazardous chemicals in
excess of specified threshold quantities. The Company has denied these
allegations. The Company does not maintain environmental liability insurance,
and if the Company were required to pay the expenses related to these
environmental liabilities, such expenses could have a material adverse effect on
the Company. See "Business--Environmental Matters."
11
<PAGE>
CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL. The Company's
Certificate of Incorporation, as amended, and Bylaws contain provisions,
including cumulative voting, that may have the effect of discouraging certain
transactions involving an actual or threatened change of control of the Company.
In addition, the Board of Directors of the Company has the authority to issue up
to 1,000,000 shares of Preferred Stock in one or more series in connection with
the purchase by the Company of the assets or stock of another corporation or the
merger of the Company with or into another corporation, and to fix the
preferences, rights and limitations of any such series without stockholder
approval. Cumulative voting and the ability to issue Preferred Stock could have
the effect of discouraging unsolicited acquisition proposals or making it more
difficult for a third party to gain control of the Company, or otherwise could
adversely affect the market price of the Common Stock.
CONTROL BY PRINCIPAL STOCKHOLDERS. Upon completion of this offering, CVC,
if it were to convert its shares of Class D Common Stock, would own 38.5% of the
outstanding Common Stock. The Company's executive officers will own an aggregate
of 5.1% of the outstanding Common Stock. After this offering, CVC, either acting
alone or together with the Company's executive officers, may be able to control
the election of a majority of the members of the Company's Board of Directors
and, therefore, to control the business, policies and affairs of the Company.
See "Principal and Selling Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE. As of the date of this Prospectus, in
addition to the 2,325,000 shares of Common Stock offered pursuant to this
offering, which will be freely tradeable without restriction, an additional
6,021,626 shares of Common Stock and 3,727,962 shares of Common Stock issuable
upon conversion from Class D Common Stock held by current stockholders will be
either freely tradeable or eligible for sale pursuant to Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"). The Company, its
executive officers and directors and certain of its stockholders who
beneficially own 5,441,704 shares, in the aggregate, have agreed not to offer,
sell, contract to sell, or otherwise dispose of, any shares of Common Stock or
any securities convertible into, or exercisable or exchangeable for, shares of
Common Stock, for a period of 90 days after the date of this Prospectus without
the prior written consent of BT Alex. Brown Incorporated. In addition, CVC,
which owns an aggregate of 920,573 shares of Common Stock and 3,727,962 shares
of Class D Common Stock, certain of its affiliates, the Selling Stockholder and
certain members of management have certain demand and piggyback registration
rights with respect to the shares of Common Stock held by such individuals and
entities. Sales of a substantial number of shares of Common Stock in the public
market following the date of this Prospectus could adversely affect the market
price for the Common Stock.
12
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 2,000,845 shares of Common Stock
offered by the Company are estimated to be approximately $62.8 million ($70.1
million if the Underwriters exercise their over-allotment option in full),
assuming a public offering price per share of $33.25 (after deducting
underwriting discounts and commissions and estimated offering expenses). The
Company intends to use the net proceeds, including the net proceeds from the
sale of shares of Common Stock subject to the over-allotment, if any, for
repayment of indebtedness under the Credit Facility. The Credit Facility matures
on March 31, 2002 and bears interest, at the option of the Company, at the
fluctuating prime rate or LIBOR plus applicable basis points. On September 30,
1997, an aggregate amount of approximately $54.0 million was outstanding under
the Credit Facility, $50.0 million of which was accruing interest at LIBOR plus
applicable basis points, or 6.1875% per annum, and $4.0 million of which was
accruing interest at the prime rate of 8.5% per annum. Amounts repaid on the
Credit Facility may be reborrowed. Pending such uses, the net proceeds will be
invested in short-term, interest-bearing investments. The Company will not
receive any of the proceeds from the sale of Common Stock by the Selling
Stockholder.
DIVIDEND POLICY
The Company has paid no dividends on its Common Stock. The Board of
Directors of the Company does not intend to declare any dividends on its Common
Stock in the foreseeable future. Rather, the Company intends, after consummation
of this offering, to retain its earnings, if any, for use in the operation of
its business. The Common Stock and the Class D Common Stock will be treated the
same with respect to any dividends declared by the Board of Directors.
Furthermore, the Company's ability to declare or pay dividends on its Common
Stock is limited by the terms of the Credit Facility and other financing
arrangements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
PRICE RANGE OF COMMON STOCK
The Common Stock has been traded on the NYSE under the symbol "TGI" since
October 25, 1996, the date of the Company's initial public offering. The
following table sets forth, for the periods indicated, the high and the low
sales prices for the Common Stock, as reported on the NYSE:
<TABLE>
<CAPTION>
HIGH LOW
------- ---------
<S> <C> <C> <C>
FISCAL 1997
Third Quarter (from October 25, 1996)....................................................... $ 27 1/4 $ 20
Fourth Quarter.............................................................................. 31 3/4 24
FISCAL 1998
First Quarter............................................................................... $ 31 7/8 $ 23
Second Quarter.............................................................................. 33 5/8 27
Third Quarter (through November 3, 1997).................................................... 37 1/4 32
<CAPTION>
<S> <C>
FISCAL 1997
Third Quarter (from October 25, 1996)....................................................... 7/8
Fourth Quarter..............................................................................
FISCAL 1998
First Quarter...............................................................................
Second Quarter.............................................................................. 1/8
Third Quarter (through November 3, 1997).................................................... 1/2
</TABLE>
13
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of September 30, 1997: (i) on an actual basis; (ii) on a pro forma basis; and
(iii) on a pro forma as adjusted basis. The pro forma amounts give effect to the
acquisition of Stolper which occurred on October 29, 1997. The pro forma as
adjusted amounts give effect to the sale of 2,000,845 shares of Common Stock in
this offering (at an assumed public offering price of $33.25 per share and after
deducting estimated underwriting discounts and commissions and offering expenses
payable by the Company), the acquisition of Stolper and the application of the
net proceeds therefrom as described under "Use of Proceeds." This table should
be read in conjunction with the Company's Unaudited Interim Condensed
Consolidated Financial Statements and the Notes thereto and the Company's
Audited Consolidated Financial Statements and the Notes thereto incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- ------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt (including current portion):
Revolving credit facility............................................... $ 54,013 $ 87,618 $ 24,816
Subordinated note....................................................... 6,607 6,607 6,607
Junior subordinated promissory notes.................................... 426 426 426
Other debt and capital lease obligations................................ 5,694 5,694 5,694
----------- ----------- ------------
Total debt............................................................ 66,740 100,345 37,543
Stockholders' equity:
Preferred Stock, $.001 par value, 1,000,000 shares authorized; no shares
outstanding........................................................... -- -- --
Common Stock, $.001 par value, 15,000,000 shares authorized; 6,021,626
shares issued on an actual and pro forma basis(1); 8,346,626 shares
issued on a pro forma as adjusted basis(2)............................ 6 6 8
Class D Common Stock, $.001 par value, 6,000,000 shares authorized;
3,727,962 shares issued............................................... 4 4 4
Additional paid-in capital.............................................. 68,479 68,479 131,279
Retained earnings....................................................... 33,721 33,721 33,721
----------- ----------- ------------
Total stockholders' equity............................................ 102,210 102,210 165,012
----------- ----------- ------------
Total capitalization................................................ $ 168,950 $ 202,555 $ 202,555
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
- ------------------------
(1) Excludes 241,513 shares of Common Stock issuable upon exercise of stock
options granted to certain employees of the Company and 650,000 shares of
Common Stock issuable upon exercise of the warrant held by the Selling
Stockholder.
(2) Excludes 241,513 shares of Common Stock issuable upon exercise of stock
options granted to certain employees of the Company and 325,845 shares of
Common Stock issuable upon exercise of the warrant held by the Selling
Stockholder.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected consolidated financial data of the
Company as of the dates and for the periods indicated. The operating data and
balance sheet data are derived from the audited and unaudited consolidated
financial statements of the Company. The selected consolidated financial data as
of September 30, 1996 and 1997 and for the six months ended September 30, 1996
and 1997 are unaudited; however, in the Company's opinion, include all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of such information. The interim results of operations may not be
indicative of the results for the full fiscal year or for any other interim
period. The selected consolidated financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the audited and unaudited consolidated financial statements and
notes thereto included elsewhere or incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY TRIUMPH GROUP, INC.
------------------------ --------------------------------------------------------------------
EIGHT
MONTHS TEN MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED YEARS ENDED ENDED
SEPTEMBER 30, MAY 31, MARCH 31, MARCH 31, SEPTEMBER 30,
------------- --------- ----------- --------------------------------- --------------------
1992(1) 1993(1) 1994 1995 1996(2) 1997(2) 1996(6) 1997(6)
------------- --------- ----------- ----------- --------- --------- --------- ---------
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVIATION GROUP
Net sales................... $ 76,346 $ 46,517 $ 57,257 $ 70,714 $ 100,166 $ 167,731 $ 76,570 $ 102,773
Cost of products sold....... 55,254 34,568 39,941 51,395 70,643 110,932 50,398 68,758
------------- --------- ----------- ----------- --------- --------- --------- ---------
Gross profit................ 21,092 11,949 17,316 19,319 29,523 56,799 26,172 34,015
Selling, general and
administrative............ 9,161 5,830 6,799 8,761 12,915 24,228 11,228 13,818
Depreciation and
amortization.............. 2,060 1,413 1,379 1,780 2,513 5,066 2,340 3,335
------------- --------- ----------- ----------- --------- --------- --------- ---------
Operating income, before
corporate expense(3)...... 9,871 4,706 9,138 8,778 14,095 27,505 12,604 16,862
METALS GROUP
Net sales................... 78,258 57,216 72,738 93,451 86,608 82,747 42,530 44,229
Cost of products sold....... 60,178 45,293 57,154 74,441 69,097 65,118 34,288 35,012
------------- --------- ----------- ----------- --------- --------- --------- ---------
Gross profit................ 18,080 11,923 15,584 19,010 17,511 17,629 8,242 9,217
Selling, general and
administrative............ 10,741 7,704 9,614 11,715 11,874 12,177 6,343 5,995
Depreciation and
amortization.............. 832 658 594 916 999 979 503 522
------------- --------- ----------- ----------- --------- --------- --------- ---------
Operating income, before
corporate expense(3)...... 6,507 3,561 5,376 6,379 4,638 4,473 1,396 2,700
------------- --------- ----------- ----------- --------- --------- --------- ---------
------------- --------- ----------- ----------- --------- --------- --------- ---------
Combined operating income,
before gain on sale of
assets and corporate
expense..................... $ 16,378 $ 8,267 14,514 15,157 18,733 31,978 14,000 19,562
------------- ---------
------------- ---------
Gain on sale of assets........ -- -- -- -- -- 1,250
----------- ----------- --------- --------- --------- ---------
Corporate expense(4).......... 1,573 1,606 2,522 4,371 2,152 2,233
----------- ----------- --------- --------- --------- ---------
Operating income.............. 12,941 13,551 16,211 27,607 11,848 18,579
Interest expense.............. 4,908 6,589 7,318 6,591 4,404 1,879
----------- ----------- --------- --------- --------- ---------
Income from continuing
operations, before income
taxes and extra-ordinary
item........................ 8,033 6,962 8,893 21,016 7,444 16,700
Income tax expense............ 3,125 2,598 3,699 8,461 3,005 6,513
----------- ----------- --------- --------- --------- ---------
Income from continuing
operations, before
extraordinary item.......... 4,908 4,364 5,194 12,555 4,439 10,187
Extraordinary (loss) gain, net
of income taxes............. -- -- -- (1,478) (1,478) 610
Income (loss) from
discontinued operations..... (462) (2,852) 4,496 -- -- --
----------- ----------- --------- --------- --------- ---------
Net income.................... $ 4,446 $ 1,512 $ 9,690 $ 11,077 $ 2,961 $ 10,797
----------- ----------- --------- --------- --------- ---------
----------- ----------- --------- --------- --------- ---------
Earnings per share(5):
Income from continuing
operations, before
extraordinary item(5)..... $ 0.73 $ 0.68 $ 0.80 $ 1.50 $ 0.65 $ 0.97
Shares used in computing
earnings per share(5)..... 7,180 7,268 7,369 8,648 7,386 10,508
BALANCE SHEET DATA:
Working capital............. $ 32,360 $ 33,296 $ 49,152 $ 39,609 $ 60,379 $ 56,288 $ 55,365 $ 81,293
Total assets................ 154,343 152,761 104,905 111,386 161,406 171,315 168,862 241,521
Long-term debt, including
current portion........... 64,477 69,013 74,403 71,738 98,769 24,392 96,198 66,740
Redeemable preferred
stock..................... -- -- 1,423 1,912 2,652 -- -- --
Total stockholders'
equity.................... 69,283 63,398 5,080 6,094 15,065 91,413 18,462 102,210
</TABLE>
15
<PAGE>
- ------------------------------
(1) Financial information related to the year ended September 30, 1992 and the
eight month period ended May 31, 1993 is unaudited and represents operating
results for the divisions and subsidiaries of the predecessor company which
were purchased by the Company as of June 1, 1993. Information is provided
through operating income to assist the reader in evaluating the Company's
historical operating trends. Financial information after operating income is
excluded as the information is not comparable to subsequent periods because
of the significantly changed corporate organization and capital structure
which resulted from such acquisition.
(2) The operating results of Air Lab, TCI and AMTI are included since October 2,
1995, January 1, 1996 and July 31, 1996, respectively. The combined
operations of Air Lab, TCI and AMTI contributed $11.0 million and $62.7
million to the Aviation Group's net sales and $2.3 million and $15.4 million
to the Aviation Group's operating income, before corporate expense, for the
fiscal years ended March 31, 1996 and 1997, respectively.
(3) Operating income, before corporate expense, is presented by group to assist
the investor in evaluating each of the group's results of operations before
financing and corporate expenses.
(4) Corporate expenses primarily consist of compensation, rent and general costs
related to the operation of the Company's corporate office and other general
expenses of the Company including professional fees.
(5) Earnings per share information represents the Company's per share data and
weighted average Common Stock outstanding, restated to give retroactive
effect to the 65-for-one stock split effected immediately prior to the
Company's initial public offering, the dilutive effects of warrants, stock
issued during the period commencing 12 months prior to the Company's initial
public offering at prices below the public offering price, the conversion of
all of the Company's capital stock and JSDs immediately prior to the
Company's initial public offering, the exchange of capital stock and JSDs
immediately prior to the Company's initial public offering into shares of
Common Stock and shares of Class D Common Stock and an adjustment for the
interest on the JSDs net of tax expense. Primary and fully diluted earnings
per share are the same.
(6) The operating results of AMTI, JDC Company and Hydro-Mill are included since
August 1, 1996, May 1, 1997 and September 1, 1997, respectively. The
combined operations of AMTI, JDC Company and Hydro-Mill contributed $4.5
million and $19.9 million to the Aviation Group's net sales and $1.0 million
and $4.0 to the Aviation Group's operating income, before corporate expense,
for the six months ended September 30, 1996 and 1997, respectively.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
audited and unaudited consolidated financial statements and notes thereto
incorporated by reference in this Prospectus.
OVERVIEW
The Aviation Group designs, engineers, manufactures, repairs and overhauls
aircraft components for commercial airlines and air cargo carriers, as well as
OEMs, on a worldwide basis. The Metals Group manufactures, machines, forges,
processes and distributes metal products to customers in the computer,
construction, container, farm equipment and office furniture industries,
primarily within North America.
Net sales consist of sales of aircraft components and metal products, as
well as revenues derived from repairing and overhauling aircraft components. Net
sales are recorded when services are performed or when products are shipped,
except for long-term construction contracts entered into by the Metals Group,
which are recorded on the percentage-of-completion method based on the
relationship between actual costs incurred and total estimated costs at
completion. Net sales from long-term construction contracts which are recorded
on the percentage-of-completion method approximated 4.3% and 8.6% of total net
sales in 1997 and 1996, respectively.
Operating costs consist primarily of cost of products sold, selling, general
and administrative expenses and depreciation and amortization. Selling, general
and administrative expenses consist primarily of compensation and related
benefits to certain administrative employees, marketing, communications and
professional fees.
The Company focuses its acquisition activities on companies engaged in the
aviation products and services industry. The Aviation Group has historically
provided, and the Company believes that it will continue to provide, higher
operating margins than the Metals Group.
SIX MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1996
AVIATION GROUP
NET SALES. The Aviation Group's net sales increased by $26.2 million, or
34.2%, to $102.8 million for the six months ended September 30, 1997 from $76.6
million for the six months ended September 30, 1996. This increase was primarily
due to the inclusion of an aggregate of $19.9 million and $4.5 million for the
six months ended September 30, 1997 and 1996, respectively, in net sales of
AMTI, JDC Company and Hydro-Mill. The other operating divisions and subsidiaries
in the Aviation Group experienced a 16.2% increase in net sales from the six
months ended September 30, 1996. Increased demand for overhaul and repair
services from the commercial airlines and air cargo carriers, as well as
increased orders of aircraft components from OEMs, accounted for the increase in
net sales in the Aviation Group.
