<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE
QUARTERLY PERIOD ENDED JANUARY 31, 1997
COMMISSION FILE NUMBER 1-5407
WHITTAKER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4033076
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO. )
1955 N. SURVEYOR AVENUE 93063
SIMI VALLEY, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(805) 526-5700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
- -
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date: 11,149,473 shares, par value
$.01 per share as of January 31, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITTAKER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
($ IN 000)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JANUARY 31,
1997 1996
------ -------
<S> <C> <C>
Sales................................... $ 50,055 $ 44,420
---------- ---------
Costs and expenses
Cost of sales......................... 32,980 24,900
Engineering and development........... 4,920 3,095
Selling, general and administrative... 21,274 11,735
Restructuring costs................... 5,268 --
---------- ---------
Operating Profit (loss) (14,387) 4,690
Interest expense...................... 3,839 1,655
Interest income....................... (149) (162)
Other expense......................... 6 1
---------- ---------
Income (loss) before provision for taxes (18,083) 3,196
Provision for taxes..................... -- 1,306
---------- ---------
Net income (loss)....................... $ (18,083) $ 1,890
========== =========
Average common and common
equivalent shares outstanding (000).... 11,116 9,608
========== =========
Earnings (loss) per share............... $ (1.63) $ .20
========== =========
</TABLE>
Unaudited
See Notes to Consolidated Condensed Financial Statements
(2)
<PAGE>
WHITTAKER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($ IN 000)
<TABLE>
<CAPTION>
UNAUDITED
AT JANUARY 31, AT OCTOBER 31,
1997 1996
----------------- -----------------
<S> <C> <C>
ASSETS
Current Assets
- --------------
Cash $ 1,866 $ 1,566
Receivables 60,359 74,258
Inventories 45,195 46,087
Other current assets 3,678 2,319
Income taxes recoverable 4,039 5,443
Deferred income taxes 17,621 17,928
------------- -------------
Total Current Assets 132,758 147,601
------------- -------------
Property and equipment, at cost 91,019 89,787
Less accumulated depreciation and
amortization (49,253) (46,421)
------------- -------------
Net Property and Equipment 41,766 43,366
------------- -------------
Other Assets
- ------------
Goodwill, net of amortization 94,143 95,003
Other intangible assets, net of
amortization 43,588 45,422
Notes and other noncurrent receivables 2,677 2,898
Other noncurrent assets 13,026 14,065
Net assets held for sale or development 31,826 31,129
------------- -------------
Total Other Assets 185,260 188,517
------------- -------------
Total Assets $ 359,784 $ 379,484
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
- -------------------
Current maturities of long-term debt $ 153,905 $ 161,482
Accounts payable 15,794 13,830
Accrued liabilities 42,134 38,020
------------- -------------
Total Current Liabilities 211,833 213,332
------------- -------------
Other Liabilities
- -----------------
Long-term debt 418 453
Other noncurrent liabilities 11,316 12,019
Deferred income taxes 22,448 22,544
------------- -------------
Total Other Liabilities 34,182 35,016
------------- -------------
Stockholders' Equity
- --------------------
Capital stock
Preferred stock 1 1
Common Stock 111 110
Additional paid-in capital 71,036 70,321
Retained earnings 42,621 60,704
------------- -------------
Total Stockholders' Equity 113,769 131,136
------------- -------------
Total Liabilities and Stockholders'
Equity $ 359,784 $ 379,484
============= =============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
(3)
<PAGE>
WHITTAKER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($ IN 000)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JANUARY 31,
------------------------
1997 1996
---------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....................... $ (18,083) $ 1,890
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization........... 5,762 2,741
Net periodic pension income............. -- (60)
Decrease (increase) in income taxes
recoverable............................ 1,404 (2,727)
Change in deferred taxes................ 211 (3,343)
Changes in operating assets and
liabilities:
Decrease in receivables................. 13,724 3,315
Increase in inventories and other
current assets......................... (467) (3,799)
Increase (decrease) in accounts payable
and other liabilities.................. 6,078 (3,385)
---------- ---------
Net cash provided (used) by operating
activities............................. 8,629 (5,368)
---------- ---------
INVESTING ACTIVITIES
Purchase of property, plant and (1,343) (816)
equipment..............................
Purchased business...................... -- (885)
Net decrease in notes receivable........ 396 582
Increase in assets held for sale or
development............................ (697) (749)
Other items, net........................ 72 (68)
---------- ---------
Net cash used by investing activities... (1,572) (1,936)
---------- ---------
FINANCING ACTIVITIES
Net (decrease) increase in debt......... (7,612) 7,726
Deferred debt costs..................... 139 87
Proceeds from shares issued under stock
plans.................................. 716 4
---------- ---------
Net cash provided (used) by financing
activities............................. (6,757) 7,817
---------- ---------
Net increase in cash.................... 300 513
Cash at beginning of year............... 1,566 161
---------- ---------
Cash at end of period................... $ 1,866 $ 674
========== =========
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest............................. $ 3,435 $ 1,545
========== =========
Income taxes......................... $ 59 $ 116
========== =========
</TABLE>
Unaudited
See Notes to Consolidated Condensed Financial Statements
(4)
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of Whittaker Corporation
("Whittaker" or the "Company") and its subsidiaries have been prepared in
conformity with generally accepted accounting principles, consistent in all
material respects with those applied in the Annual Report on Form 10-K for the
year ended October 31, 1996. The interim financial information is unaudited,
but reflects all adjustments which are of a normal recurring nature and, in the
opinion of management, necessary to provide a fair statement of the results for
the interim periods presented. The preparation of financial statements in
conformity with generally accepted accounting principles may require management
to make certain estimates and assumptions that could effect the amounts reported
in the financial statements and accompanying notes. These estimates and
assumptions include, among other things, future costs to complete long term
contracts, valuation of slow moving or obsolete inventories, and amounts of
estimated liabilities for contingent losses and future costs of litigation.