COST OF PRODUCTS SOLD. The Aviation Group's cost of products sold increased
by $18.4 million, or 36.4%, to $68.8 million for the six months ended September
30, 1997 from $50.4 million for the six months ended September 30, 1996. This
increase was primarily due to the inclusion of an aggregate of $12.0 million and
$1.9 million for the six months ended September 30, 1997 and 1996, respectively,
in cost of products sold associated with the net sales generated by AMTI, JDC
Company and Hydro-Mill. The remaining increase is associated with the increase
in net sales of the other operating divisions and subsidiaries in the Aviation
Group.
GROSS PROFIT. The Aviation Group's gross profit increased by $7.8 million,
or 30.0%, to $34.0 million for the six months ended September 30, 1997 from
$26.2 million for the six months ended September 30, 1996. Of this increase,
$5.4 million was a result of the inclusion of gross profit on the net sales
generated by AMTI, JDC Company and Hydro-Mill. In addition, the other operating
divisions and
17
<PAGE>
subsidiaries in the Aviation Group experienced a 12.0% increase in gross profit
on the increased sales volume. As a percentage of net sales, gross profit for
the Aviation Group was 33.1% and 34.2% for the six months ended September 30,
1997 and 1996, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Aviation Group's selling,
general and administrative expenses increased by $2.6 million, or 23.1%, to
$13.8 million for the six months ended September 30, 1997 from $11.2 million for
the six months ended September 30, 1996. This increase was primarily due to the
inclusion of an aggregate of $2.8 million and $1.2 million for the six months
ended September 30, 1997 and 1996, respectively, in selling, general and
administrative expenses of AMTI, JDC Company and Hydro-Mill. The remaining
increase is associated with the increase in net sales of the other operating
divisions and subsidiaries in the Aviation Group.
DEPRECIATION AND AMORTIZATION. The Aviation Group's depreciation and
amortization increased by $1.0 million, or 42.5%, to $3.3 million for the six
months ended September 30, 1997 from $2.3 million for the six months ended
September 30, 1996. This increase was primarily due to the depreciation and
amortization attributable to the assets acquired in connection with the AMTI,
JDC Company and Hydro-Mill acquisitions.
OPERATING INCOME. The Aviation Group's operating income increased by $4.3
million, or 33.8%, to $16.9 million for the six months ended September 30, 1997
from $12.6 million for the six months ended September 30, 1996. This increase
was assisted by the continued growth in aircraft production and the increased
outsourcing of repair and overhaul services by commercial aircraft operators.
This increase was primarily due to the inclusion of an aggregate of $4.0 million
and $1.0 million for the six months ended September 30, 1997 and 1996,
respectively, in operating income generated by AMTI, JDC Company and Hydro-Mill.
This increase was accompanied by $1.3 million of incremental operating income
resulting from increased sales volume at the other operating divisions and
subsidiaries in the Aviation Group, which experienced an 11.9% increase in the
six months ended September 30, 1997 from the six months ended September 30,
1996. As a percentage of net sales, operating income for the Aviation Group was
16.4% and 16.5% for the six months ended September 30, 1997 and 1996,
respectively.
METALS GROUP
NET SALES. The Metals Group's net sales increased by $1.7 million, or 4.0%,
to $44.2 million for the six months ended September 30, 1997 from $42.5 million
for the six months ended September 30, 1996. This increase was primarily due to
increased volume over the prior year.
COST OF PRODUCTS SOLD. The Metals Group's cost of products sold increased
by $0.7 million, or 2.1%, to $35.0 million for the six months ended September
30, 1997 from $34.3 million for the six months ended September 30, 1996.
GROSS PROFIT. The Metals Group's gross profit increased by $1.0 million, or
11.8%, to $9.2 million for the six months ended September 30, 1997 from $8.2
million for the six months ended September 30, 1996. As a percentage of net
sales, gross profit for the Metals Group was 20.8% and 19.4% for the six months
ended September 30, 1997 and 1996, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Metals Group's selling,
general and administrative expenses decreased by $0.3 million, or 5.5%, to $6.0
million for the six months ended September 30, 1997 from $6.3 million for the
six months ended September 30, 1996.
DEPRECIATION AND AMORTIZATION. The Metals Group's depreciation and
amortization remained relatively unchanged at $0.5 million for the six months
ended September 30, 1997 and 1996.
OPERATING INCOME. The Metals Group's operating income increased by $1.3
million, or 93.4%, to $2.7 million for the six months ended September 30, 1997
from $1.4 million for six months ended
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September 30, 1996. This increase was due to improved margins and reduced
selling, general and administrative expenses. As a percentage of net sales,
operating income for the Metals Group was 6.1% and 3.3% for the six months ended
September 30, 1997 and 1996, respectively.
OVERALL RESULTS
GAIN ON SALE OF ASSETS. The results for the six months ended September 30,
1997 benefited from the $1.3 million pre-tax gain on the sale of substantially
all of the assets of the Company's Seattle, Washington division, Air Lab to
Sextant Avionique, Inc. ("Sextant") for approximately $5.9 million in cash and
the assumption by the purchaser of certain liabilities.
CORPORATE EXPENSES. Corporate expenses increased by $0.1 million, or 3.8%,
to $2.2 million for the six months ended September 30, 1997 from $2.1 million
for the six months ended September 30, 1996.
INTEREST EXPENSE. Interest expense decreased by $2.5 million to $1.9
million for the six months ended September 30, 1997 from $4.4 million for the
six months ended September 30, 1996. This decrease was primarily due to reduced
debt levels associated with the application of the proceeds from the initial
public offering of the Company's Common Stock and proceeds from the sale of Air
Lab, which amount was partially offset by the acquisitions of AMTI, JDC Company
and Hydro-Mill, the cash portions of such acquisitions were financed by
borrowings under the Credit Facility.
INCOME FROM CONTINUING OPERATIONS, BEFORE INCOME TAXES AND EXTRAORDINARY
ITEM. Income from continuing operations, before income taxes and extraordinary
item, increased by $9.3 million, or 124.3%, to $16.7 million for the six months
ended September 30, 1997 from $7.4 million for the six months ended September
30, 1996. This increase was primarily due to the contribution generated by AMTI,
JDC Company and Hydro-Mill, the overall favorable conditions in the aviation
industry resulting in increased net sales of the Company's products and services
and the gain on sale of the assets of Air Lab.
INCOME TAX EXPENSE. The effective tax rate was 39.0% and 40.4% for the six
months ended September 30, 1997 and 1996, respectively.
EXTRAORDINARY ITEM, NET OF INCOME TAXES. An extraordinary gain of $0.6
million for the six months ended September 30, 1997 relates to a discount
realized on the prepayment of a subordinated note payable to IKON. An
extraordinary loss of $1.5 million for the six months ended September 30, 1996
relates to prepayment premiums and the related write-off of unamortized deferred
financing cost due to the retirement of 11% senior subordinated notes, senior
term loans and the Credit Facility.
NET INCOME. Net income increased by $7.8 million, or 264.6%, to $10.8
million for the six months ended September 30, 1997 from $3.0 million for the
six months ended September 30, 1996. This increase in net income was primarily
attributable to the strong results of the Aviation Group, improved operating
results of the Metals Group, the gain on the sale of assets of Air Lab and the
extraordinary gain on the repayment of indebtedness.
FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996
AVIATION GROUP
NET SALES. Net sales for the Aviation Group increased by $67.6 million, or
67.5%, to $167.7 million for fiscal 1997 from $100.2 million for fiscal 1996.
This increase was primarily due to the inclusion of an aggregate of $62.7
million and $11.0 million in net sales for TCI, Air Lab and AMTI in fiscal 1997
and fiscal 1996, respectively. Net sales for the other operating divisions and
subsidiaries in the Aviation Group, experienced a 17.8% increase in net sales
over fiscal 1996. Increased demand for overhaul and repair services from the
commercial airlines and cargo carriers, as well as increased orders of aircraft
components from OEMs, accounted for the increase in net sales in the Aviation
Group.
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COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Group
increased by $40.3 million, or 57.0%, to $110.9 million for fiscal 1997 from
$70.6 million for fiscal 1996. This increase was primarily due to inclusion of
$35.5 million and $6.0 million in fiscal 1997 and fiscal 1996, respectively, of
costs of products sold associated with net sales generated by TCI, Air Lab and
AMTI. The remaining increase is associated with the increase in net sales of the
remaining operating divisions and subsidiaries in the Aviation Group.
GROSS PROFIT. Gross profit for the Aviation Group increased by $27.3
million or 92.4%, to $56.8 million for fiscal 1997 from $29.5 million for fiscal
1996. Of this increase, $22.2 million was a result of the inclusion of gross
profit on the net sales generated by TCI, Air Lab and AMTI. In addition, $5.1
million of gross profit was generated on the increased sales volume of the other
operating divisions and subsidiaries in the Aviation Group. As a percentage of
net sales, gross profit for the Aviation Group was 33.9% and 29.5% for fiscal
1997 and fiscal 1996, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Group increased by $11.3 million, or
87.6%, to $24.2 million for fiscal 1997 from $12.9 million for fiscal 1996, due
to increased sales volume and the TCI, Air Lab and AMTI acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Aviation Group increased by $2.6 million, or 101.6%, to $5.1 million for fiscal
1997 from $2.5 million for fiscal 1996, primarily due to the assets acquired in
connection with the TCI, Air Lab and AMTI acquisitions.
OPERATING INCOME. Operating income for the Aviation Group increased by
$13.4 million, or 95.1%, to $27.5 million for fiscal 1997 from $14.1 million for
fiscal 1996. This increase was assisted by the growth in aircraft production and
the increased outsourcing of repair and overhaul services by commercial aircraft
operators. This increase was also due to the addition of net sales and profits
generated by TCI, Air Lab and AMTI, as well as the incremental operating income
resulting from increased sales volume. As a percentage of net sales, operating
income for the Aviation Group was 16.4% and 14.1% for fiscal 1997 and fiscal
1996, respectively.
METALS GROUP
NET SALES. Net sales for the Metals Group decreased by $3.9 million, or
4.5%, to $82.7 million for fiscal 1997 from $86.6 million for fiscal 1996. This
decrease was primarily due to reduced sales volume at the Company's steel
erecting facility.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Metals Group
decreased by $4.0 million, or 5.8%, to $65.1 million for fiscal 1997 from $69.1
million for fiscal 1996. This decrease was primarily due to the reduced sales
volume as a result of reorganizing the fabrication operations at the Company's
steel erecting facility.
GROSS PROFIT. Gross profit for the Metals Group increased by $.1 million,
or .7%, to $17.6 million for fiscal 1997 from $17.5 million for fiscal 1996, due
to the reasons discussed above. As a percentage of net sales, gross profit for
the Metals Group was 21.3% and 20.2% for fiscal 1997 and fiscal 1996,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Metals Group increased by $.3 million, or 2.6%,
to $12.2 million for fiscal 1997 from $11.9 million for fiscal 1996.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the Metals
Group remained unchanged at $1.0 million for fiscal 1997 and 1996.
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OPERATING INCOME. Operating income for the Metals Group decreased by $.1
million, or 3.6%, to $4.5 million for fiscal 1997 from $4.6 million for fiscal
1996, due to the reasons discussed above. As a percentage of net sales,
operating income for the Metals Group was 5.4% for both years.
OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $1.9 million, or 73.3%,
to $4.4 million for fiscal 1997 from $2.5 million for fiscal 1996. This increase
was primarily due to additional incentive compensation and staffing and
professional fees associated with public company reporting requirements.
INTEREST EXPENSE. Interest expense decreased by $0.7 million, or 9.9%, to
$6.6 million for fiscal 1997 from $7.3 million for fiscal 1996. This decrease
was primarily due to reduced debt levels associated with the application of the
proceeds from the initial public offering of the Company's Common Stock and the
proceeds from the sale of Quality Park, partially offset by the acquisitions of
TCI, Air Lab and AMTI, the cash portions of which were financed by borrowings
under the Company's credit agreement.
INCOME TAX EXPENSE. The effective tax rate was 40.3% for fiscal 1997 and
41.6% for fiscal 1996.
INCOME FROM CONTINUING OPERATIONS, BEFORE EXTRAORDINARY LOSS. Income from
continuing operations, before extraordinary loss, increased by $7.4 million, or
141.7%, to $12.6 million for fiscal 1997 from $5.2 million for fiscal 1996. This
increase was primarily due to the contribution generated by TCI, Air Lab and
AMTI and the overall favorable conditions in the aviation industry resulting in
increased net sales of the Company's products and services.
INCOME FROM DISCONTINUED OPERATIONS. The Company had income from
discontinued operations of $4.5 million in fiscal 1996, principally as a result
of the sale of Quality Park Products, Inc. ("Quality Park"), which resulted in
an after-tax gain of $2.5 million, and improved operating results at Quality
Park due to the favorable effects of restructuring efforts.
EXTRAORDINARY LOSS. An extraordinary loss in fiscal 1997 of $1.5 million
(net of tax benefit of $1.0 million), relates to prepayment premiums and the
related write-off of unamortized deferred financing costs due to the early
retirement of 11% senior subordinated notes, senior term loans and the Credit
Facility.
NET INCOME. Net income increased by $1.4 million, or 14.3%, to $11.1
million for fiscal 1997 from $9.7 million for fiscal 1996. The increase in
fiscal 1997 net income was primarily attributable to the strong results of the
Aviation Group, partially offset by the extraordinary loss recorded in fiscal
1997 and the comparison to fiscal 1996 which included the results of
discontinued operations.
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995
AVIATION GROUP
NET SALES. Net sales for the Aviation Group increased by $29.5 million, or
41.6%, to $100.2 million for fiscal 1996 from $70.7 million for fiscal 1995.
This increase was primarily due to an $18.4 million increase in net sales for
the operating divisions and subsidiaries in the Aviation Group, representing a
26.0% increase in net sales over fiscal 1995, and the inclusion of an aggregate
of $11.0 million in net sales for TCI and Air Lab. Increased demand for overhaul
and repair services from the commercial airlines and cargo carriers, as well as
increased orders of aircraft components from OEMs, accounted for the increase in
net sales in the Aviation Group.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Aviation Group
increased by $19.2 million, or 37.5%, to $70.6 million for fiscal 1996 from
$51.4 million for fiscal 1995. This increase was primarily due to $6.4 million
of increased costs of products sold associated with net sales generated by TCI
and Air Lab.
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The remaining increase is associated with the increase in net sales of the
remaining operating divisions and subsidiaries in the Aviation Group.
GROSS PROFIT. Gross profit for the Aviation Group increased by $10.2
million, or 52.8%, to $29.5 million for fiscal 1996 from $19.3 million for
fiscal 1995. Of this increase, $5.0 million was a result of the increased sales
volume and $0.6 million was a result of improved margins at the operating
divisions and subsidiaries in the Aviation Group. This increase was also
attributable to the inclusion of $4.6 million of gross profit on the net sales
generated by TCI and Air Lab. As a percentage of net sales, gross profit for the
Aviation Group was 29.5% and 27.3% for fiscal 1996 and fiscal 1995,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Aviation Group increased by $4.2 million, or
47.4%, to $12.9 million for fiscal 1996 from $8.8 million for fiscal 1995, due
to increased sales volume and the TCI and Air Lab acquisitions.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Aviation Group increased by $0.7 million, or 41.2%, to $2.5 million for fiscal
1996 from $1.8 million for fiscal 1995, primarily due to the assets acquired in
connection with the TCI and Air Lab acquisitions.
OPERATING INCOME. Operating income for the Aviation Group increased by $5.3
million, or 60.6%, to $14.1 million for fiscal 1996 from $8.8 million for fiscal
1995. This increase was assisted by the growth in aircraft production and the
increased outsourcing of repair and overhaul services by commercial aircraft
operators. This increase was also due to the addition of net sales and profits
generated by TCI and Air Lab, as well as the incremental operating income
resulting from increased sales volume. As a percentage of net sales, operating
income for the Aviation Group was 14.1% and 12.4% for fiscal 1996 and fiscal
1995, respectively.
METALS GROUP
NET SALES. Net sales for the Metals Group decreased by $6.8 million, or
7.3%, to $86.6 million for fiscal 1996 from $93.5 million for fiscal 1995. This
decrease was primarily due to weakened demand and lower selling prices for
flatrolled steel products processed by the Company. In addition, the Company's
electrogalvanized products experienced greater competition from hot-dipped
rolled steel products.
COSTS OF PRODUCTS SOLD. Costs of products sold for the Metals Group
decreased by $5.3 million, or 7.2%, to $69.1 million for fiscal 1996 from $74.4
million for fiscal 1995. This decrease was primarily due to the reduced sales
volume and lower costs of raw materials.
GROSS PROFIT. Gross profit for the Metals Group decreased by $1.5 million,
or 7.9%, to $17.5 million for fiscal 1996 from $19.0 million for fiscal 1995,
due to the reasons discussed above. As a percentage of net sales, gross profit
for the Metals Group was 20.2% and 20.3% for fiscal 1996 and fiscal 1995,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the Metals Group increased by $0.2 million, or 1.4%,
to $11.9 million for fiscal 1996 from $11.7 million for fiscal 1995.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the Metals
Group increased by $0.1 million, or 9.1%, to $1.0 million for fiscal 1996 from
$0.9 million for fiscal 1995. This increase was primarily due to depreciation of
certain assets recently placed into service.