Actual costs could differ from these estimates. The interim financial
statements should be read in conjunction with the financial statements and
related notes in the Company's Annual Report on Form 10-K for the year ended
October 31, 1996. The results of operations for interim periods are not
necessarily indicative of the results of operations for the full year.
Primary earnings per share are computed based on the weighted average number
of common and common equivalent shares outstanding. Common stock equivalents
include Series D Participating Convertible Preferred Stock on an if converted
method, and dilutive employee stock options calculated using the treasury stock
method. Common stock equivalents have been excluded from the 1997 calculations
as inclusion of such shares would have been antidilutive. Fully diluted
earnings per share include the additional potential dilutive effects of employee
stock options under the treasury stock method. The inclusion of additional
shares assuming the conversion of the convertible debt would have been
antidilutive. Fully diluted earnings per share are not presented because the
calculations result in dilution of less than 3%.
NOTE 2. ACQUISITIONS
On April 10, 1996, the Company acquired all of the capital stock of Xyplex,
Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon Company ("Raytheon").
Xyplex is a producer of high-speed internetworking equipment, terminal servers
and shared media products for business local area networks. Xyplex also
provides remote access products that interconnect with phone companies' wide
area networks. The purchase price was $67.5 million in cash, subject to certain
adjustments, and $50.0 million in the form of 1,974,333 newly issued shares of
the Company's common stock. Other direct costs associated with the acquisition
were approximately $1.4 million. The cash paid to Raytheon was obtained from
the Company's bank lending group pursuant to an amendment to the Company's
existing credit facility entered into on April 10, 1996.
The Xyplex acquisition was accounted for as a purchase and the balance sheet
of Xyplex was combined with the Company's balance sheet as of April 30, 1996.
The transaction resulted in the acquisition of intangible assets valued at $39.2
million which are being amortized on a straight-line basis over periods ranging
from five to fifteen years, goodwill of $62.8 million which is being amortized
on a straight-line basis over twenty years. Acquired in-process research and
development valued at $11.7 million was expensed at the acquisition date. The
Company also assumed accrued liabilities of $16.6 million at the acquisition
date.
The accompanying consolidated financial statements reflect the operating
results of Xyplex since the effective date of the acquisition. The unaudited
pro forma results of operations for the three months ended January 31, 1996,
assuming the consummation of the purchase as of November 1, 1995, are summarized
below (in thousands except per share amounts):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JANUARY 31,
1996
------------
<S> <C>
Net sales $ 70,808
Net income $ 1,063
Earnings per share $ 0.09
</TABLE>
(5)
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION> ($ IN 000)
JANUARY 31, OCTOBER 31,
1997 1996
---------------- -------------
<S> <C> <C>
Parts and materials $ 21,784 $ 22,482
Work in process 15,454 14,162
Finished goods 6,947 8,349
Costs relating to long-term contracts 1,059 1,289
Unliquidated progress billings (49) (195)
---------------- -------------
$ 45,195 $ 46,087
================ =============
</TABLE>
NOTE 4. COMMITMENTS AND CONTINGENCIES
In certain years, after evaluating the availability and cost of insurance,
the Company did not purchase insurance for certain risks, including workers'
compensation and product liability. Consequently, the Company is without
insurance for various risks, including product liability for certain products it
previously manufactured. The Company currently has workers' compensation
insurance and product liability insurance for products it currently
manufactures. The Company's insurance carriers have taken the position that in
certain cases the Company is uninsured for environmental matters, a position
that the Company disputes in certain instances.
As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted
to address public health and environmental concerns arising with respect to the
past treatment and disposal of hazardous substances. The Company is also a
potentially responsible party in a number of other actions brought under state
laws patterned after CERCLA. In nearly all of these matters, the Company
contributed a small amount (generally less than 1%) of the total treated or
disposed of waste. In addition to the CERCLA and similar actions described
above, the Company also, from time to time, conducts or participates in remedial
investigations and cleanup activities at facilities currently or formerly
occupied by its operating units. there are also various other claims and suits
pending against the Company.
At January 31, 1997, the Company had provided for its aggregate liability
related to various claims, including uninsured risks and potential claims in
connection with the environmental matters noted above excluding the
environmental remediation activities related to its property located in the City
of Santa Clarita, California. The amounts provided on the Company's books for
contingencies, including environmental matters, are recorded at gross amounts.