OPERATING INCOME. Operating income for the Metals Group decreased by $1.7
million or 27.3%, to $4.6 million for fiscal 1996 from $6.4 million for fiscal
1995, due to the reasons discussed above. As a percentage of net sales,
operating income for the Metals Group was 5.4% and 6.8% for fiscal 1996 and
fiscal 1995, respectively.
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OVERALL RESULTS
CORPORATE EXPENSES. Corporate expenses increased by $0.9 million, or 57.0%,
to $2.5 million for fiscal 1996 from $1.6 million for fiscal 1995. This increase
was primarily due to additional incentive compensation, staffing and
professional fees.
INTEREST EXPENSE. Interest expense increased by $0.7 million, or 11.1%, to
$7.3 million for fiscal 1996 from $6.6 million for fiscal 1995. This increase
was primarily due to increased debt levels associated with the acquisitions of
TCI and Air Lab, the cash portions of which were financed by borrowings under
the Company's credit agreement.
INCOME TAX EXPENSE. The effective tax rate was 41.6% for fiscal 1996 and
37.3% for fiscal 1995.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
increased by $0.8 million, or 19.0%, to $5.2 million for fiscal 1996 from $4.4
million for fiscal 1995. This increase was primarily due to the net sales
generated by TCI and Air Lab and the overall favorable conditions in the
aviation industry resulting in increased net sales of the Company's products and
services.
INCOME (LOSS FROM DISCONTINUED OPERATIONS). The Company had income from
discontinued operations of $4.5 million in fiscal 1996, principally as a result
of the sale of Quality Park, which resulted in an after-tax gain of $2.5
million, and improved operating results at Quality Park due to the favorable
effects of restructuring efforts. The Company had a loss from discontinued
operations of $2.9 million in fiscal 1995 due to $2.0 million in operating
losses at Quality Park and a $0.9 million loss on the sale of certain assets of
Quality Park.
NET INCOME. Net income increased by $8.2 million, or 540.9%, to $9.7
million for fiscal 1996 from $1.5 million for fiscal 1995. Of this increase,
$7.3 million was attributable to the income from the discontinued Quality Park
operations in fiscal 1996 as compared to the loan at these operations during
fiscal 1995. The increase in fiscal 1996 net income was also attributable to the
strong results of the Aviation Group, partially offset by a decline in
profitability in the Metals Group. As a percentage of net sales, net income was
5.2% and 0.9% for fiscal 1996 and fiscal 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs are generally funded through cash flows
from operations and borrowings under its credit arrangments. The Company used
approximately $3.8 million of cash flows from operating activities, principally
for working capital requirements, for the six months ended September 30, 1997.
The Company used approximately $35.0 million in investing activities, while
providing $43.2 million in financing activities for the six months ended
September 30, 1997. As of September 30, 1997, $29.7 million was available under
the Credit Facility.
The Company provided approximately $8.1 million from operating activities
and $11.2 million from investing activities, while using $18.9 million in
financing activities, net of the Company's initial public offering, primarily
for retirement of debt for the fiscal year ended March 31, 1997.
On July 19, 1996, the Company entered into an unsecured five-year credit
agreement for $85.0 million ($50.0 million revolver and $35.0 million term
loan). On December 31, 1996, the Company amended the credit agreement increasing
the revolving credit facility to $85.0 million and retiring the term loan. The
term loan of $33.8 million was repaid using proceeds from the Company's initial
public offering and borrowings under the Company's revolving credit facility.
On March 31, 1997, the Company entered into an amended and restated
agreement (the "Credit Facility") with its lenders to extend the maturity date
of the existing credit agreement, reduce interest rates and amend certain
covenants. The Credit Facility contains restrictions and covenants applicable to
the Company which include limitations on the ability to incur additional
indebtedness, issue stock
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options or warrants, make certain restricted payments and acquisitions, create
liens, enter into transactions with affiliates, sell substantial portions of its
assets and make capital expenditures. The Company's long-term debt generally
prohibits the Company from paying any dividends or making any distributions on
its capital stock. On October 24, 1997, the Company amended the Credit Facility,
increasing the availability from $85.0 million to $125.0 million.
The Credit Facility matures on March 31, 2002 and bears interest, at the
option of the Company, at the fluctuating prime rate or LIBOR plus applicable
basis points. On September 30, 1997, an aggregate amount of approximately $54.0
million was outstanding under the Credit Facility, $50.0 million of which was
accruing interest at LIBOR plus applicable basis points, or, 6.1875% per annum,
and $4.0 million of which was accruing interest at the prime rate of 8.5% per
annum. Amounts repaid on the Credit Facility may be reborrowed.
The proceeds of borrowings under the Company's credit arrangements and the
proceeds from the sale of the discontinued paper operations of Quality Park were
used to extinguish the outstanding balances of the revolving credit facility,
the senior term loans and the senior subordinated notes existing at March 31,
1996. The early extinguishment of this debt resulted in an extraordinary loss of
approximately $1.5 million, net of an income tax benefit of approximately $1.0
million.
The Company's 10.5% junior subordinated promissory notes are unsecured
obligations of the Company, which are contractually subordinated to all
liabilities of TCI and its subsidiaries. These notes were issued to TFX
Equities, Inc. and certain members of management of TCI and are due in equal
installments on December 31, 2005 and 2006, although the holders of these notes
have no right to demand payment of principal until all superior debt, as
defined, has been paid in full.
In the third quarter of fiscal 1997, the Company completed the sale of
2,875,000 shares of its Common Stock for $19.00 per share through an
underwritten public offering and the sale of 125,000 shares of its Common Stock
for $17.67 per share through a direct sale by the Company. The net proceeds from
the sales, of approximately $51.8 million, were used to pay down a portion of
the Company's long-term borrowings under its five-year credit agreement and $5.5
million of the 10% subordinated promissory note.
On May 5, 1997, the Company entered into a loan agreement with the City of
Shelbyville, Indiana relating to the City of Shelbyville, Indiana Adjustable
Rate Economic Development Revenue Bonds, Series 1997 (the "Bonds"). The proceeds
of the Bonds of $5.0 million are being used to fund the expansion of the
Company's K-T Corporation facility. The Bonds mature on May 1, 2012 and are
secured by an irrevocable letter of credit issued by PNC Bank, N.A. The Bonds
bear interest at a variable weekly rate.
In July 1997, the Company entered into a $10.0 million discretionary line of
credit (the "Line of Credit"). The Line of Credit bears interest at the current
rate offered by the lender. Borrowings under the Line of Credit are payable on
the last day of the applicable interest period or on demand. The Line of Credit
expires in July 1998 and may be continued or renewed at that time; provided,
however, that the lender may terminate such Line of Credit or may refuse to lend
under such Line of Credit at any time.
On September 15, 1997, the Company retired the remaining $8.0 million
subordinated note payable to IKON. The terms of the note provided for a $1.0
million discount in the event the note was repaid by October 1, 1997. The cash
payment of $7.0 million was funded by the Company's long-term borrowings under
its revolving credit facility. The early extinguishment of this debt resulted in
an extraordinary gain of $0.6 million, net of income taxes of $0.4 million.
Capital expenditures were approximately $7.4 million for the six months
ended September 30, 1997 primarily for manufacturing machinery and equipment for
the Aviation Group. Capital expenditures were approximately $8.2 million for the
fiscal year ended March 31, 1997 primarily for manufacturing machinery and
equipment for the Aviation Group. The Company funded these expenditures through
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borrowings under its Credit Facility and from the proceeds from the Bonds. The
Company expects capital expenditures to be approximately $15.0 million for its
fiscal year ending March 31, 1998. The expenditures are expected to be used
primarily to expand capacity at several facilities in the Aviation Group.
On July 31, 1996, the Company acquired all of the outstanding stock of AMTI
based in Tempe, Arizona for an aggregate purchase price of approximately $21.2
million, including cash consideration of approximately $8.0 million, an option
to purchase 13,000 shares of the Company's Class A common stock at an exercise
price of $1.87 per share, a five-year covenant not-to-compete contract valued at
$2.8 million and the assumption of liabilities and costs related to the
transaction of approximately $10.3 million. The acquisition was accounted for
under the purchase method, and the purchase price was allocated to the assets
based on their estimated fair values, with any excess recorded as cost over net
assets acquired. The acquisition was funded through the Company's long-term
borrowings.
As of April 30, 1997, the Company purchased substantially all of the assets
of JDC Company in a cash transaction. The transaction was funded by borrowings
under the Credit Facility. JDC Company, based in Ft. Lauderdale, Florida,
specializes in the repair, overhaul and exchange of electromechanical aircraft
instruments. The cash purchase price was approximately $2.1 million.
On July 31, 1997, the Company sold substantially all of the assets of its
Seattle, Washington based facility, Air Lab, to Sextant for approximately $5.9
million in cash and the assumption by the purchaser of certain liabilities. In
connection with the sale of Air Lab, the Company and Sextant entered into a
five-year marketing and service agreement pursuant to which A. Biederman, a
division of the Company, will serve as an authorized warranty and non-warranty
repair station for certain products of Sextant and as an authorized distributor
for spare parts of Sextant. The Company believes that such marketing and service
agreement will enhance customer service and increase its market share in
instrument repair and distribution.
On September 1, 1997, the Company purchased substantially all of the capital
stock of Hydro-Mill in a cash transaction. The transaction was funded by
borrowings under the Credit Facility. Hydro-Mill, based in Chatsworth,
California, specializes in the manufacture of precision machine parts and
assemblies for the aircraft industry. The cash purchase price was approximately
$31.5 million.
On October 29, 1997, the Company acquired all of the outstanding stock of
Stolper. The transaction was funded by borrowings under the Credit Facility.
Stolper fabricates sheet metal from high temperature alloys, which is used
primarily in the hot section of jet engines. Stolper also provides repair and
overhaul services to aerospace end-users. Stolper operates facilities in
Brookfield, Wisconsin and Phoenix, Arizona. The cash portion of the purchase
price was approximately $33.6 million.
The Company believes that cash generated by operations, borrowings under the
Credit Facility and proceeds from the Bonds will be sufficient to meet
anticipated cash requirements for its operations in the next 12 months. However,
the Company intends to grow through acquisition and is continuously evaluating
various acquisition opportunities. As a result, the Company currently is
considering a number of candidates. In the event that more than one of these
transactions were successfully consummated, the availability under the Credit
Facility might be fully utilized and additional funding sources may be needed.
There can be no assurance that such funding sources will be available to the
Company.
FORWARD-LOOKING STATEMENTS
The foregoing discussion and analysis contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
relating to the Company's future operations and prospects, including statements
that are based on current projections and expectations about the markets in
which the Company operates, and management's beliefs concerning future
performance and capital requirements based upon current available information.
Actual results could differ materially from management's current expectations
and there can be no assurance that additional capital will not
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be required or that additional capital, if required, will be available on
reasonable terms, if at all, at such times and in such amounts as may be needed
by the Company. In addition to these factors, among other factors that could
cause actual results to differ materially are uncertainties relating to the
integration of acquired businesses, general economic conditions affecting the
Company's two business segments, dependence of certain of the Company's
businesses on certain key customers as well as competitive factors relating to
the aviation and metals industries. For a more detailed discussion of these and
other factors affecting the Company, see "Risk Factors."
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BUSINESS
GENERAL OVERVIEW
The Company designs, engineers, manufactures, repairs and overhauls aircraft
components such as mechanical and electromechanical control systems, aircraft
and engine accessories, APUs, avionics and aircraft instruments. The Company
serves a broad spectrum of the aviation industry, including commercial airlines
and air cargo carriers, as well as OEMs of aircraft and aircraft components, on
a worldwide basis.
PRODUCTS AND SERVICES
The Company's aviation products and services may generally be divided into
three categories: structural components, instrument and flight controls and
operational components. The following is a description of some of the products
and services offered by the Company in each of these three categories:
STRUCTURAL COMPONENTS. The Company performs stretch forming, bending, die
forming, machining, milling, welding, assembly and other fabrication on aircraft
wings, fuselages and skins for aircraft produced by OEMs such as Boeing. The
Company also manufactures metallic and composite bonded honeycomb assemblies for
fuselage, wings and flight control surface parts for commercial airlines and
other aircraft operators.
INSTRUMENT AND FLIGHT CONTROLS. The Company designs and engineers
mechanical and electromechanical controls such as remote valve operators and
push/pull controls ranging from simple vent controls to sophisticated
flight-critical engine controls for OEMs and commercial airlines and general
aviation. In certain cases, principally at TCI, the Company's designs and
engineering for such controls are proprietary because such designs are not sold
to the OEM for whom the control is manufactured. Consequently, the OEM generally
relies on the Company to repair or replace such component. The Company also
performs repair and overhaul services and supplies spare parts for various types
of cockpit instruments and gauges for a broad range of commercial airlines on a
worldwide basis.
OPERATIONAL COMPONENTS. The Company performs complete repair and overhaul
services on APUs and components for APUs for both commercial airlines and OEMs.
APUs are used to provide power for all non-propulsion aircraft functions such as
air conditioning, lights and other electrical functions. The Company also
repairs and overhauls aircraft accessories, including constant speed drives,
pneumatic or electrically actuated valves, cabin compressors, starters and
generators, and manufactures refueling booms. Certain of these components, like
the APUs, are repaired pursuant to SFAR 36 certifications. In addition, the
Company manufactures hot section components for small propulsion jet engines,
APUs and land-based power units and combustion system components for power
equipment manufacturers. Finally, the Company provides precision machining
services for other operational components manufactured from refractory and other
metals for the aviation and aerospace industry.
INDUSTRY OVERVIEW AND TRENDS
According to 1996 U.S. Department of Commerce statistics, the annual
worldwide market for aircraft, including components, is approximately $56.7
billion. This market is expected to grow at an annual rate of 5% to 6% through
2000. AVIATION WEEK AND SPACE TECHNOLOGY has stated that the global airline
industry spends at least $20 billion annually to maintain its aircraft. Both the
aircraft component production and component repair industries are highly
fragmented, each consisting of a limited number of well-capitalized companies,
which offer a broad range of products and services, and a large number of
smaller, specialized companies. The aviation industry has been consolidating at
an increasing pace in recent years, and it is expected that such consolidation
will continue for the foreseeable future.
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A number of significant trends are currently affecting the market for the
design, engineering, manufacture, repair and overhaul of aircraft components.
These trends include the following:
INCREASES IN AIR TRANSIT AND AIRCRAFT PRODUCTION. Boeing's 1997 Market
Outlook projected that global air travel will increase by 75% and that the
number of passenger and cargo delivery aircraft in service will increase by 48%
through the year 2006. This trend will be driven, in part, by the anticipated
continued growth of established carriers engaged in the air freight and package
delivery businesses. Average passenger seat miles flown is also expected to
increase significantly over the next few years. Further, many new airlines are
expected to commence operations in the United States and abroad, especially in
China and other countries in Asia where air traffic previously was limited.
Because start-up airlines generally do not invest in the infrastructure
necessary to service their aircraft, such airlines outsource all or most of
their repair and overhaul services. To meet their needs, certain foreign and
many start-up airlines have turned to older aircraft which generally require
more frequent servicing. Further, as aging aircraft are retired, new aircraft
production is increasing. The number of surplus aircraft is expected to
significantly decline while new aircraft production is expected to increase over
the next several years. The continued growth in air transit and aircraft
production will increase the demand for aircraft component purchases and
repairs.
INCREASED OUTSOURCING BY AIRCRAFT OPERATORS AND OEMS. Aircraft operators
have come under increasing pressure to reduce both operating and capital costs
associated with providing aviation services. While several of the expenditures
incurred by aircraft operators are beyond their direct control, such as fuel
prices and labor costs, aircraft operators seeking cost reductions have
increased purchases of certain components from third parties and have outsourced
repair and overhaul functions. Aircraft components sold by third party suppliers
and aircraft components that have been repaired and overhauled are generally
less expensive than new aircraft components sold by OEMs. In addition, OEMs are
increasingly becoming "assemblers" of aviation products by outsourcing more
manufacturing and repair functions to third parties. In this regard, the Company
supplies many OEMs with aircraft components and subassemblies, in addition to
performing repair and overhaul services. In addition, as consolidation in the
aviation services industry continues, aviation services consumers are requiring
vendors to offer a broader range of services including, in some instances,
inventory maintenance and management services. The Company believes that its
broad array of aviation products and services and its reputation for quality and
timely and reliable delivery will position the Company to continue to capitalize
on the outsourcing trend. The Company anticipates that increased reliance on
outsourcing will continue to cause consolidation in the industry since only
those suppliers with extensive capacities and adequate capital will secure such
agreements with OEMs and aircraft operators.
REDUCTION IN THE NUMBER OF APPROVED SUPPLIERS AND VENDORS. In order to
reduce purchasing costs, streamline purchasing decisions and have greater
control over quality, purchasing departments of OEMs and aircraft operators have
been reducing the number of approved suppliers and vendors. In the past year,
several OEMs and aircraft operators have reduced their supplier and vendor lists
from as many as 50 to a core group of five to ten "mega-suppliers" or
"mega-vendors" who have the size and capacity to meet their needs. The Company
has secured a position on such lists of a number of OEMs and airlines. The
Company believes that this trend will continue in the future and that, due to
its established market presence and reputation for quality, the Company will
continue to be selected as an approved supplier and vendor. See "-- Government
Regulation."
INCREASED MAINTENANCE AND SAFETY REQUIREMENTS. Under regulations
promulgated by the FAA and similar agencies in other countries, including the
Joint Aviation Authority (the "JAA") and the Civil Aviation Administration of
China (the "CAAC"), as well as guidelines established by OEMs and aircraft
operators, when an aircraft component fails to perform within certain prescribed
limits or after logging a prescribed number of flight hours, the aircraft
component must be brought to a repair facility certified by the FAA or similar
agency of a foreign nation for various types of designated service or
replacement. The FAA has changed the nature of the licenses that it grants, from
the grant of broad licenses for aircraft
28
<PAGE>
accessories or instruments within broad classifications to more limited licenses
covering specific parts within more narrow classifications. The Company holds
many perpetual broad licenses that will continue unless abandoned, suspended or
revoked. In addition, aircraft components require regular maintenance and
inspection and replacement of "life-limited" components. The trend toward more
stringent maintenance requirements and more frequent maintenance and overhaul
has increased the size of the market for the repair of such components, because
the use of new components is not always cost effective. In addition, a proposed
change in FAA regulations will require aircraft repair stations and others to
implement and follow internal maintenance and safety requirements in addition to
FAA regulations. The Company believes that, because of its broad licenses and
long-standing emphasis on quality control, it will benefit from these higher
maintenance and safety standards.
INCREASED EMPHASIS ON COMPONENT TRACEABILITY. Because of concerns regarding
the use of unapproved aircraft spare parts, regulatory authorities have
increased the level of documentation that must be maintained on spare parts.
This requirement has been extended by OEMs and aircraft operators to the vendors
of spare parts. The high cost of required technology to compete effectively in
the redistribution market has made entry into and survival in the aircraft spare
parts redistribution market increasingly difficult and expensive. The Company
has implemented technology to enable it to meet these more stringent
traceability requirements and intends to continue to do so in the future.
COMPETITIVE ADVANTAGES
The Company believes that it is well positioned to take advantage of trends
affecting the market for the design, engineering, manufacture, repair and
overhaul of aircraft components due to:
BROAD ARRAY OF PRODUCTS AND SERVICES. The Company offers the aviation
industry a consolidated point of purchase for a broad array of aviation products
and services. The Company designs, engineers and manufactures aircraft
components to fulfill the particular needs and requirements of its customers,
including electromechanical controls and fuselage structural components for the
777 model aircraft for Boeing. In certain cases, principally at TCI, the Company
owns the proprietary rights to these designs and, accordingly, the customer
generally relies on the Company to provide service on such aircraft components
at every stage of their useful lives, including the repair and overhaul or
replacement of such components. In addition, the Company manufactures aviation
components according to its customers' specifications. The Company also performs
repair and overhaul services for customers on various aviation components
manufactured by third parties such as AlliedSignal Inc. ("AlliedSignal"). The
Company offers to maintain and manage inventories of aircraft components and
other products for certain of its customers. In certain instances, the Company's
customers require it to maintain and manage their inventories.
GOVERNMENT CERTIFICATIONS. The Company operates 12 FAA-certified repair
stations and has been granted licenses from the FAA and foreign regulatory
counterparts, including the JAA and the CAAC, to perform repair and overhaul
services on broad classifications of aircraft instruments and accessories.
Without such broad certifications and licenses, which are often expensive and
time-consuming to obtain and involve extensive audit procedures, other companies
are precluded from offering these products and services, thereby constituting a
significant barrier to entry. See "-- Government Regulation." In addition, the
Company holds two exclusive licenses issued by the FAA which permit the Company
to design, engineer, repair, test and release into service without FAA approval
certain products to its own specifications for certain aircraft components and
therefore to compete directly with OEMs with respect to such components. These
exclusive licenses, known as SFAR 36 certifications, enable the Company to
offer, on a proprietary basis, certain repaired parts relating to various
aircraft accessories such as APUs and constant speed drives to its customers at
a lower cost than other companies that must purchase replacement parts from
third parties. The Company employs three DERs who are certified to act on behalf
of the FAA to develop, substantiate and approve repairs on components.
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<PAGE>
EMPHASIS ON QUALITY CONTROL. The Company incurs significant expenses to
maintain the most stringent quality control of its products and services. In
addition to domestic and foreign governmental regulations, OEMs, commercial
airlines and other customers require that the Company satisfy certain
requirements relating to the quality of its products and services. The Company
has continually met or exceeded these requirements, and has successfully
completed many audits conducted on a regular basis by the Coordinated Agency for
Supplier Evaluation ("C.A.S.E."), a consortium of United States airlines. As a
C.A.S.E.-listed vendor, the Company is reviewed on a regular basis for quality
and efficiency. In addition, the Company conducts voluntary, thorough
self-auditing, utilizing inspectors from its various companies to audit other
companies in its Aviation Group. The Company also performs testing and
certification procedures on all of the products that it designs, engineers,
manufactures, repairs and overhauls, and maintains detailed records to ensure
traceability of the production of and service on each aircraft component. The
Company believes that its emphasis on quality control has enabled it to obtain
many of the FAA licenses it enjoys, including its exclusive SFAR 36
certifications. The expense required to institute and maintain the Company's
quality control procedures represents a barrier to entry for other companies.
BROAD CUSTOMER BASE. Due to the Company's broad array of products and
services and its emphasis on quality control and timely delivery, the Company's
customers include virtually all of the world's major commercial airlines and an
increasing number of the most widely recognized air cargo carriers, including
Federal Express Corporation and United Parcel Service of America Inc., and OEMs
such as Boeing, Bombardier Inc., Aerospatiale (Airbus) and AlliedSignal. The
Company expects that its customer base will continue to strengthen and broaden
with increased cross-selling efforts by the Company of its related products and
services. Boeing (including McDonnell Douglas, which has been recently acquired
by Boeing) accounted for more than 10% of the Company's consolidated revenues
for the 12 months ended September 30, 1997. Although the loss of Boeing could
have a material adverse effect on the Company, the Company provides various
products and services to numerous Boeing facilities and, accordingly, the
Company believes that the loss of all Boeing business is unlikely.
ESTABLISHED INDUSTRY PRESENCE. The operating divisions and subsidiaries in
the Company's Aviation Group have substantial experience in the aviation
industry. These entities are characterized by experienced management and
highly-skilled employees. Because of its established industry presence, the
Company enjoys strong customer relations, name recognition and repeat business.
COMPANY STRATEGY
The Company intends to grow its aviation business through:
EXPANSION OF PRODUCTS AND SERVICES. The Company will continue to introduce
new aviation products and services to take advantage of the growing aviation
industry and the increasing demand for aviation products and services. In an
effort to expand its existing array of products and services and to capture
additional repair and overhaul business, the Company plans to expand, as
appropriate, its program for the distribution and inventory management of third
party aircraft components. The Company will also expand its assembly and
subassembly capabilities on certain aircraft components. By broadening its
products and services, the Company intends to further expand its position as a
consolidated point of purchase to the aviation industry, capitalizing on the
increasing trend toward outsourcing and the reduction by aircraft operators and
OEMs of the number of approved suppliers and vendors.
ACQUISITIONS. The Company expects to continue its growth through
acquisitions of other companies, assets or product lines that add to or
complement the Company's existing aviation products and services. The Company
successfully completed six acquisitions since October 1995, three of which were
completed since the Company's initial public offering. The Company acquired JDC
Company as of April 30, 1997. JDC Company is engaged in the business of
repairing, overhauling, exchanging and selling instrumentation for the aviation
industry. In addition, the Company purchased Hydro-Mill on
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<PAGE>
September 2, 1997. Hydro-Mill manufactures, repairs and overhauls precision
machine parts and assemblies for the airline industry. The Company also acquired
Stolper on October 29, 1997. Stolper fabricates precision sheet metal
turbomachinery components, manufactures hot section components for small
propulsion jet engines and APUs and manufactures combustion system components.
Because of the fragmented nature of much of the market for aircraft products and
services, the Company believes that many additional acquisition opportunities
exist in the aviation industry. The Company intends to further capitalize on the
consolidation trend in the aviaition industry and, therefore, the Company is
currently evaluating acquisition opportunities. There can be no assurance that
the Company will successfully complete any of these acquisitions or, that if so
acquired, such entities will be properly integrated into the Company.
EXPANDED OPERATING CAPACITY. The Company plans to increase its operating
capacity to meet the expected increased growth and demand in the aviation
industry. The Company will increase its capital expenditures, including
expenditures for additional equipment and skilled labor, to support this
increased capacity. The Company intends to continue to invest in state of the
art machinery to increase its operating efficiencies and improve operating
margins.
INCREASED INTERNATIONAL MARKETING. The Company will continue to take
advantage of the expanding international market for aviation products and
services as worldwide air travel escalates and foreign nations, particularly
China and other countries in Asia, purchase used aircraft that require more
frequent repair and maintenance. The Company currently supplies products and
services to virtually every major commercial airline in the world and retains
independent sales representatives in a number of foreign countries. In addition,
the Company participates each year in several international trade shows,
including the Paris Air Show and the Singapore Air Show. The Company intends to
build on its existing international presence through continued market
penetration and, as appropriate opportunities arise, foreign acquisitions.
CAPITALIZING ON AVIATION GROUP AFFILIATION. Utilizing the group affiliation
of the Company's operating divisions and subsidiaries, the Company plans to
increase cross-selling of related capabilities to its customers. For example,
one of the Company's operating divisions distributes certain electromechanical
controls manufactured by a subsidiary of the Company. The Company's operating
divisions and subsidiaries will continue to share independent sales
representatives and jointly bid on projects where appropriate, while still
maintaining their individual identities.
HISTORICAL BACKGROUND
The Company was formed by members of management and CVC to acquire (the
"Acquisition") certain businesses and assets from IKON. In connection with the
Acquisition, 19 members of management contributed capital in the aggregate
amount of approximately $1.1 million and CVC, an institutional investor,
contributed capital in the aggregate amount of approximately $6.9 million.
PROPRIETARY RIGHTS
The Company benefits from its proprietary rights relating to certain
designs, engineering, manufacturing processes and repair and overhaul
procedures. For example, at TCI, the Company designs and engineers flight
control systems and retains the proprietary rights to these designs and
engineering. Accordingly, the customer generally relies on the Company to
provide initial and additional components, as well as to redesign, reengineer,
replace or repair and provide overhaul services on such aircraft components at
every stage of their useful lives. In addition, the Company has proprietary
rights to certain of its manufacturing processes. For certain products, the
Company's unique manufacturing capabilities are required by the customer's
specifications or designs, thereby necessitating reliance on the Company for
production of such designed product. The Company also holds two SFAR 36
certifications that permit it to develop proprietary repair procedures to be
used in certain repair and overhaul processes, enabling the Company to offer the
customer a lower cost alternative to purchasing the OEM's replacement part. The
Company employs three DERs who are certified to act on behalf of the FAA to
develop, substantiate and approve repairs on components for certain of the
Company's operating divisions and subsidiaries.
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<PAGE>
RAW MATERIALS AND REPLACEMENT PARTS
The Company purchases raw materials, primarily consisting of steel and
aluminum coils, sheets and shapes, from various vendors. The Company also
purchases replacement parts which are utilized in its various repair and
overhaul operations. Although the Company believes that these raw materials and
replacement parts are generally available at competitive prices from numerous
sources, the Company has recently had difficulty purchasing aluminum sheet and
extrusions in sufficient amount to meets its customers' demands. See "Risk
Factors-- Limited Availability of Raw Materials."
OPERATING DIVISIONS AND SUBSIDIARIES
The Company operates through several operating divisions and subsidiaries
which are divided into two groups: the Aviation Group and the Metals Group. The
following chart describes the operations, customer base and certain other
information with respect to the Company's operating divisions and subsidiaries:
<TABLE>
<CAPTION>
OPERATING NUMBER
DIVISION/SUBSIDIARY OF
(YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ------------------------- ----------------- -------------------------- -------------------------- ---------------
<S> <C> <C> <C> <C>
AVIATION GROUP
A. Biederman(1) Glendale, CA Sells and services Commercial airlines, U.S. 85
(1933) aircraft and industrial military and cargo
instruments. carriers.
Advanced Materials Tempe, AZ Repairs and manufactures Aviation OEMs and aircraft 255
Technologies, Inc.(3) components for APUs and operators.
(1987) gas turbine engines.
Aerospace Technologies, Forth Worth, TX Manufactures metallic/ Commercial airlines, U.S. 100
Inc.(1) composite bonded honeycomb military and component
(1969) assemblies and repairs supplier industry.
fuselage, wing, flight
control surface parts and
other flight critical
components.
JDC Company(3) Ft. Lauderdale, Repairs and services Aircraft manufacturers 49
(1985) FL Georgetown, TX aircraft instruments. ranging from general
aviation to wide-body air
transport.
Hydro-Mill Co. Chatsworth, CA Manufactures, repairs and Aviation OEMs, commercial 170
(1937) overhauls precision airlines and aircargo
machine parts and carriers.
assemblies.
K-T Corporation Shelbyville, IN Performs stretch forming, Aviation OEMs, U.S. 255
(1963) bending, die forming, military and aerospace,
machining, welding, mass transportation,
assembly and other energy and heavy trucking
fabrication on aircraft industries.
wings, fuselages and
skins.
L.A. Gauge Co. Sun Valley, CA Machines, bonds and Defense, aerospace, 42
(1954) fabricates ultra-precision medical, automotive and
parts. computer industries.
Lamar Electro-Air Wellington, KS Repairs and overhauls U.S. government, 116
Corporation (1)(2) aircraft and engine commercial airlines and
(1965) accessories, manufactures general aviation aircraft
pneumatic and electrically operators.
actuated valves for
aircraft and assembles
axles and aluminum wheels
for automobiles.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
OPERATING NUMBER
DIVISION/SUBSIDIARY OF
(YEAR ESTABLISHED) LOCATION BUSINESS TYPE OF CUSTOMERS EMPLOYEES
- ------------------------- ----------------- -------------------------- -------------------------- ---------------
<S> <C> <C> <C> <C>
Northwest Industries Albany, OR Machines and fabricates Aerospace, nuclear, 29
(1960) refractory, reactive, heat medical, electronic and
and corrosion-resistant chemical industries.
precision products.
Special Processes of Phoenix, AZ Produces and applies Aviation OEMs and aircraft 15
Arizona, Inc.(1) plasma coating. operators.
(1987)
Stolper-Fabralloy Phoenix, AZ Fabricates precision sheet Commercial, military and 207
Company, LLC(3) Brookfield, WI metal turbomachinery aerospace OEMs.
(1908) components, manufactures
hot section components for
small propulsion jet
engines and APUs and
manufactures combustion
system components.
Triumph Air Repair, Phoenix, AZ Repairs and overhauls APUs Worldwide commercial 174
Inc.(1)(2) and supplemental airlines.
(1979) equipment.
Triumph Controls, Inc.(1) North Wales, PA Designs and manufactures Aviation OEMs, shipyards, 283
(1943) mechanical and repair and overhaul
electromechanical control facilities, airlines and
systems. U.S. and NATO military
forces.
METALS GROUP
Deluxe Specialties Mfg. Hutchinson, KS Manufactures fuel tanks U.S. manufacturers of 115
Co. and hydraulic reservoirs. mobile, material handling,
(1961) agricultural, construction
and power generation
equipment.
Great Western Steel Co. Chicago, IL Produces steel products, Manufacturers, primarily 38
(1918) specializing in flat in the home and office
rolled products. products industries.
Kilroy Structural Steel Cleveland, OH Erects structural steel General contractors, 11
Co. frameworks. engineers and architects
(1918) of commercial buildings
and bridges.
Triumph Industries Bridgeview, IL Produces and distributes Computer and electronic 54
(1960) specialty industries.
electrogalvanized
products.
</TABLE>
- ------------------------
(1) Designates FAA-certified repair station.
(2) Designates SFAR 36 certification.
(3) Designates that two locations are FAA-certified repair stations.
METALS PROCESSING AND DISTRIBUTION
The Company's Metals Group consists of three operating divisions and one
subsidiary with substantial experience in the metals industry. These businesses
include a leading producer of electrogalvanized steel products, a steel service
center specializing in flat rolled steel products and a leading manufacturer of
fuel tanks and hydraulic reservoirs. These entities supply products to several
hundred manufacturers and other customers in the computer, electronics and
agricultural industries on a regional and national basis. In addition, the
Company operates a business engaged in the erection of structural frameworks for
buildings and bridges in the midwestern United States.