Because of the uncertainty with respect to the amount of probable insurance
recoveries, these potential insurance recoveries are not taken into account as a
reduction of those amounts provided unless an insurance carrier has agreed to
such coverage. The Company has made cash expenditures of approximately $0.4
million for these environmental matters during the three months ended January
31, 1997. The Company does not anticipate that these matters will have a
material adverse effect on the Company's financial position, or on its ability
to meet its working capital and capital expenditure needs. Although the Company
has recorded estimated liabilities for contingent losses, including uninsured
risks and claims in connection with environmental matters, in accordance with
generally accepted accounting principles, the absence of or denial of various
insurance coverages and the filing of future environmental claims which are
unknown to the Company at this time represents a potential exposure for the
Company, and the net income of the Company in future periods could be adversely
affected if uninsured losses in excess of amounts recorded were to be incurred.
(6)
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5. LONG-TERM DEBT
On April 10, 1996, the Company and its existing agent bank entered into an
amendment to the credit agreement pursuant to which the amount of the credit
facility was increased to $170.0 million and all of the credit commitments under
the agreement were assigned to the agent bank. Commitments under the credit
agreement were subsequently syndicated to ten additional banks. At January 31,
1997, the credit facility consisted of an $85.0 million revolving credit
facility that expires in April 2001 and a $78.5 million term loan payable in
quarterly installments until 2001. Interest on loans outstanding under the
credit agreement are based, at the Company's option, on LIBOR or the agent
bank's prime rate, and the increment over LIBOR or the prime rate is based on
the levels of cash flow and debt of the Company. At January 31, 1997, the
annual interest rate based on LIBOR was LIBOR plus 4.5%, and the annual interest
rate based on the prime rate was prime plus 2.0%. The Company is obligated to
pay letter of credit fees which, at January 31, 1997, ranged between 4.125% per
annum and 4.625% per annum on the aggregate amount of outstanding letters of
credit, and commitment fees on the unused amount of the revolving credit
facility. Additional borrowings under the amended credit facility will be used
going forward to fund working capital and other corporate requirements.
The Company's obligations under the credit agreement are secured by a pledge
of shares of stock of subsidiaries of the Company, accounts receivable,
inventory, equipment, intellectual property and other assets of the Company and
its subsidiaries. The agreement includes financial covenants with respect to
financial leverage, cash flow, and net worth. At January 31, 1997, the Company
was not in compliance with several of the financial ratio covenants. The
Company has obtained waivers of the defaults up to, but not including April 30,
1997. The most recent waiver agreement required the Company to pay a waiver
fee, requires the Company to make interest payments monthly, limits the
Company's selection of applicable interest periods, and limits to $79.0 million
the amount of the revolving credit facility that the Company may utilize during
the waiver period.
Under the Company's 7% convertible subordinated note issued to Hughes
Electronics Corporation, the Company may not pay or declare cash dividends or
redeem shares of the Company if the Company's tangible net worth is less than
$15 million. As of April 30, 1996, the Company's tangible net worth was less
than $15 million and the Company has not paid or declared dividends (including
the quarterly dividend for the Series D Preferred Stock) or redeemed shares
since that date. However, dividends on the Series D Preferred Stock have been
accrued since that date.
There is no assurance that in future periods the Company will be in
compliance with all of the financial covenants contained in its amended credit
agreement, or that additional waivers of the financial covenants will be
obtained. Acceleration of the debt under the bank credit agreement by the bank
lending group upon the Company's failure to comply with a financial covenant
would be an event of default under the $15 million 7% convertible subordinated
note. Because of this possible cross default, the entire $15 million principal
balance of the 7% convertible subordinated note has been classified as current
debt.
In order to reduce the risk of higher interest expense under the Company's
credit agreement that could result from an increase in LIBOR, the Company in
June 1996 purchased an interest rate cap with an initial notional amount of
$42.5 million. Under the terms of the interest rate cap, the Company will
receive a payment at the end of each quarterly period, as defined in the
interest rate cap agreement, if three-month LIBOR at the beginning of the period
exceeds 7.5%. The amount of such payment will be the interest for such period
on the notional amount of the interest rate cap at the beginning of such period
calculated using an interest rate equal to the positive difference, if any,
between LIBOR at the beginning of such period and 7.5%. The interest rate cap
expires in July 1999. The cost of this interest rate cap is being amortized
over its 37 month term. At January 31, 1997, the unamortized cost was $219
thousand.
At January 31, 1997, there were $12.2 million of letters of credit
outstanding under the revolving credit facility.
On February 26, 1997, the Company concluded the sale and leaseback of its
Simi Valley facilities. The net proceeds of $17.4 million from the sale were
used to prepay term debt under the Company's credit agreement. The initial
lease term covers the fifteen year period ending February 28, 2012 and calls for
rent escalations of 6% every three years beginning with the fourth year.
(7)
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 6. BUSINESS SEGMENTS
The Company develops specialized aerospace and electronics technologies to
create products and customer solutions for aircraft, defense, communications and
industrial markets. The Company operates in two business segments: Aerospace,
which designs, manufactures, and distributes a wide variety of fluid control
devices and fire detection systems, as well as defense electronics products and
systems, and Communications, which designs, develops, and markets a
comprehensive line of networking products and services.
Operating profit (loss) is total revenue less operating expenses. General
corporate expenses have not been allocated to the business segments and are
shown as a separate expense element of operating profit (loss) to reconcile to
consolidated operating profit (loss). Communications segment operating results
in 1997 reflect restructuring costs of $5.3 million. Aerospace and
Communications segments operating results for 1997 also reflect one-time charges
of $2.0 million and $2.7 million, respectively, for the write-down of
inventories, relocation costs and other costs in connection with the move of the
Aerospace Concord, California operation to Simi Valley, California and the
restructuring and move of the Communications Santa Clara, California operations
to Littleton, Massachusetts.
Information about the Company's operations by business segment for the
periods ended January 31, 1997 and 1996 follows ($ in thousands):
<TABLE>
<CAPTION>
UNAUDITED
FOR THE THREE MONTHS
ENDED JANUARY 31,
1997 1996
---------- ---------
<S> <C> <C>
SALES:
Aerospace.................. $ 25,340 $ 29,110
Communications............. 24,715 15,310
---------- ---------
$ 50,055 $ 44,420
========== =========
OPERATING PROFIT (LOSS):
Aerospace.................. $ 2,828 $ 6,175
Communications............. (14,866) 297
Corporate and Other........ (2,349) (1,782)
---------- ---------
$ (14,387) $ 4,690
========== =========
</TABLE>
NOTE 7. RESTRUCTURING COSTS
During the first quarter of 1997 the Company's Communications segment
recognized restructuring costs aggregating $5.3 million. This charge was taken
to cover the costs of closing its Santa Clara, California facility and
integrating that operation into its Littleton, Massachusetts facility. These
costs include severance payments to approximately 75 employees, the write-down
of idle fixed assets to net realizable value and other costs associated with the
closedown of the Santa Clara facility. The Enterprise Hub product line formerly
sold and supported from the Santa Clara facility will be sold through Xyplex
Networks sales channels and will continue to be supported from the Littleton
facility.
(8)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
- ----------------------------------------------------------
Sales. The Company's first quarter 1997 sales of $50.1 million increased by
$5.6 million (12.7%) over first quarter sales in the prior fiscal year. Sales
generated by the Company's Communications segment increased by $9.4 million,
primarily as a result of the acquisition of Xyplex, Inc. ("Xyplex") on April
10, 1996. The 1997 Communications segment sales were negatively impacted by the
restructuring and move of its Santa Clara, California operation to its
Littleton, Massachusetts operation. The Company expects this negative impact to
be eliminated as the restructuring efforts are completed.
The Company's Aerospace segment sales for the first quarter of fiscal 1997
were down $3.8 million (13.0%) from the same period in 1996, due to decreased
sales of fluid control devices, and to a lesser extent, reduced sales of defense
electronics products and aircraft fire and overheat detector products and
systems. Increased emphasis has been placed on expanding sales from overhaul
repairs, retrofits, upgrades and spare components to end-users such as airlines,
cargo carriers, maintenance stations, military bases and government agencies.
New aircraft production is on the rise, which may further contribute to an
improved business climate for these Company products.
Gross Margin. The Company's gross margin for the first quarter of 1997 as a
percentage of sales was 34.1%, compared with 43.9% for the first quarter of
1996. The first quarter 1997 gross margin consists of Communications segment
gross margin of $8.8 million (35.7% of sales), and Aerospace segment gross
margin of $8.2 million (32.5% of sales). Communications segment gross margin as
a percentage of sales decreased from 45.8% in 1996 to 35.7% in 1997
substantially because of inventory write-downs in connection with the
restructuring and move of operations from Santa Clara to Littleton. Aerospace
segment gross margin as a percentage of sales decreased from 43.0% in 1996 to
32.5% in 1997 primarily reflecting increased costs associated with the move of
the Concord, California operations to Simi Valley, California, lower sales
volume of fluid control devices and decreased margins on defense electronic
products. Without the inventory write-downs and move costs, the 1997 Aerospace
and Communications segments gross margins, as a percent of sales, would have
been 39.2% and 46.8%, respectively.
Engineering and Development. Engineering and development expenses for the
first quarter of 1997 increased by $1.8 million from the first quarter of 1996.
The first quarter 1997 engineering and development expenses consist of
Communications segment expenses of $4.7 million (18.9% of sales) and Aerospace
segment expenses of $0.2 million (1.0% of sales). Communications segment
engineering and development expenses increased by $2.6 million from 1996 to 1997
primarily due to the inclusion of Xyplex's engineering and development expenses
since its acquisition on April 10, 1996. To maintain its competitive market
position in the Communications segment, the Company expects to continue to
invest a significant amount of its resources in the development of new
Communications products and product enhancements. Aerospace segment engineering
and development expenses decreased by $0.8 million from 1996 to 1997.
Selling, General and Administrative. Selling, general and administrative
expenses (SG&A) for the first quarter of 1997 increased by $9.5 million from the
first quarter of 1996, from 26.4% of sales in 1996 to 42.5% of sales in 1997.