The Company's Metals Group processes, converts and distributes steel and
steel products including electrogalvanized steel products which are stamped,
formed, welded and painted, and coated steel for
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<PAGE>
the electronic and computer industries. The Company's steel service center
specializes in flat rolled products and their processing, including hot or cold
rolled sheet and coil and galvanized sheet and coil used primarily by the home
and office products and appliance industry. The Company's fuel tanks and
hydraulic reservoirs are used in off-highway mobile equipment units, which are
sold primarily to the agricultural industry.
The Company also erects structural framework, including steel members and
allied materials, for buildings and bridges, with a specialty in commercial and
industrial buildings. Included among the Company's projects are Jacobs' Field,
the Cleveland Indians' baseball stadium, and the Rock 'n Roll Hall of Fame in
Cleveland, Ohio. These structural erection services are provided on a
project-by-project basis primarily in the midwestern United States. These
projects are generally awarded on a fixed fee, competitive bid basis.
SALES AND MARKETING
Each of the Company's operating divisions and subsidiaries independently
conducts sales and marketing efforts directed at their respective customers and
industries and, in some cases, collaborates with other operating divisions and
subsidiaries within its group for cross-marketing efforts. Each sales force and
the respective officers of the operating divisions and subsidiaries are
responsible for obtaining new customers and maintaining relationships with
existing customers. Sales and marketing efforts are conducted primarily by
independent regional manufacturer's representatives and in-house personnel.
Generally, manufacturer's representatives receive a commission on sales and the
in-house sales personnel receive a base salary plus commission. Engaging
independent sales representatives at the local level facilitates responsiveness
to each customer's changing needs and current trends in each marketplace in
which the Company operates.
Presidents of each of the Company's operating divisions and subsidiaries in
the Aviation Group meet periodically to discuss ways to improve sales and
cross-marketing opportunities. The management of each operating division and
subsidiary of the Company also maintains close business relationships with many
customers, thereby furthering the sales and marketing efforts of their
businesses.
A significant portion of the Company's government and defense contracts are
awarded on a competitive bidding basis. The Company generally does not bid or
act as the primary contractor, but will typically bid and contract as a
subcontractor on contracts on a fixed fee basis. The Company generally sells to
its other customers on a fixed fee, negotiated contract or purchase order basis.
BACKLOG
As of September 30, 1997, the Company's Aviation and Metals Groups had
outstanding purchase orders representing an aggregate invoice price of
approximately $133.0 million and $13.0 million, respectively. As of September
30, 1996, the Company's Aviation and Metals Groups had outstanding purchase
orders representing an aggregate invoice price of approximately $71.0 million
and $13.0 million, respectively. The Company believes that purchase orders in an
aggregate approximate amount of $29.0 million will not be shipped by the
Aviation Group by March 31, 1998. The Company believes that all of the purchase
orders will be shipped by the Metals Group by March 31, 1998.
COMPETITION
The aircraft components production and repair industry is highly fragmented,
consisting of both a limited number of well-capitalized companies which offer a
broad range of products and services and a large number of smaller, specialized
companies. The Company believes that the principal competitive factors in the
aviation products and services industry are quality, turnaround time, overall
customer service and price. See "--Competitive Advantages." The Company believes
that it competes favorably on the basis of the foregoing factors. The Company
does not believe that the location of its repair facilities is
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<PAGE>
a significant factor to its customers in selecting the Company, as substantially
all of the components serviced by the Company are transported by common carrier
to the Company's facilities for service.
The Company competes with third party manufacturers, some of which are
divisions or subsidiaries of OEMs or other large companies in the manufacture of
aircraft components and subassemblies. Competition for the repair and overhaul
of aviation components comes from three primary sources, some with greater
financial and other resources than the Company: OEMs, major commercial airlines
and other independent service companies. Certain major commercial airlines
continue to own and operate their own service centers, while others have begun
to sell their repair and overhaul services to other aircraft operators. The
repair and overhaul services provided by domestic airlines are primarily for
their own aircraft, although these airlines may outsource a limited amount of
repair and overhaul services to third parties. Foreign airlines that provide
repair and overhaul services typically provide these services not only for their
own aircraft but for other airlines as well. OEMs also maintain service centers
which provide repair and overhaul services for the components they manufacture.
Other independent service organizations also compete for the repair and overhaul
business of other users of aircraft components.
The Company's principal competitors in the metals industry include national
and regional steel mills, other steel service centers, steel erection companies
and pre-engineered building manufacturers. Some of these competitors have
greater financial and other resources than the Company.
GOVERNMENT REGULATION
The aviation industry is highly regulated in the United States by the FAA
and in other countries by similar agencies. The Company must be certified by the
FAA and, in some cases, by individual OEMs, in order to engineer and service
parts and components used in specific aircraft models. If material
authorizations or approvals were revoked or suspended, the operations of the
Company would be adversely affected. New and more stringent government
regulations may be adopted, or industry oversight heightened, in the future and
such new regulations, if enacted, or any industry oversight, if heightened, may
have an adverse impact on the Company.
The Company must also satisfy the requirements of its customers, including
OEMs, that are subject to FAA regulations, and provide these customers with
products and services that comply with the government regulations applicable to
aircraft components used in commercial flight operations. The FAA regulates
commercial flight operations and requires that aircraft components meet its
stringent standards. In addition, the FAA requires that various maintenance
routines be performed on aircraft components, and the Company currently
satisfies these maintenance standards in its repair and overhaul services.
Several of the Company's operating divisions are FAA-approved repair stations.
Currently, the FAA is granting licenses only for the manufacture or repair
of a specific aircraft component, rather than the broader licenses that have
been granted in the past. The FAA licensing process may be costly and
time-consuming. In order to obtain an FAA license, an applicant must satisfy all
applicable regulations of the FAA governing repair stations. These regulations
require that an applicant have experienced personnel, inspection systems,
suitable facilities and equipment. In addition, the applicant must demonstrate a
need for the license. Because an applicant must procure manufacturing and repair
manuals from third parties relating to a particular aircraft component in order
to obtain a license with respect to such component, the application process may
involve substantial cost.
The license approval processes for the JAA and CAAC are similarly stringent,
involving potentially lengthy audits conducted by these regulatory authorities.
The Company's aviation and metals operations are also subject to a variety
of worker and community safety laws. The Occupational Safety and Health Act of
1970 ("OSHA") mandates general requirements for safe workplaces for all
employees. In addition, OSHA provides special procedures and measures for the
handling of certain hazardous and toxic substances. Specific safety standards
have been
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<PAGE>
promulgated for workplaces engaged in the treatment, disposal or storage of
hazardous waste. The Company believes that its operations are in material
compliance with OSHA's health and safety requirements.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local
environmental laws and regulation by government agencies, including the EPA.
Among other matters, these regulatory authorities impose requirements that
regulate the emission, discharge, generation, management, transportation and
disposal of hazardous materials, pollutants and contaminants, govern public and
private response actions to hazardous or regulated substances which may be or
have been released to the environment, and require the Company to obtain and
maintain licenses and permits in connection with its operations. This extensive
regulatory framework imposes significant compliance burdens and risks on the
Company. Although management believes that the Company's operations and its
facilities are in material compliance with such laws and regulations, there can
be no assurance that future changes in such laws, regulations or interpretations
thereof or the nature of the Company's operations will not require the Company
to make significant additional capital expenditures to ensure compliance in the
future.
Certain of the Company's facilities have been or are currently the subject
of environmental remediation activities, the cost of which is subject to
indemnification provided by IKON pursuant to the Acquisition. One of these
facilities is connected with a site included on the National Priorities List of
Superfund sites maintained by the EPA. Another of these facilities is located on
a site included in the EPA's database of potential Superfund sites. IKON's
indemnification covers the Company for losses the Company might suffer in
connection with liabilities and obligations (and other liabilities and
obligations arising out of or in connection with the Acquisition) arising under
environmental, health and safety laws with respect to operations or use of those
facilities prior to their acquisition by the Company. More specifically, this
IKON indemnification covers both (i) the costs, claims and potential losses
associated with environmental matters identified in the purchase agreement for
the Acquisition as the result of environmental assessments or other disclosures
made in connection with the Acquisition, including the costs, claims and
potential losses associated with all the environmental remediation activities
and identified liabilities, and (ii) the losses connected to environmental
liabilities which were not identified in the purchase agreement and which arise
from conditions or activities existing at the facilities or operations acquired
from IKON prior to their acquisition from IKON, provided that they are
identified by the Company to IKON before July 22, 2000. Certain other facilities
acquired and operated by the Company or one of its subsidiaries, including a
leased facility located on an EPA National Priorities List site, are under
active investigation for environmental contamination by federal or state
agencies when acquired, and continue to be under such investigation. The Company
is indemnified by prior operators and/or present owners of the facilities for
liabilities which the Company incurs as a result of these investigations and the
environmental contamination found which pre-dates the Company's acquisition of
these facilities. Two Company facilities also have been the subject of notices
from a citizen group alleging failure to notify and file reports with
appropriate agencies regarding the presence of certain hazardous chemicals in
excess of specified threshold quantities. The Company has denied these
allegations. See "Risk Factors -- Potential Exposure to Environmental
Liabilities."
EMPLOYEES
As of September 30, 1997, the Company employed approximately 1,900 persons,
of whom 193 were management employees, 50 were sales and marketing personnel,
156 were technical personnel, 266 were administrative personnel and 1,235 were
production workers. As of September 30, 1997, approximately 228 employees were
subject to collective bargaining agreements. None of these collective bargaining
agreements will expire in the next 12 months. The Company is currently
contesting the election of a union for certain employees at one of the Company's
operating divisions in the Metals Group. The Company has not experienced any
material labor-related work stoppage and considers its relations with its
employees to be good.
36
<PAGE>
PROPERTIES
The Company's executive offices are located in Wayne, Pennsylvania, where
the Company leases 7,695 square feet of space. This lease expires in November
2002. In addition, the Company owns or leases the following facilities in which
its operating divisions and subsidiaries are located.
<TABLE>
<CAPTION>
OWNED/
SQUARE LEASE
LOCATION DESCRIPTION FOOTAGE EXPIRATION
- -------------------------------------------- -------------------------------------------- --------- -----------
<S> <C> <C> <C>
Chandler, AZ................................ Thermal processing facility/office 7,000 2017
Phoenix, AZ................................. Plasma spray facility/office 13,500 2000
Phoenix, AZ................................. Repair and overhaul shop/office 50,000 1998
Phoenix, AZ................................. Manufacturing facility/office 35,000 1999
Tempe, AZ................................... Manufacturing facility/office 13,500 Owned
Tempe, AZ................................... Machine shop 9,300 Owned
Tempe, AZ................................... Machine shop 32,000 Owned
Chatsworth, CA.............................. Manufacturing facility/office 101,900 Owned
Chatsworth, CA.............................. Manufacturing facility 10,000 1998
Glendale, CA................................ Instrument shop/warehouse/office 25,000 2005
Milpitas, CA................................ Warehouse/repair shop/office 3,700 1997
Sun Valley, CA.............................. Mechanic shop/office 30,000 Owned
Ft. Lauderdale, FL.......................... Instrument shop/warehouse/office 7,200 2002
Bridgeview, IL.............................. Steel processing facility/office 135,700 2006
Chicago, IL................................. Steel distributing facility/office 140,000 Owned
Shelbyville, IN............................. Manufacturing facility/office 192,300 Owned
Shelbyville, IN............................. Manufacturing facility/office 50,000 Owned
Hutchinson, KS.............................. Manufacturing facility/office 75,000 Owned
Wellington, KS.............................. Repair and overhaul/office 90,000 1997
Cleveland, OH............................... Steel fabrication facility/office 163,000 Owned
Plain City, OH.............................. Office 2,000 1997
Albany, OR.................................. Machine shop/office 25,000 Owned
North Wales, PA............................. Manufacturing facility/office 111,400 2002
Fort Worth, TX.............................. Manufacturing facility/office 114,100 Owned
Georgetown, TX.............................. Instrument shop/warehouse/office 2,200 1997
Brookfield, WI.............................. Manufacturing facility/office 62,000 2006
</TABLE>
The Company believes that its properties are adequate to support its
operations for the foreseeable future.
LEGAL PROCEEDINGS
The Company is not presently involved in any material legal proceedings
outside of the ordinary course of business. The Company may in the future be
named as a defendant in lawsuits involving product defects, breach of warranty
or other actions relating to products that it manufactures or products that it
distributes that are manufactured by others. The Company believes that its
potential exposure is adequately covered by its aviation product and general
liability insurance.
37
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of October 31, 1997 by (i) all
persons known to the Company to be the beneficial owner of 5% or more of the
Common Stock; (ii) each director of the Company; (iii) each executive officer of
the Company; (iv) all directors and executive officers of the Company as a
group; and (v) the Selling Stockholder. This table does not include shares of
Common Stock that may be purchased pursuant to options not excercisable within
60 days of October 31, 1997. All persons listed have sole voting and investment
power with respect to their shares unless otherwise noted. The following table
assumes that the Selling Stockholder has exercised its warrant with respect to
324,155 shares of Common Stock prior to the offering.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING(1) AFTER OFFERING
------------------------ SHARES TO ------------------------
SHARES PERCENT BE SOLD SHARES PERCENT
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
Richard C. Ill(2)..................................... 278,943 2.8% -- 278,943 2.3%
John R. Bartholdson(2)(3)............................. 264,376 2.6% -- 264,376 2.2%
Richard M. Eisenstaedt(4)............................. 3,500 * -- 3,500 *
Paul T. Stimmler(4)(5)................................ 57,500 * -- 57,500 *
Kevin E. Kindig(4)(6)................................. 33,253 * -- 33,253 *
Richard C. Gozon...................................... 66,095 * -- 66,095 *
Claude F. Kronk....................................... 64,969 * -- 64,969 *
Joseph M. Silvestri................................... 23,824 * -- 23,824 *
Michael A. Delaney.................................... 20,922 * -- 20,922 *
Citicorp Venture Capital, Ltd.(7)..................... 4,648,535 46.1% -- 4,648,535 38.5%
All executive officers and directors as a group (9
persons)............................................ 813,382 8.0% -- 813,382 6.7%
SELLING STOCKHOLDER:
World Equity Partners, L.P.(8)........................ 650,000 6.3% 324,155 325,845 2.6%
</TABLE>
- ------------------------
* Less than one percent.
(1) Based upon outstanding shares of Common Stock and Class D Common Stock.
(2) Includes 8,750 shares of Common Stock which are subject to currently
exercisable stock options.
(3) Includes 1,500 shares of Common Stock beneficially owned by Mr.
Bartholdson's daughters for which he disclaims beneficial ownership.
(4) Includes 2,500 shares of Common Stock which are subject to currently
exercisable stock options.
(5) Includes 25,000 shares of Common Stock held by Mr. Stimmler's wife for
which he disclaims beneficial ownership.
(6) Includes 200 shares of Common Stock beneficially owned by Mr. Kindig's
children for which he disclaims beneficial ownership.
(7) Includes 920,753 shares of Common Stock and 3,727,962 shares of Class D
Common Stock. Excludes 324,155 shares of Common Stock and 325,845 shares of
Common Stock issuable upon exercise of the warrant held by the Selling
Stockholder, which is separately provided in this table.
(8) Includes 325,845 shares of Common Stock issuable upon exercise of the
warrant. World Equity Partners, L.P. is a limited partnership, the general
partner of which is Citicorp Capital Investors, Ltd., an affiliate of CVC.
38
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Underwriters named below have severally agreed to purchase from the Company
and the Selling Stockholder the following respective numbers of shares of Common
Stock at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
BT. Alex. Brown Incorporated.........................................................................
SBC Warburg Dillon Read Inc..........................................................................
Total................................................................................................ 2,325,000
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase the total number of shares of Common Stock offered hereby if any of
such shares are purchased.
The Company and the Selling Stockholder have been advised by the
Underwriters that the Underwriters propose to offer the shares of Common Stock
directly to the public at the public offering price set forth on the cover page
of this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. The public offering price and other selling terms may be changed by the
Underwriters.
The Company has granted to the Underwriters an option, excercisable not
later than 30 days after the date of this Prospectus, to purchase up to 232,500
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 2,325,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 2,325,000 shares are being offered.
39
<PAGE>
The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
The Company and the Selling Stockholder have agreed that until 90 days after
the date of this Prospectus, they will not, without the prior written consent of
BT Alex. Brown Incorporated, sell, offer to sell, issue, or otherwise distribute
any shares of Common Stock or securities convertible into or exchangeable or
excercisable for Common Stock except those shares issued pursuant to the
Company's 1996 Stock Option Plan.
The Company, its executive officers and directors, and CVC, its largest
stockholder, who beneficially own 5,441,704 shares in the aggregate, have agreed
not to offer, sell, contract to sell, or otherwise dispose of, any shares of
Common Stock or any securities convertible into, or excercisable and
exchangeable for, shares of Common Stock, for a period of 90 days after the date
of this Prospectus without the prior written consent BT Alex. Brown
Incorporated.