Communications segment SG&A expenses increased by $9.1 million from first
quarter 1996 to first quarter 1997 due primarily to the inclusion of Xyplex SG&A
expenses since its acquisition on April 10, 1996. Communications segment SG&A
expenses for the first quarter of 1997 were $13.8 million (55.7% of sales),
which included amortization expense of $2.6 million related to goodwill and
intangible assets, compared with SG&A expenses of $4.7 million (30.3% of sales),
which included amortization expense of $0.6 million related to goodwill and
intangible assets, for the first quarter of 1996.
Aerospace segment SG&A expenses were $5.2 million (20.4% of sales) for the
first quarter of 1997 compared to $5.3 million (18.3% of sales) for the same
period in 1996.
(9)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------
Restructuring Costs. During the first quarter of 1997, the Communications
segment recognized costs and related liabilities of $5.3 million in connection
with the integration of its Santa Clara, California operations into its
Littleton, Massachusetts facility. The liabilities include $2.2 million for
severance payments, $2.1 million for facility closedown costs and $1.0 million
for the write-off of other assets and other costs.
Interest Expense. Interest expense increased to $3.8 million for the first
quarter of 1997 from $1.7 million in the same period of 1996 primarily as a
result of incremental debt related to the acquisition of Xyplex.
Income Taxes. In compliance with FASB 109, the Company has established a
full valuation allowance against its carry forward benefits. The Company will
continue to offset income tax benefits with this valuation allowance until such
time as its pretax profits would allow for the elimination of this allowance.
Operating Results. In addition to the restructuring costs described above,
the Company recognized other one-time charges in connection with its overall
streamlining and integration efforts. The Communications segment incurred costs
of $2.7 million for the writedown of inventories which became excess or obsolete
in connection with the restructuring plan. The Aerospace segment incurred costs
of $2.0 million for the closedown and move of its Concord, California facility
to Simi Valley, California.
ACQUISITION
On April 10, 1996, the Company acquired all of the capital stock of Xyplex,
Inc. ("Xyplex"), a wholly-owned subsidiary of Raytheon Company ("Raytheon").
Xyplex is a producer of high-speed internetworking equipment, terminal servers
and shared media products for business local area networks. Xyplex also
provides remote access products that interconnect with phone companies' wide
area networks. The purchase price was $67.5 million in cash, subject to certain
adjustments, and $50.0 million in the form of 1,974,333 newly issued shares of
the Company's common stock. Other direct costs associated with the acquisition
were approximately $1.4 million. The cash paid to Raytheon was obtained from an
amendment to the Company's existing credit facility entered into on April 10,
1996.
The Xyplex acquisition was accounted for as a purchase and the balance sheet
of Xyplex was combined with the Company's balance sheet as of April 30, 1996.
The transaction resulted in the acquisition of intangible assets valued at $39.2
million which are being amortized on a straight-line basis over periods ranging
from five to fifteen years, goodwill of $62.8 million which is being amortized
on a straight-line basis over twenty years. Acquired in-process research and
development valued at $11.7 million was expensed at the acquisition date. The
Company also assumed accrued liabilities of $16.6 million at the acquisition
date.
Sales of Xyplex products and services contributed substantial revenues to the
Company beginning in the third fiscal quarter of 1996, as well as resulting in
increased operating expenses. A significant portion of the increase in
operating expenses for the three months ended January 31, 1997 over the three
months ended January 31, 1996 was due to the acquisition of Xyplex and the
integration of the Whittaker Communications, Inc. ("WCI") and Xyplex operations.
FINANCIAL CONDITION
On April 10, 1996, in conjunction with the purchase of Xyplex, the Company
amended and increased its bank credit facility and borrowed an additional $76.5
million under such facility. At that time the amended credit agreement
consisted of an $85.0 million revolving credit facility with a five-year term
and an $85.0 million term loan repayable in quarterly installments over five
years. The cash payment to Raytheon Company for the purchase of Xyplex on April
10, 1996 was $67.3 million.
(10)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------
At January 31, 1997, the Company's debt totaled $154.3 million, which
consisted of $60.0 million of loans under the revolving credit facility, $78.5
million under the term loan, $15.0 million of convertible subordinated debt, and
$0.8 million of other debt. In addition, there were $12.2 million of letters of
credit outstanding under the revolving credit facility. The Company was not in
compliance with several of the financial ratio covenants in its bank credit
agreement at January 31, 1997. The Company has obtained waivers of the defaults
up to, but not including April 30, 1997. The most recent waiver agreement
required the Company to pay a waiver fee, requires the Company to make interest
payments monthly, limits the Company's selection of applicable interest periods,
and limits to $79.0 million the amount of the revolving credit facility that the
Company may utilize during the waiver period. The Company and its bank lending
group are currently discussing alternatives for reducing the Company's bank
debt. Some of these alternative measures may result in financing that is more
expensive than the Company's current bank financing. If a reduction of the bank
debt cannot be achieved, the bank lending group may elect to pursue its
remedies, including acceleration of the total bank indebtedness. There is no
assurance that in future periods, the Company will be in compliance with all of
the financial covenants contained in its amended credit agreement or that
additional waivers of the financial covenants will be obtained. Consequently,
bank debt in the amount of $126.5 million, which otherwise would have been
classified as noncurrent, has been classified as current. Furthermore,
acceleration of the debt under the bank credit agreement by the bank lending
group upon the Company's failure to comply with a financial covenant would be an
event of default under the $15 million 7% convertible subordinated note issued
by the Company to Hughes Electronics Corporation as partial consideration for
its purchase of WCI in 1995. Because of this possible cross default, the entire
$15 million principal balance of the 7% convertible subordinated note has also
been classified as current debt.
The Company believes that its existing cash and available credit will be
adequate to meet future operating cash needs through the waiver period.
Thereafter, if the Company is permitted to utilize the full $85.0 million amount
of the revolving credit facility, the Company believes that it will be able to
meet its operating cash needs. However, there can be no assurance that the
Company's bank lending group will so permit the Company to utilize the full
$85.0 million of its revolving credit facility after the waiver period has
ended.
Debt as a percent of total capitalization (stockholders' equity plus debt)
was 57.6% at January 31, 1997, compared with 55.3% at October 31, 1996. The
current ratio at January 31, 1997 was 0.63, compared with 0.69 at October 31,
1996, while working capital was ($79.1) million at January 31, 1997, compared
with ($65.7) million at October 31, 1996. Excluding the debt reclassifications
discussed above, the current ratio would have been 1.89 and working capital
would have been $62.4 million at January 31, 1997 and at October 31, 1996 the
current ratio and working capital would have been 2.36 and $85.3 million.
Cash flow provided by operations for the first quarter of 1997 was $8.6
million, compared to ($5.4) million for the same period in 1996. The $14.0
million increase from 1996 to 1997 was due primarily to decreases in accounts
receivable and other operating assets, increases in operating liabilities,
decreases in deferred and recoverable income taxes and higher depreciation and
amortization offset in part by a decrease in net income of $20.0 million.
Capital expenditures during the first quarter of 1997 were $1.3 million,
compared to $0.8 million for 1996. At January 31, 1997, there were
approximately $0.5 million of approved capital expenditures outstanding for the
replacement and upgrade of existing plant and equipment at the Company's various
facilities. Funds for these and other capital expenditures are expected to be
provided from operations. Capital expenditure amounts are a component of one of
the financial ratio covenants contained in the Company's credit agreement.
The Company's program for divestiture of its discontinued operations was
substantially complete by the end of fiscal 1992. A 996-acre parcel of land,
which was formerly used by a discontinued technology unit, remains. The land is
located in the city of Santa Clarita, California, approximately 35 miles from
downtown Los Angeles. In September 1995, the City granted entitlements
necessary to develop this property as a mixed-use residential, commercial, and
light industrial development. The initial term of the entitlements was ten
years. In February 1996, the City approved a development agreement which, among
other things, extended the ten-year term of the entitlements to over 20 years.
The Company is evaluating the most advantageous means to realize the value of
this asset. Cash expenditures related to the environmental remediation of this
property were $0.7 million during the first quarter of 1997.
(11)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
- --------------------------------
The Company believes that current real estate market conditions are less
likely to result in realization of the highest value of the property from a cash
sale than either from an agreement with a developer to participate in the
development of the property's infrastructure for sale of parcels to merchant
builders or from the Company's infrastructure development of the property
itself. There can be no assurance, however, that such a development agreement
will be reached or that the Company will have the financial and development
capabilities to develop the property itself. The Company believes that the
undiscounted cash flows from the development of this property will be sufficient
to cover its carrying value as well as the costs to complete remediation
activities.
On February 26, 1997, the Company concluded the sale and leaseback of its
Simi Valley facilities. The net proceeds of $17.4 million from the sale were
used to prepay term debt under the Company's credit agreement. The lease term
covers the fifteen year period ending February 28, 2012 and calls for rent
escalations of 6% every three years beginning with the fourth year.
The Company has engaged a financial advisor to assist in the disposition of
certain product lines of its defense electronics unit. The Company has not
received any offers to purchase such product lines and it cannot predict the
amount of cash such dispositions would generate. Under the terms of the
Company's credit agreement, the net proceeds of such dispositions are required
to be applied to the prepayment of the Company's term loan.
Statements made herein that are not based on historical fact are "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. The risk factors that could cause actual results to differ
from the forward looking statements include delay in developing new programs and
products, inability to qualify for new programs or to develop new products, loss
of existing business and inability to attract new business and customers,
reduced spending by commercial and defense customers and development of
competing products.
(12)
<PAGE>
EXHIBITS TO PART I
- ------------------
I(a) Calculation of Earnings (Loss) Per Share.
(13)
<PAGE>
Exhibit I(a)
WHITTAKER CORPORATION
CALCULATION OF EARNINGS (LOSS) PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JANUARY 31,
1997 1996
----------- --------
<S> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS)
Net income (loss) $ (18,083) $ 1,890
Adjustments: ----------- --------
Net income (loss) used in primary
earnings per share calculations $ (18,083) $ 1,890
=========== ========
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES
Weighted average number of common
shares outstanding 11,116 8,703
Common equivalent shares:
Series D Participating Convertible
Preferred Stock -- 266
Stock options included under treasury
stock method -- 639
----------- --------
TOTAL 11,116 9,608
=========== ========
Primary Earnings (Loss) Per Share $ (1.63) $ 0.20
=========== ========
</TABLE>
NOTE
Earnings per share have been computed based on the weighted average number of
common and common equivalent shares outstanding during the periods. Common
stock equivalents include Series D Participating Convertible Preferred Stock,
and dilutive employee stock options calculated using the treasury stock method.