Certain principals of SBC Warburg Dillon Read Inc. held an ownership
interest in Stolper for which they received a portion of the purchase price from
the sale of Stolper to the Company. SBC Warburg Dillon Read Inc. received usual
and customary fees in connection with the transaction.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Ballard Spahr Andrews &
Ingersoll, Philadelphia, Pennsylvania. Certain legal matters related to this
offering will be passed upon for the Underwriters by Wilmer, Cutler & Pickering,
Baltimore, Maryland.
EXPERTS
The consolidated financial statements and schedule of Triumph Group, Inc. as
of March 31, 1997 and 1996 and for each of the three years in the period ended
March 31, 1997 incorporated by reference in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated by reference
herein and in the Registration Statement. Such consolidated financial statements
and schedule are incorporated by reference herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
40
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and other information with the Securities and
Exchange Commission ("Commission"). Such reports, proxy and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549-1004 and at its Regional Offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such materials can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-1004. Such reports
and other information can also be inspected at the NYSE where the Company's
Common Stock is listed. In addition, the Commission maintains a Web site that
contains reports, proxy and other information regarding registrants that file
electronically with the Commission. The address of such Web site is
http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement on Form S-3
("Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus omits certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and exhibits
thereto for further information with respect to the Company and the securities
offered hereby. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission are not necessarily complete, and in each instance reference
is made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended March 31, 1997;
2. Quarterly Reports on Form 10-Q for the quarters ended June 30, 1997 and
September 30, 1997;
3. Current Report on Form 8-K filed on September 15, 1997; and
4. Registration Statement on Form 8-A filed on September 27, 1996.
All other reports filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Common Stock
offered hereby shall be deemed to be incorporated herein by reference and to be
part hereof from the date of filing of such documents.
Any statement contained herein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein hereby modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will furnish without charge upon written or oral request to each
person to whom this Prospectus is delivered a copy of any or all documents
incorporated by reference herein other than exhibits to such documents not
specifically incorporated by reference thereto. Such request should be directed
to Richard M. Eisenstaedt, Vice President, General Counsel and Secretary,
Triumph Group, Inc., at Four Glenhardie Corporate Center, 1255 Drummers Lane,
Suite 200, Wayne, Pennsylvania 19087 or at (610) 975-0420.
41
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 9
Use of Proceeds................................. 13
Dividend Policy................................. 13
Price Range of Common Stock..................... 13
Capitalization.................................. 14
Selected Consolidated Financial Data............ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 17
Business........................................ 27
Principal and Selling Stockholders.............. 38
Underwriting.................................... 39
Legal Matters................................... 40
Experts......................................... 40
Available Information........................... 41
Incorporation of Certain Information by
Reference..................................... 41
</TABLE>
2,325,000 SHARES
[LOGO]
TRIUMPH GROUP, INC.
COMMON STOCK
------------
PROSPECTUS
------------
BT ALEX. BROWN
SBC WARBURG DILLON READ INC.
November , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated amount of various expenses in
connection with the sale and distribution of the securities being registered:
<TABLE>
<S> <C>
SEC registration fee............................................ $ 25,265
NASD filing fee................................................. 8,838
NYSE filing fee................................................. 10,000
Printing and engraving expenses................................. 100,000
Legal fees and expenses (including blue sky fees and
expenses)..................................................... 100,000
Accounting fees and expenses.................................... 60,000
Miscellaneous................................................... 95,897
---------
Total........................................................... $ 400,000*
---------
---------
</TABLE>
- ------------------------
* Expenses set forth in this chart to be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws of the Registrant provide for indemnification of directors and
officers in accordance with indemnification provisions of the Delaware General
Corporation Law. The Delaware statute permits indemnification of directors and
officers of a corporation under certain conditions and subject to certain
limitations.
The Registrant's Certificate of Incorporation, as amended, provides that,
subject to certain limitations, no director shall be personally liable to the
Registrant or its stockholders for monetary damages for any breach of fiduciary
duty by such director as a director.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
1 Form of Underwriting Agreement.
4 Form of certificate evidencing Common Stock of the Company (incorporated by reference to the
Company's Registration Statement on Form S-1 (Registration Statement No. 333-10777)).
5 Opinion of Ballard Spahr Andrews & Ingersoll regarding legality of securities being registered.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5).
</TABLE>
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
II-1
<PAGE>
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Chester, Commonwealth of Pennsylvania, on October
31, 1997.
TRIUMPH GROUP, INC.
BY: /s/ Richard C. Ill
-----------------------------------------
Richard C. Ill
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ RICHARD C. ILL President, Chief Executive
- ------------------------------ Officer and Director October 31, 1997
Richard C. Ill
/s/ JOHN R. BARTHOLDSON Senior Vice President,
- ------------------------------ Chief Financial Officer, October 31, 1997
John R. Bartholdson Treasurer and Director
/s/ RICHARD C. GOZON Director
- ------------------------------ October 31, 1997
Richard C. Gozon
/s/ CLAUDE F. KRONK Director
- ------------------------------ October 31, 1997
Claude F. Kronk
/s/ JOSEPH M. SILVESTRI Director
- ------------------------------ October 31, 1997
Joseph M. Silvestri
/s/ MICHAEL A. DELANEY Director
- ------------------------------ October 31, 1997
Michael A. Delaney
II-3
<PAGE>
__________ Shares
TRIUMPH GROUP, INC.
Common Stock
($.001 Par Value)
UNDERWRITING AGREEMENT
November __, 1997
BT Alex. Brown Incorporated
SBC Warburg Dillon Read Inc.
As Representatives of the
Several Underwriters
c/o BT Alex. Brown Incorporated
1 South Street
Baltimore, Maryland 21202
Gentlemen:
Triumph Group, Inc., a Delaware corporation (the "Company"), and a
shareholder of the Company (the "Selling Shareholder") propose to sell to the
several underwriters (the "Underwriters") named in Schedule I hereto for whom
you are acting as representatives (the "Representatives") an aggregate of
_________ shares of the Company's Common Stock, $.001 par value (the "Firm
Shares"), of which ____________ shares will be sold by the Company and
_________shares will be sold by the Selling Shareholder. The respective
amounts of the Firm Shares to be so purchased by the several Underwriters are
set forth opposite their names in Schedule I hereto, and the amount to be
sold by the Selling Shareholder is set forth opposite its name in Schedule II
hereto. The Company and the Selling Shareholder are sometimes referred to
herein collectively as the "Sellers." The Company also proposes to sell at
the Underwriters' option an aggregate of up to _________ additional shares of
the Company's Common Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company and the Selling
Shareholder (a) that you are authorized to enter into this Agreement on
behalf of the several Underwriters, and
<PAGE>
(b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option
Shares if you elect to exercise the over-allotment option in whole or in part
for the accounts of the several Underwriters. The Firm Shares and the Option
Shares (to the extent the aforementioned option is exercised) are herein
collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company and the Selling Shareholder.
(a) The Company represents and warrants to each of the Underwriters as
follows:
(i) A registration statement on Form S-3 (File No. 333- ) with
-----
respect to the Shares has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"),
and the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and has
been filed with the Commission. The Company has complied with the
conditions for the use of Form S-3. Copies of such registration
statement, including any amendments thereto, the preliminary prospectuses
(meeting the requirements of the Rules and Regulations) contained therein
and the exhibits, financial statements and schedules, as finally amended
and revised, have heretofore been delivered by the Company to you. Such
registration statement, together with any registration statement filed by
the Company pursuant to Rule 462 (b) of the Act, herein referred to as
the "Registration Statement," which shall be deemed to include all
information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and
no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. "Prospectus" means (a) the form of
prospectus first filed with the Commission pursuant to Rule 424(b) or (b)
the last preliminary prospectus included in the Registration Statement
filed prior to the time it becomes effective or filed pursuant to Rule
424(a) under the Act that is delivered by the Company to the Underwriters
for delivery to purchasers of the Shares, together with the term sheet or
abbreviated term sheet filed with the Commission pursuant to Rule
424(b)(7) under the Act. Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus." Any reference herein to the
Registration Statement, any Preliminary Prospectus or to the Prospectus
shall be deemed to refer to and include any documents incorporated by
reference therein, and, in the case of any reference herein to any
Prospectus, also shall be deemed to include any documents incorporated by
reference therein, and any supplements or amendments thereto, filed with
the Commission after the date of filing of the Prospectus under Rules
424(b) or 430A, and prior to the termination of the offering of the
Shares by the Underwriters.
2
<PAGE>
(ii) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement. Each of the
subsidiaries of the Company as listed in Exhibit A hereto (collectively,
the "Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement. The Subsidiaries are the only subsidiaries, direct or
indirect, of the Company. The Company and each of the Subsidiaries are
duly qualified to transact business in all jurisdictions in which the
conduct of their business requires such qualification. The outstanding
shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable and to
the extent shown in Exhibit A hereto are owned by the Company or another
Subsidiary free and clear of all liens, encumbrances and equities and
claims; and no options, warrants or other rights to purchase, agreements
or other obligations to issue or other rights to convert any obligations
into shares of capital stock or ownership interests in the Subsidiaries
are outstanding.
(iii) The outstanding shares of Common Stock of the Company, including
all shares to be sold by the Selling Shareholder, have been duly
authorized and validly issued and are fully paid and non-assessable; the
portion of the Shares to be issued and sold by the Company have been duly
authorized and when issued and paid for as contemplated herein will be
validly issued, fully paid and non-assessable; and no preemptive rights
of stockholders exist with respect to any of the Shares or the issue and
sale thereof. Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives
rise to any rights, other than those which have been waived or satisfied,
for or relating to the registration of any shares of Common Stock.
(iv) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform to the
description thereof contained in the Registration Statement. The form of
certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.
(v) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares
nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto
will contain, all statements which are required to be stated therein by,
and will conform, to the requirements of the Act and the Rules and
Regulations. The documents incorporated by reference in the Prospectus,
at the time filed with the Commission conformed, in all respects to the
requirements of the Securities Exchange Act of 1934 or the Act, as
applicable, and the rules and regulations
3
<PAGE>
of the Commission thereunder. The Registration Statement and any
amendment thereto do not contain, and will not contain, any untrue
statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue
statement of material fact; and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted
from the Registration Statement or the Prospectus, or any such amendment
or supplement, in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of any Underwriter
through the Representatives, specifically for use in the preparation
thereof.
(vi) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth or
incorporated by reference in the Registration Statement, present fairly
the financial position and the results of operations and cash flows of
the Company and the consolidated Subsidiaries, at the indicated dates and
for the indicated periods. Such financial statements and related
schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods
involved, except as disclosed therein or herein, and all adjustments
necessary for a fair presentation of results for such periods have been
made. The summary financial and statistical data included or incorporated
by reference in the Registration Statement presents fairly the
information shown therein and such data has been compiled on a basis
consistent with the financial statements presented therein and the books
and records of the Company. The condensed consolidated pro forma
financial statements and other pro forma financial information included
in the Registration Statement and the Prospectus present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma bases described
therein, and, in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred
to therein.
(vii) Ernst & Young LLP, who have certified certain of the financial
statements filed with the Commission as part of, or incorporated by
reference in, the Registration Statement, are independent public
accountants as required by the Act and the Rules and Regulations.
[Other accountants for acquired companies]are independent public
accountants as required by the Act and the Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of
the Subsidiaries before any
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court or administrative agency or otherwise, which, if determined
adversely to the Company or any of its Subsidiaries, might result in any
material adverse change in the earnings, business, management,
properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and of the Subsidiaries taken as a
whole or to prevent the consummation of the transactions contemplated
hereby, except as set forth in the Registration Statement.
(ix) The Company and the Subsidiaries have good and marketable title
to all of the properties and assets reflected in the financial statements
(or as described in the Registration Statement) hereinabove described,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except those reflected in such financial statements (or as described in
the Registration Statement) or which are not material in amount. The
Company and the Subsidiaries occupy their leased properties under valid
and binding leases conforming in all material respects to the description
thereof set forth in the Registration Statement.
(x) The Company and the Subsidiaries have filed all Federal, state,
local and foreign income tax returns which have been required to be filed
and have paid all taxes indicated by said returns and all assessments
received by them or any of them to the extent that such taxes have become
due. All tax liabilities have been adequately provided for in the
financial statements of the Company.
(xi) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise), or prospects of the Company and its
Subsidiaries taken as a whole, whether or not occurring in the ordinary
course of business, and there has not been any material transaction
entered into or any material transaction that is probable of being
entered into by the Company or the Subsidiaries, other than transactions
in the ordinary course of business and changes and transactions described
in the Registration Statement, as it may be amended or supplemented. The
Company and the Subsidiaries have no material contingent obligations
which are not disclosed in the Company's financial statements which are
included in the Registration Statement.
(xii) Neither the Company nor any of the Subsidiaries is or, with the
giving of notice or lapse of time or both, will be, in violation of or in
default under its respective Certificate of Incorporation or charter, as
applicable, or By-Laws or under any agreement, lease, contract, indenture
or other instrument or obligation to which it is a party or by which it,
or any of its properties, is bound and which default is of material
significance in respect of the condition, financial or otherwise of the
Company and its Subsidiaries taken as a whole or the business,
management, properties, assets, rights, operations, condition
5
<PAGE>
(financial or otherwise) or prospects of the Company and the Subsidiaries
taken as a whole. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated and the fulfillment
of the terms hereof will not conflict with or result in a material breach
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or any Subsidiary is a party, or of the Certificate of
Incorporation or By-Laws of the Company or any order, rule or regulation
applicable to the Company or any Subsidiary of any court or of any
regulatory body or administrative agency or other governmental body
having jurisdiction.
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions
herein contemplated (except such additional steps as may be required by
the Commission, the National Association of Securities Dealers, Inc. (the
"NASD") or such additional steps as may be necessary to qualify the
Shares for public offering by the Underwriters under state securities or
Blue Sky laws) has been obtained or made and is in full force and effect.
(xiv) The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their respective businesses; and, to the
best knowledge of the Company, neither the Company nor any of the
Subsidiaries has infringed any patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business
of the Company and the Subsidiaries taken as a whole. The Company knows
of no material infringement by others of patents, patent rights, trade
names, trademarks or copyrights owned by or licensed to the Company.
(xv) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation
of the price of shares of Common Stock of the Company to facilitate the
sale or resale of the Shares.
(xvi) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company Act
of 1940 and the rules and regulations of the Commission thereunder.
(xvii) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii)
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<PAGE>
access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xviii) The Company and each of its Subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their
respective properties and as is customary for companies engaged in
similar industries.
(xix) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined
in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has
not incurred and does not expect to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension
plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986,
as amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" for which the Company
would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(xx) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, An Act Relating to Disclosure of doing Business with Cuba, and
the Company further agrees that if it commences engaging in business with
the government of Cuba or with any person or affiliate located in Cuba
after the date the Registration Statement becomes or has become effective
with the Commission or with the Florida Department of Banking and Finance
(the "Department"), whichever date is later, or if the information
reported or incorporated by reference in the Prospectus, if any,
concerning the Company's business with Cuba or with any person or
affiliate located in Cuba changes in any material way, the Company will
provide the Department notice of such business or change, as appropriate,
in a form acceptable to the Department.
(xxi) The Company and its Subsidiaries are (a) in compliance with any
and all material applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (b) have no properties listed or
proposed for listing on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") and neither the Company nor any Subsidiary has received
written notification of any pending or
7
<PAGE>
threatened claims for personal injury or property damage with respect
thereto or notice that it or they is a potentially responsible person
("PRP") for environmental remediation costs, (c) have received all
material permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses, and
(d) are in compliance with all terms and conditions of any such permit,
license or approval except where such noncompliance with Environmental
Laws, designation as a CERCLA site or as a PRP, failure to receive
required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits licenses or approvals would not
have a material effect on the Company or any of its Subsidiaries.
(xxii) The Shares have been approved for listing on the New York Stock
Exchange.
(b) The Selling Shareholder represents and warrants as follows:
(i) Such Selling Shareholder now has and at the Closing Date (as such
date is hereinafter defined) will have good and marketable title to the
Firm Shares to be sold by such Selling Shareholder, free and clear of any
liens, encumbrances, equities and claims, and full right, power and
authority to effect the sale and delivery of such Firm Shares; and upon
the delivery of, against payment for, such Firm Shares pursuant to this
Agreement, the Underwriters will acquire good and marketable title
thereto, free and clear of any liens, encumbrances, equities and claims.
(ii) Such Selling Shareholder has full right, power and authority to
execute and deliver this Agreement, the Power of Attorney, and the
Custodian Agreement referred to below and to perform its obligations
under such Agreements. The execution and delivery of this Agreement and
the consummation by such Selling Shareholder of the transactions herein
contemplated and the fulfillment by such Selling Shareholder of the terms
hereof will not require any consent, approval, authorization, or other
order of any court, regulatory body, administrative agency or other
governmental body (except as may be required under the Act, state
securities laws or Blue Sky laws) and will not result in a breach of any
of the terms and provisions of, or constitute a default under,
organizational documents of such Selling Shareholder, if not an
individual, or any indenture, mortgage, deed of trust or other agreement
or instrument to which such Selling Shareholder is a party, or of any
order, rule or regulation applicable to such Selling Shareholder of any
court or of any regulatory body or administrative agency or other
governmental body having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has constituted,
or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock of the
Company and, other than as permitted by the Act, the Selling
8
<PAGE>
Shareholder will not distribute any prospectus or other offering material
in connection with the offering of the Shares.