Fully diluted earnings per share include the additional potential dilutive
effect of employee stock options.
Common equivalent shares have been excluded from 1997 calculations and
additional shares assuming conversion of subordinated convertible debt have been
excluded from 1997 and 1996 calculations as antidilutive.
Unaudited
(14)
<PAGE>
Exhibit I(a)
WHITTAKER CORPORATION
CALCULATION OF EARNINGS (LOSS) PER SHARE - (CONTINUED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JANUARY 31,
1997 1996
----------- --------
<S> <C> <C>
FULLY DILUTED EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS)
Net income (loss) used in primary
earnings per share calculation (above) $ (18,083) $ 1,890
Adjustments:
---------- --------
Net income (loss) used in fully diluted
earnings per share calculations $ (18,083) $ 1,890
========== ========
AVERAGE SHARES USED TO CALCULATE FULLY
DILUTED EARNINGS (LOSS) PER SHARE
Average common and common equivalent
shares (above) 11,116 9,608
Add:
Additional stock options included
under treasury stock method -- 165
Additional shares assuming conversion
of subordinated convertible debt -- --
----------- --------
TOTAL 11,116 9,773
=========== ========
Fully Diluted Earnings (Loss) Per Share $ (1.63) $ 0.19
=========== ========
</TABLE>
NOTES
Earnings per share have been computed based on the weighted average number of
common and common equivalent shares outstanding during the periods. Common
stock equivalents include Series D Participating Convertible Preferred Stock,
and dilutive employee stock options calculated using the treasury stock method.
Fully diluted earnings per share include the additional potential dilutive
effect of employee stock options.
Common equivalent shares have been excluded from 1997 calculations and
additional shares assuming conversion of subordinated convertible debt have been
excluded from 1997 and 1996 calculations as antidilutive.
Unaudited
(15)
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
- ---------------------
As a result primarily of the activities of its discontinued operations, the
Company is a potentially responsible party in a number of actions filed under
the Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted
to address public health and environmental concerns arising with respect to the
past treatment and disposal of hazardous substances. The Company is also a
potentially responsible party in a number of other actions brought under state
laws patterned after CERCLA. In nearly all of these matters, the Company
contributed a small amount (generally less than 1%) of the total treated or
disposed of waste. In addition to the CERCLA and similar actions described
above, the Company also, from time to time, conducts or participates in remedial
investigations and cleanup activities at facilities currently or formerly
occupied by its operating units.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. *
10.1 Fourth Amendment and Waiver, dated as of February 26, 1997, among
Registrant, NationsBank of Texas, N.A., as Agent, and the financial
institutions named therein as Lenders.
11. Statements recomputation of per share earnings forthe three months
ended January 31, 1997 (Exhibit I(a) of Part I to this Form 10-Q).
22. See Part II, Item 4 of this Form 10-Q.
27. Financial Data Schedule.
- ---------
* Exhibits followed by aparenthetical reference are incorporated by reference to
the documents described therein.
(b) Reports on Form 8-K.
During the quarter ended January 31, 1997, the Company did not file any
reports on Form 8-K.
(16)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITTAKER CORPORATION
Date: March 14, 1997 By: /s/ Joseph F. Alibrandi
---------------------------------------
Joseph F. Alibrandi
Chairman and Chief Executive Officer
By: /s/ Eva H. L. Jonutis
---------------------------------------
Eva H. L. Jonutis
Controller
(17)
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NO.* DESCRIPTION NUMBERED PAGE
- ---------- ----------- -------------
10.1 Fourth Amendment and Waiver, dated
as of February 26, 1997, among
Registrant, NationsBank of Texas,
N.A., as Agent, and the financial
institutions named therein as
Lenders.
11. Statements re computation of per
share earnings for the three months
ended January 31, 1997 (Exhibit
I(a) of Part I to this Form 10-Q).
22. See Part II, Item 4 of this Form
10-Q.
27. Financial Data Schedule.
- -------------
* Exhibits followed by a parenthetical reference are incorporated by reference
to the documents described therein.
<PAGE>
EXHIBIT 10.1
FOURTH AMENDMENT AND WAIVER
TO WHITTAKER CORPORATION
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF FEBRUARY 26, 1997
This FOURTH AMENDMENT AND WAIVER (the "Amendment") is among WHITTAKER
CORPORATION, a Delaware corporation (the "Borrower"), the Financial Institutions
party to the Credit Agreement referred to below (the "Lenders"), NATIONSBANK OF
TEXAS, N.A., as agent (the "Agent") for the Lenders thereunder and CIBC INC., as
co-agent ("Co-Agent") for the Lenders thereunder.
PRELIMINARY STATEMENTS:
1. The Borrower, the Lenders, the Co-Agent and the Agent have entered
into an Amended and Restated Credit Agreement dated as of April 10, 1996 (as
amended to date, the "Credit Agreement"; capitalized terms used and not
otherwise defined herein have the meanings assigned to such terms in the Credit
Agreement).