(iv) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties of
the Company contained herein or the information contained in the
Registration Statement, such Selling Shareholder has no reason to believe
that the representations and warranties of the Company contained in this
Section 1 are not true and correct, is familiar with the Registration
Statement and has no knowledge of any material fact, condition or
information not disclosed in the Registration Statement which has
adversely affected or may adversely affect the business of the Company or
any of the Subsidiaries; and the sale of the Firm Shares by such Selling
Shareholder pursuant hereto is not prompted by any information concerning
the Company or any of the Subsidiaries which is not set forth in the
Registration Statement or the documents incorporated by reference
therein. The information pertaining to such Selling Shareholder under
the caption "Principal and Selling Stockholders" in the Prospectus is
complete and accurate in all material respects.
2. Purchase, sale and delivery of the firm shares.
(a) On the basis of the representations, warranties and covenants herein
contained, and subject to the conditions herein set forth, the Sellers agree
to sell to the Underwriters and each Underwriter agrees, severally and not
jointly, to purchase, at a price of $_____ [net price] per share, the number
of Firm Shares set forth opposite the name of each Underwriter in Schedule I
hereof, subject to adjustments in accordance with Section 9 hereof. The
number of Firm Shares to be purchased by each Underwriter from each Seller
shall be as nearly as practicable in the same proportion to the total number
of Firm Shares being sold by each Seller as the number of Firm Shares being
purchased by each Underwriter bears to the total number of Firm Shares to be
sold hereunder. The obligations of the Company and the Selling Shareholder
shall be several and not joint.
(b) Certificates in negotiable form for the total number of the Shares to
be sold hereunder by the Selling Shareholder have been placed in custody with
as custodian (the "Custodian") pursuant to the Custodian
- ---------------------
Agreement executed by the Selling Shareholder for delivery of all Firm Shares
to be sold hereunder by the Selling Shareholder. The Selling Shareholder
specifically agrees that the Firm Shares represented by the certificates held
in custody for the Selling Shareholder under the Custodian Agreement are
subject to the interests of the Underwriters hereunder, that the arrangements
made by the Selling Shareholder for such custody are to that extent
irrevocable, and that the obligations of the Selling Shareholder hereunder
shall not be terminable by any act or deed of the Selling Shareholder (or by
any other person, firm or corporation including the Company, the Custodian or
the Underwriters) or by operation of law (including the death of an
individual Selling Shareholder or the dissolution of a corporate Selling
Shareholder) or by the occurrence of any other event or events, except as set
forth in the Custodian Agreement. If any such event should occur prior to
the delivery to the
9
<PAGE>
Underwriters of the Firm Shares hereunder, certificates for the Firm Shares,
as the case may be, shall be delivered by the Custodian in accordance with
the terms and conditions of this Agreement as if such event has not occurred.
The Custodian is authorized to receive and acknowledge receipt of the
proceeds of sale of the Shares held by it against delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in New
York Clearing House funds by wire transfer or certified or bank cashier's
checks drawn to the order of the Company for the shares to be sold by it and
to the order of , "as Custodian" for the shares to
----------------------------
be sold by the Selling Shareholder, in each case against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters. Such payment and delivery are to be made at the offices of BT
Alex. Brown Incorporated, 1 South Street, Baltimore, Maryland, at 10:00 a.m.,
Baltimore time, on the third business day after the date of this Agreement or
at such other time and date not later than five business days thereafter as
you and the Company shall agree upon, such time and date being herein
referred to as the "Closing Date." (As used herein, "business day" means a
day on which the New York Stock Exchange is open for trading and on which
banks in New York are open for business and not permitted by law or executive
order to be closed.) The certificates for the Firm Shares will be delivered
in such denominations and in such registrations as the Representatives
request in writing not later than the second full business day prior to the
Closing Date, and will be made available for inspection by the
Representatives at least one business day prior to the Closing Date.
(d) In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of
this Section 2. The option granted hereby may be exercised in whole or in
part by giving written notice (i) at any time before the Closing Date and
(ii) only once thereafter within 30 days after the date of this Agreement, by
you, as Representatives of the several Underwriters, to the Company, setting
forth the number of Option Shares as to which the several Underwriters are
exercising the option, the names and denominations in which the Option Shares
are to be registered and the time and date at which such certificates are to
be delivered. The time and date at which certificates for Option Shares are
to be delivered shall be determined by the Representatives but shall not be
earlier than three nor later than five full business days after the exercise
of such option, nor in any event prior to the Closing Date (such time and
date being herein referred to as the "Option Closing Date"). If the date of
exercise of the option is three or more days before the Closing Date, the
notice of exercise shall set the Closing Date as the Option Closing Date.
The number of Option Shares to be purchased by each Underwriter shall be in
the same proportion to the total number of Option Shares being purchased as
the number of Firm Shares being purchased by such Underwriter bears to the
total number of Firm Shares, adjusted by you in such manner as to avoid
fractional shares. The option with respect to the Option Shares granted
hereunder may be exercised only to cover over-allotments in the sale of the
Firm Shares by the Underwriters. You, as Representatives of the several
Underwriters, may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the
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<PAGE>
Company. To the extent, if any, that the option is exercised, payment for
the Option Shares shall be made on the Option Closing Date in New York
Clearing House funds by wire transfer or certified or bank cashier's check
drawn to the order of the Company against delivery of certificates therefor
at the offices of BT Alex. Brown Incorporated, 1 South Street, Baltimore,
Maryland.
(e) If on the Closing Date the Selling Shareholder fails to sell the Firm
Shares which such Selling Shareholder has agreed to sell on such date as set
forth in Schedule II hereto, the Company agrees that it will sell or arrange
for the sale of that number of shares of Common Stock to the Underwriters
which represents Firm Shares which such Selling Shareholder has failed to so
sell, as set forth in Schedule II hereto, or such lesser number as may be
requested by the Representatives.
3. Offering by the underwriters.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable
to do so. The Firm Shares are to be initially offered to the public at the
initial public offering price set forth on the cover page of the Prospectus.
The Representatives may from time to time thereafter change the public
offering price and other selling terms. To the extent, if at all, that any
Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the company and the selling shareholder.
(a) The Company covenants and agrees with the Underwriters that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a
Prospectus in a form approved by the Representatives containing
information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and
Regulations, (B) not file any amendment to the Registration Statement or
supplement to the Prospectus or document incorporated by reference
therein of which the Representatives shall not previously have been
advised and furnished with a copy or to which the Representatives shall
have reasonably objected in writing or which is not in compliance with
the Rules and Regulations and (C) file on a timely basis all reports and
any definitive proxy or information statements required to be filed by
the Company with the Commission
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<PAGE>
subsequent to the date of the Prospectus and prior to the termination of
the offering of the Shares by the Underwriters.
(ii) The Company will advise the Representatives promptly (A) when
the Registration Statement or any post-effective amendment thereto shall
have become effective, (B) of receipt of any comments from the
Commission, (C) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, and (D) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
the use of the Prospectus or of the institution of any proceedings for
that purpose. The Company will use its best efforts to prevent the
issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if
issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of
such jurisdictions as the Representatives may reasonably have designated
in writing and will make such applications, file such documents, and
furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a
consent. The Company will, from time to time, prepare and file such
statements, reports, and other documents, as are or may be required to
continue such qualifications in effect for so long a period as the
Representatives may reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company
will deliver to, or upon the order of, the Representatives during the
period when delivery of a Prospectus is required under the Act, as many
copies of the Prospectus in final form, or as thereafter amended or
supplemented, as the Representatives may reasonably request. The Company
will deliver to the Representatives at or before the Closing Date, one
copy of the manually signed Registration Statement and each amendment
thereto including all exhibits filed therewith, and will deliver to the
Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), including documents incorporated by reference
therein, and of all amendments thereto, as the Representatives may
reasonably request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange
Act"), and the rules and regulations of the Commission thereunder, so as
to permit the completion of the distribution of the Shares as
contemplated in this Agreement and the Prospectus. If during the period
in which a prospectus is required by law to be delivered by an
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<PAGE>
Underwriter or dealer, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of the Underwriters,
it becomes necessary to amend or supplement the Prospectus in order to
make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading,
or, if it is necessary at any time to amend or supplement the Prospectus
to comply with any law, the Company promptly will either (i) prepare and
file with the Commission an appropriate amendment to the Registration
Statement or supplement to the Prospectus or (ii) prepare and file with
the Commission an appropriate filing under the Securities Exchange Act of
1934 which shall be incorporated by reference in the Prospectus so that
the Prospectus as so amended or supplemented will not, in the light of
the circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with the law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration
Statement, an earning statement (which need not be audited) in reasonable
detail, covering a period of at least 12 consecutive months beginning
after the effective date of the Registration Statement, which earning
statement shall satisfy the requirements of Section 11(a) of the Act and
Rule 158 of the Rules and Regulations and will advise you in writing when
such statement has been so made available.
(vii) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies
of all other documents, reports and information furnished by the Company
to its stockholders or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Act
or the Securities Exchange Act of 1934, as amended. The Company will
deliver to the Representatives similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and
Regulations, which are not consolidated in the Company's financial
statements.
(viii) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other securities convertible
into or exchangeable or exercisable for shares of Common Stock or
derivative of Common Stock (or an agreement for such) will be made for a
period of 90 days after the date of this Agreement, directly or
indirectly, by the Company otherwise than hereunder or with the prior
written consent of BT Alex. Brown Incorporated.
(ix) The Company will cause the Shares to continue to be listed on
the New York Stock Exchange.
(x) The Company has caused each officer and director and the
principal shareholders of the Company to furnish to you, on or prior to
the date of this agreement, a
13
<PAGE>
letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such person shall agree not to
offer, sell, sell short or otherwise dispose of any shares of Common
Stock of the Company or other capital stock of the Company, or any other
securities convertible, exchangeable or exercisable for shares of Common
Stock or derivative of shares of Common Stock owned by such person or
request the registration for the offer or sale of any of the foregoing
(or as to which such person has the right to direct the disposition of)
for a period of 90 days after the date of this Agreement, directly or
indirectly, except with the prior written consent of BT Alex. Brown
Incorporated ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with
the Commission with respect to the sale of the Shares and the application
of the proceeds therefrom as may be required in accordance with Rule 463
under the Act.
(xii) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act").
(xiii) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for
the Common Stock.
(xiv) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
(b) The Selling Shareholder covenants and agrees with the Underwriters
that:
(i) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other capital stock of the Company or
other securities convertible, exchangeable or exercisable for Common
Stock or derivative of Common Stock owned by the Selling Shareholder or
request the registration for the offer or sale of any of the foregoing
(or as to which the Selling Shareholder has the right to direct the
disposition of) will be made for a period of 90 days after the date of
this Agreement, directly or indirectly, by such Selling Shareholder
otherwise than hereunder or with the prior written consent of BT Alex.
Brown Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 and the Interest and Dividend Tax Compliance
Act of 1983 with respect to the transactions herein contemplated, the
Selling Shareholder agrees to deliver to you prior to or at the Closing
Date a properly completed and executed United States Treasury Department
Form W-9
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(or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
(iii) Such Selling Shareholder will not take, directly or indirectly,
any action designed to cause or result in, or that has constituted or
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company .
5. Costs and expenses.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement,
including, without limiting the generality of the foregoing, the following:
accounting fees of the Company; the fees and disbursements of counsel for the
Company [and the Selling Shareholder]; the cost of printing and delivering
to, or as requested by, the Underwriters copies of the Registration
Statement, the Preliminary Prospectuses, the Prospectus, this Agreement, the
Underwriters' Selling Memorandum, the Underwriters' Invitation Letter, the
Listing Application, the Blue Sky Survey and any supplements or amendments
thereto; the filing fees of the Commission; the filing fees and expenses
(including legal fees and disbursements) incident to securing any required
review by the National Association of Securities Dealers, Inc. (the "NASD")
of the terms of the sale of the Shares; the Listing Fee of the New York Stock
Exchange and the expenses, including the fees and disbursements of counsel
for the Underwriters, incurred in connection with the qualification of the
Shares under State securities or Blue Sky laws. [The Selling Shareholder has
agreed with the Company to reimburse the Company for a portion of such
expenses. To the extent, if at all, that any of the Selling Shareholder
engage special legal counsel to represent them in connection with this
offering, the fees and expenses of such counsel shall be borne by such
Selling Shareholder. Any transfer taxes imposed on the sale of the Shares to
the several Underwriters will be paid by the Sellers pro rata.] The Sellers
agree to pay all costs and expenses of the Underwriters, including the fees
and disbursements of counsel for the Underwriters, incident to the offer and
sale of directed shares of the Common Stock by the Underwriters to employees
and persons having business relationships with the Company and its
Subsidiaries. The Sellers shall not, however, be required to pay for any of
the Underwriters expenses (other than those related to qualification under
NASD regulations and State securities or Blue Sky laws) except that, if this
Agreement shall not be consummated because the conditions in Section 6 hereof
are not satisfied, or because this Agreement is terminated by the
Representatives pursuant to Section 11 hereof, or by reason of any failure,
refusal or inability on the part of the Company or the Selling Shareholder to
perform any undertaking or satisfy any condition of this Agreement or to
comply with any of the terms hereof on their part to be performed, unless
such failure to satisfy said condition or to comply with said terms be due to
the default or omission of any Underwriter, then the Company shall reimburse
the several Underwriters for reasonable out-of-pocket expenses, including
fees and disbursements of counsel, reasonably incurred in connection with
investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company and
the Selling Shareholder shall not in any event
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be liable to any of the several Underwriters for damages on account of loss
of anticipated profits from the sale by them of the Shares.
6. Conditions of obligations of the underwriters.
The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date
are subject to the accuracy, as of the Closing Date or the Option Closing
Date, as the case may be, of the representations and warranties of the
Company and the Selling Shareholder contained herein, and to the performance
by the Company and the Selling Shareholder of their covenants and obligations
hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments thereto
shall have become effective and any and all filings required by Rule 424 and
Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceedings for that purpose
shall have been taken or, to the knowledge of the Company or the Selling
Shareholder, shall be contemplated by the Commission and no injunction,
restraining order, or order of any nature by a Federal or state court of
competent jurisdiction shall have been issued as of the Closing Date which
would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Ballard Spahr Andrews
& Ingersoll, counsel for the Company
[and ____________________________, counsel for the Selling Shareholder],
dated the Closing Date or the Option Closing Date, as the case may be,
addressed to the Underwriters (and stating that it may be relied upon by
counsel to the Underwriters) to the effect that
[modify for counsel for Selling Shareholder, if necessary]:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; each of
the Subsidiaries has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement; and the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued and are fully
paid and non-assessable and are owned by the Company or a Subsidiary,
except that an affiliate of Teleflex Incorporated (the "Teleflex
Affiliate") owns a minority interest in Triumph Controls, Inc., a
subsidiary of the Company ("TCI"); and, to the best of such counsel's
knowledge, the outstanding shares of capital stock of each of the
Subsidiaries is owned free and clear of all liens, encumbrances and
equities
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and claims, and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into any shares of capital stock or of ownership interests in
the Subsidiaries are outstanding, except that the Company has the right
to convert the minority interest in TCI into shares of Common Stock of
the Company.
(ii) The Company has authorized and outstanding capital stock as set
forth under the caption "Capitalization" in the Prospectus. The
authorized shares of the Company's Common Stock have been duly
authorized. The outstanding shares of the Company's Common Stock,
including the Shares to be sold by the Selling Shareholder, have been
duly authorized and validly issued and are fully paid and non-assessable.
All of the Shares conform to the description thereof contained in the
Prospectus. The certificates for the Shares, assuming they are in the
form filed with the Commission, are in due and proper form. The shares
of Common Stock, including the Option Shares, if any, to be sold by the
Company pursuant to this Agreement have been duly authorized and will be
validly issued, fully paid and non-assessable when issued and paid for as
contemplated by this Agreement. No preemptive rights of stockholders
exist with respect to any of the Shares or the issue or sale thereof.
(iii) Except as described in or contemplated by the Prospectus, to
the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares of capital stock of the Company and
there are no outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its capital stock
or any securities convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of such stock. Except as
described in the Prospectus, to the knowledge of such counsel, no holder
of any securities of the Company or any other person has the right,
contractual or otherwise, which has not been satisfied or effectively
waived, to cause the Company to sell or otherwise issue to them, or to
permit them to underwrite the sale of, any of the Shares or the right to
have any Common Shares or other securities of the Company included in the
Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(iv) The Registration Statement, the Prospectus and each amendment or
supplement thereto and document incorporated by reference therein comply
as to form in all material respects with the requirements of the Act or
the Securities Exchange Act of 1934, as applicable and the applicable
rules and regulations thereunder (except that such counsel need express
no opinion as to the financial statements and related schedules or
incorporated by reference therein). The conditions for the use of Form
S-3, set forth in the General Instructions thereto, have been satisfied.
(v) The statements under the captions ["Management's Discussion and
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Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," and "Business - Government Regulation,"
"--Environmental Matters"]in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or matters of law,
fairly summarize in all material respects the information called for with
respect to such documents and matters.
(vi) Such counsel does not know of any contracts or documents
required to be filed as exhibits to or incorporated by reference in the
Registration Statement or described in the Registration Statement or the
Prospectus which are not so filed, incorporated by reference or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all
material respects.
(vii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries except as set forth in the Prospectus.
(viii) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, the Certificate of Incorporation or
By-Laws of the Company, or any material agreement or instrument (a) known
to such counsel to which the Company or any of the Subsidiaries is a
party or by which the Company or any of the Subsidiaries may be bound or
(b) filed as an exhibit to the Registration Statement.
(ix) This Agreement has been duly authorized, executed and delivered
by the Company.
(x) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions
herein contemplated (other than as may be required by the NASD or as
required by State securities and Blue Sky laws as to which such counsel
need express no opinion) except such as have been obtained or made,
specifying the same.
(xi) This Agreement has been duly authorized, executed and delivered
on behalf of the Selling Shareholder.
(xii) The Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as required by
State securities and Blue Sky laws as to which such counsel need express
no opinion), to sell, assign, transfer and deliver the portion of the
Shares to be sold by such Selling Shareholder.
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<PAGE>
(xiii) The Custodian Agreement and the Power of Attorney executed
and delivered by the Selling Shareholder is valid and binding.
(xiv) The Underwriters (assuming that they are bona fide purchasers
within the meaning of the Uniform Commercial Code) have acquired good and
marketable title to the Shares being sold by the Selling Shareholder on
the Closing Date, free and clear of all liens, encumbrances, equities and
claims.
In rendering such opinion, Ballard Spahr Andrews & Ingersoll may rely as
to matters governed by the laws of states other than the laws of the
Commonwealth of Pennsylvania, the corporate laws of the State of Delaware or
Federal laws on local counsel in such jurisdictions and as to the matters set
forth in subparagraphs (xii), (xiii) and (xiv) on opinions of other counsel
representing the respective Selling Shareholder, provided that in each case
Ballard Spahr Andrews & Ingersoll shall state that they believe that they and
the Underwriters are justified in relying on such other counsel. In addition
to the matters set forth above, such opinion shall also include a statement
to the effect that nothing has come to the attention of such counsel which
leads them to believe that (i) the Registration Statement, at the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the
Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (ii) the Prospectus, or any supplement thereto, on the date
it was filed pursuant to the Rules and Regulations and as of the Closing Date
or the Option Closing Date, as the case may be, contained an untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements, in the light of the circumstances under which they are
made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein). With
respect to such statement, Ballard Spahr Andrews & Ingersoll may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification. In addition, such opinion shall state
that the Registration Statement has become effective under the Act and, to
the best of the knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the
Act. With respect to such statement, Ballard Spahr Andrews & Ingersoll may
state that their belief is based on written advice from the Commission
without independent check and verification.
(c) The Representatives shall have received from Wilmer, Cutler &
Pickering, counsel for the Underwriters, an opinion dated the Closing Date or
the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (ii), (iv), (v) and (x) of Paragraph (b) of this
Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In rendering such
opinion, Wilmer, Cutler & Pickering may rely as to all matters governed other
than by the laws of the State of Maryland or Federal laws on the opinion of
Ballard Spahr Andrews & Ingersoll. In addition to the matters set forth
above, such opinion shall also include a statement to the effect that nothing
has come to the attention of such counsel which leads them to believe that
(i) the Registration Statement, or
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<PAGE>
any amendment thereto, as of the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to
Rule 430A under the Act) as of the Closing Date or the Option Closing Date,
as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and (ii) the Prospectus, or
any supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact, necessary in order to make the statements, in the
light of the circumstances under which they are made, not misleading (except
that such counsel need express no view as to financial statements, schedules
and statistical information therein). With respect to such statement,
Wilmer, Cutler & Pickering may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(d) The Representatives shall have received at or prior to the Closing
Date from Wilmer, Cutler & Pickering a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under
the State securities or Blue Sky laws of such jurisdictions as the
Representatives may reasonably have designated to the Company.
(e) The Representatives shall have received, on each of the dates hereof,
the Closing Date and the Option Closing Date, as the case may be, a letter
dated the date hereof, the Closing Date or the Option Closing Date, as the
case may be, in form and substance satisfactory to you, of Ernst & Young LLP
[and other accountants for acquired companies] confirming that they are
independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material
respects with the applicable accounting requirements of the Act and the
related published Rules and Regulations; and containing such other statements
and information as is ordinarily included in accountants' "comfort letters"
to Underwriters with respect to the financial statements and certain
financial and statistical information contained in the Registration Statement
and Prospectus.
(f) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
President and Chief Executive Officer and the Senior Vice President and Chief
Financial Officer of the Company to the effect that, as of the Closing Date
or the Option Closing Date, as the case may be, each of them severally
represents as follows:
(i) The Registration Statement has become effective under the Act and
no stop order suspending the effectiveness of the Registrations Statement
has been issued, and no actions for such purpose have been taken or are,
to his knowledge, contemplated by the Commission;
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<PAGE>
(ii) The representations and warranties of the Company contained in
Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules 424 or
430A under the Act have been made;
(iv) He has examined the Registration Statement and the Prospectus
and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement were
true and correct, and such Registration Statement and Prospectus did not
omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, and since the
effective date of the Registration Statement, no event has occurred which
should have been set forth in a supplement to or an amendment of the
Prospectus which has not been so set forth in such supplement or
amendment; and
(v) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the
earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company and the
Subsidiaries taken as a whole, whether or not arising in the ordinary
course of business.
(g) The Company and the Selling Shareholder shall have furnished to the
Representatives such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein and
related matters as the Representatives may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, shall have been approved
for listing on the New York Stock Exchange.
(i) The Lockup Agreements described in Section 4(x) shall be in full force
and effect.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Wilmer, Cutler &
Pickering, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company and the Selling Shareholder of
such termination in writing or by telegram at or prior to the Closing Date or
the Option Closing Date, as the case may be.
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<PAGE>
In such event, the Selling Shareholder, the Company and the Underwriters
shall not be under any obligation to each other (except to the extent
provided in Sections 5 and 8 hereof).
7. Conditions of the obligations of the sellers.
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing
Date, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
(a) The Company and the Selling Shareholder, jointly and severally, agree
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of the Act, against any losses,
claims, damages or liabilities to which such Underwriter or any such
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter
and each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in
connection with investigating or defending any such loss, claim, damage or
liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Shares, whether or not
such Underwriter or controlling person is a party to any action or
proceeding; provided, however, that the Company and the Selling Shareholder
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. In no event, however, shall
the liability of the Selling Shareholder for indemnification under this
Section 8(a) exceed the proceeds received by such Selling Shareholder from
the Underwriters in the offering. This indemnity agreement will be in
addition to any liability which the Company or the Selling Shareholder may
otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Shareholder, and each person,
if any, who controls the Company or the Selling
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<PAGE>
Shareholder within the meaning of the Act, against any losses, claims,
damages or liabilities to which the Company or any such director, officer,
Selling Shareholder or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made; and will reimburse any legal or
other expenses reasonably incurred by the Company or any such director,
officer, Selling Shareholder or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement
will be in addition to any liability which such Underwriter may otherwise
have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought
(the "indemnifying party") in writing. No indemnification provided for in
Section 8(a) or (b) shall be available to any party who shall fail to give
notice as provided in this Section 8(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related
and was materially prejudiced by the failure to give such notice, but the
failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of the provisions of Section
8(a) or (b). In case any such proceeding shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any
such proceeding, any indemnified party shall have the right to retain its own
counsel at its own expense. Notwithstanding the foregoing, the indemnifying
party shall pay as incurred (or within 30 days of presentation) the fees and
expenses of the counsel retained by the indemnified party in the event (i)
the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them or (iii) the indemnifying party shall have failed to
assume the defense and employ counsel acceptable to the indemnified party
within a reasonable
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period of time after notice of commencement of the action. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees and expenses of more than one separate firm for all such indemnified
parties. Such firm shall be designated in writing by you in the case of
parties indemnified pursuant to Section 8(a) and by the Company and the
Selling Shareholder in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party
is an actual or potential party to such claim, action or proceeding) unless
such settlement, compromise or consent includes an unconditional release of
each indemnified party from all liability arising out of such claim, action
or proceeding.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under Section 8(a)
or (b) above in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Shareholder on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Selling Shareholder on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Shareholder on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the Selling Shareholder bear to the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Shareholder, on the one hand, or the
Underwriters, on the other, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company, the Selling Shareholder and the Underwriters agree that
it would
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not be just and equitable if contributions pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 8(d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter
shall be required to contribute any amount in excess of the underwriting
discounts and commissions applicable to the Shares purchased by such
Underwriter, (ii) no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation, and
(iii) no Selling Shareholder shall be required to contribute any amount in
excess of the lesser of (A) that proportion of the total of such losses,
claims, damages or liabilities indemnified or contributed against equal to
the proportion of the total Shares sold hereunder which is being sold by such
Selling Shareholder, or (B) the proceeds received by such Selling
Shareholder from the Underwriters in the offering. The Underwriters'
obligations in this Section 8(d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing party
and consents to the service of such process and agrees that any other
contributing party may join him or it as an additional defendant in any such
proceeding in which such other contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor
to any Underwriter, or to the Company, its directors or officers, or any
person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this
Section 8.
9. Default by underwriters.
If on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter
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shall fail to purchase and pay for the portion of the Shares which such
Underwriter has agreed to purchase and pay for on such date (otherwise than
by reason of any default on the part of the Company or the Selling
Shareholder), you, as Representatives of the Underwriters, shall use your
reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company and the
Selling Shareholder such amounts as may be agreed upon and upon the terms set
forth herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as the Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to
which such default shall occur does not exceed 10% of the Firm Shares or
Option Shares, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion to the respective numbers of
Firm Shares or Option Shares, as the case may be, which they are obligated to
purchase hereunder, to purchase the Firm Shares or Option Shares, as the case
may be, which such defaulting Underwriter or Underwriters failed to purchase,
or (b) if the aggregate number of shares of Firm Shares or Option Shares, as
the case may be, with respect to which such default shall occur exceeds 10%
of the Firm Shares or Option Shares, as the case may be, covered hereby, the
Company and the Selling Shareholder or you as the Representatives of the
Underwriters will have the right, by written notice given within the next
36-hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company or of the Selling Shareholder except to the extent provided in
Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option
Closing Date, as the case may be, may be postponed for such period, not
exceeding seven days, as you, as Representatives, may determine in order that
the required changes in the Registration Statement or in the Prospectus or in
any other documents or arrangements may be effected. The term "Underwriter"
includes any person substituted for a defaulting Underwriter. Any action
taken under this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
10. Notices.
All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows: if to the Underwriters, to BT Alex. Brown
Incorporated, 1 South Street, Baltimore, Maryland 21202, Attention: David
Bannister, Managing Director, with a copy to BT Alex. Brown Incorporated, 1
South Street, Baltimore, Maryland 21202, Attention: General Counsel; if to
the Company, to Richard C. Ill, President and Chief Executive Officer, Four
Glenhardie Corporate Center, 1255 Drummers Lane, Suite 200, Wayne,
Pennsylvania 19087, with a copy to: Ballard Spahr Andrews & Ingersoll, 1735
Market Street, Philadelphia, Pennsylvania 19103, Attention: Edward D.
Slevin, Esquire; if to the Selling Shareholder, to .
-------------------------
11. Termination.
26
<PAGE>
This Agreement may be terminated by you by notice to the Sellers as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change or
any development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole, whether or
not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or
other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation, declaration,
emergency, calamity, crisis or change on the financial markets of the United
States would, in your reasonable judgment, make it impracticable to market
the Shares or to enforce contracts for the sale of the Shares, (iii)
suspension of trading in securities generally on the New York Stock Exchange
or the American Stock Exchange or limitation on prices (other than
limitations on hours or numbers of days of trading) for securities on either
such Exchange, (iv) the enactment, publication, decree or other promulgation
of any statute, regulation, rule or order of any court or other governmental
authority which in your opinion materially and adversely affects or may
materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading in the rating of the Company's debt
securities by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Exchange Act); (vii) the
suspension of trading of the Company's common stock by the Commission on the
New York Stock Exchange or (viii) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs
which in your reasonable opinion has a material adverse effect on the
securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Shareholder and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person
will have any right or obligation hereunder. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign merely
because of such purchase.
13. Information provided by underwriters.
27
<PAGE>
The Company, the Selling Shareholder and the Underwriters acknowledge and
agree that the only information furnished or to be furnished by any
Underwriter to the Company for inclusion in any Prospectus or the
Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters), legends required by Item 502(d) of Regulation S-K under the
Act and the information under the caption "Underwriting" in the Prospectus.
14. Miscellaneous.
The reimbursement, indemnification and contribution agreements contained
in this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of
any Underwriter or controlling person thereof, or by or on behalf of the
Company or its directors or officers and (c) delivery of and payment for the
Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Shareholder,
the Company and the several Underwriters in accordance with its terms.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Shareholder represents by so doing that he has been duly
appointed as Attorney-in-Fact by such Selling Shareholder pursuant to a
validly existing and binding Power of Attorney which authorizes such
Attorney-in-Fact to take such action.
Very truly yours,
TRIUMPH GROUP, INC.
By:
---------------------------------------
President and Chief Executive Officer
28
<PAGE>
WORLD EQUITY PARTNERS, L.P.
By:
---------------------------------------
[Attorney-in-Fact]
29
<PAGE>
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. BROWN INCORPORATED
SBC WARBURG DILLON READ INC.
As Representatives of the several
Underwriters listed on Schedule I
By: BT Alex. Brown Incorporated
By:
----------------------------------------
Authorized Officer
By: SBC Warburg Dillon Read Inc.
By:
----------------------------------------
Authorized Officer
30
<PAGE>
SCHEDULE I
Schedule of underwriters
Underwriter Number of Firm Shares to be Purchased
----------- -------------------------------------
BT Alex. Brown Incorporated
SBC Warburg Dillon Read Inc.
------------------
Total
31
<PAGE>
SCHEDULE II
Schedule of Selling Stockholders
Selling Stockholders Number of Firm Shares to be Sold
-------------------- --------------------------------
----------------
Total
32
<PAGE>
[Ballard Spahr Andrews & Ingersoll Letterhead Appears Here]
November 4, 1997
Triumph Group, Inc.
Four Glenhardie Corporate Center
1255 Drummers Lane, Suite 200
Wayne, PA 19087
Re: Public Offering of Common Stock
-------------------------------
Gentlemen:
We have acted as counsel to Triumph Group, Inc., a Delaware
corporation (the "Company") in connection with the preparation of a registration
statement on Form S-3 (the "Registration Statement") filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, relating
to the public offering of up to 2,557,500 shares of the Company's Common Stock,
par value $.001 per share (the "Common Stock"), of which 2,000,845 shares of
authorized but heretofore unissued shares of Common Stock will be sold by the
Company (together with up to an additional 232,500 shares of authorized but
heretofore unissued shares of Common Stock subject to an over-allotment option)
and 324,155 shares of Common Stock will be sold (upon exercise of a warrant) by
the selling stockholder named in the underwriting agreement (the "Underwriting
Agreement") attached to the Registration Statement as Exhibit 1, among the
Company, such selling stockholder (the "Selling Stockholder") and BT Alex. Brown
Incorporated and SBC Warburg Dillon Read Inc., as representatives of the several
underwriters (the "Underwriters").
In this connection, we have examined and relied upon such corporate
records and other documents, instruments and certificates and have made such
other investigation as we deemed appropriate as basis for the opinion set forth
below.
Based on the foregoing, we are of the opinion that the shares of
Common Stock to be sold by the Company and the Selling Stockholder as described
in the Registration Statement (when and to the extent purchased by the
Underwriters in accordance with the Underwriting Agreement) will be legally
issued, fully paid
<PAGE>
and non-assessable.
We express no opinion as to the law of any jurisdiction other than the
federal law of the United States, the law of the Commonwealth of Pennsylvania
and the General Corporation Law of the State of Delaware.
This opinion may be relied upon by you only in connection with this
offering and may not be used or relied upon by you or any other person for any
other purpose, without in each instance our prior written consent.
This opinion is limited to the matters expressly stated herein. No
implied opinion may be inferred to extend this opinion beyond the matters
expressly stated herein. We do not undertake to advise you or anyone else of
any changes in the opinions expressed herein resulting from changes in law,
changes in facts or any other matters that hereafter might occur or be brought
to our attention.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
-------------------------------------
Ballard Spahr Andrews & Ingersoll
<PAGE>
CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333- ) and related Prospectus of
Triumph Group, Inc. for the registration of 2,557,500 shares of its Common
Shares and to the incorporation by reference therein of our report dated
April 23, 1997, with respect to the consolidated financial statements and
schedule of Triumph Group, Inc. included in its (Annual Report) Form 10-K for
the year ended March 31, 1997, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
November 4, 1997