2. The Borrower has requested that the Lenders, among other things,
(i) waive, during the period starting on and including February 28, 1997 to (but
not including) April 30, 1997 (the "Waiver Period"), any Default arising as a
result of non-compliance with Section 6.04(a), (b), (c) or (d) of the Credit
Agreement; and (ii) amend the Credit Agreement to extend the time for closing of
a sale-leaseback transaction that would not otherwise be permitted under the
terms of the Credit Agreement.
3. The Lenders are, on the terms and conditions stated below, willing
to grant the request of the Borrower.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date
------------------------------
hereof and subject to the satisfaction of the conditions precedent set forth in
Section 4 hereof, the Credit Agreement is hereby amended as follows:
(a) During the Waiver Period, the third sentence of Section 2.01(b) of
the Credit Agreement is hereby amended and restated in its entirety as
follows:
"Each Revolving Borrowing shall be in an aggregate amount of
$1,000,000 or an integral multiple of $1,000,000 in excess thereof and
shall consist of Revolving Advances made by the Revolving Lenders
ratably according to their respective Revolving Commitments."
(b) During the Waiver Period, the proviso of Section 2.05(a) is hereby
amended by deleting "$4,000,000" and substituting therefor "$1,000,000".
<PAGE>
(c) During the Waiver Period, Section 2.06(a) is hereby amended by
deleting the words "payable quarterly in arrears on the 21st day of each
April, July, October and January, commencing April 21, 1996" and
substituting therefor the words "payable monthly in arrears on the last
Business Day of each month, commencing February 28, 1997".
(d) During the Waiver Period, the second sentence of Section 2.06(b)
of the Credit Agreement is hereby amended by deleting the words "one, two,
three, or six months" and substituting instead "one month".
Notwithstanding the foregoing, Borrower shall be permitted to maintain
until the end of their respective current Interest Periods any currently
outstanding Eurodollar Rate Advances with Interest Periods of two, three or
six months.
(e) During the Waiver Period, the parenthetical in the first sentence
of Section 2.06(c) of the Credit Agreement is hereby amended by deleting
"$4,000,000" and substituting "$1,000,000".
(f) During the Waiver Period, the second sentence of Section 2.06(c)
of the Credit Agreement is hereby amended and restated in its entirety as
follows:
"If the Borrower has made such election for Eurodollar Rate
Advances for any Interest Period, the Borrower shall pay interest on
the unpaid principal amount of such Eurodollar Rate Advance during
such Interest Period, payable in arrears on the last day of each
Interest Period (and, in addition, if such Interest Period is two,
three or six months, on the last Business Day of each month during
such Interest Period), at a rate equal, subject to Section 2.06(d), to
the sum of the Eurodollar Rate for such Interest Period for such
Eurodollar Rate Advances plus the Applicable Margin for Eurodollar
Rate Advances in effect from time to time during such Interest
Period".
(g) During the Waiver Period, notwithstanding anything to the contrary
in the Credit Agreement, the aggregate outstanding amount of Revolving
Advances plus Letter of Credit Obligations shall not exceed $79,000,000.
(h) During the Waiver Period, for purposes of calculating the
commitment fee pursuant to Section 2.07(b) of the Credit Agreement, each
Lender's Revolving Commitment shall be deemed to be reduced by such
Lender's pro rata share of $6,000,000.
(i) Section 6.02(e)(ix) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"(ix) the sale by the Borrower of its three building office
complex located in Simi Valley, California in connection with a sale-
lease back of such property but only if such sale (A) is for fair
market value and is consummated on or prior to the end of the Waiver
Period, (B) is for cash and results in gross cash proceeds
2
<PAGE>
to the Borrower of not less than $13,000,000, and (C) the lease
obligations entered into in connection therewith do not require
payments by the Borrower or any of its Subsidiaries in excess of
$2,500,000 in any period of twelve consecutive months."
(j) During the Waiver Period, the permissive exceptions to the
prohibitions of Section 6.02(g) contained in Sections 6.02(g)(v),
6.02(g)(vi), and 6.02(g)(viii) are suspended.
(k) Section 9.02 of the Credit Agreement is hereby amended by
substituting the following address for the Agent:
"901 Main Street, 66th Floor, Dallas, Texas 75202, Telecopier
No.: (214) 508-0604, Attention: William E. Livingstone, IV, Senior
Vice President"
SECTION 2. WAIVER. (a) Subject to the terms and conditions hereof,
------
Lenders hereby waive, but only during the Waiver Period, the Specified Defaults
(hereinafter defined); provided, however, that Lenders' waiver of the Specified
-------- -------
Defaults and their rights and remedies as a result of the occurrence thereof
shall not constitute and shall not be deemed to constitute a waiver of any other
Event of Default, whether arising as a result of further violations of any
provision of the Credit Agreement previously violated by the Borrower, or a
waiver of any rights and remedies arising as a result of such other Events of
Default. As used herein, "Specified Defaults" shall mean the failure of the
------------------
Borrower to comply with Sections 6.04(a), (b), (c) and (d) of the Credit
Agreement. At the end of the Waiver Period, the waiver of the Specified
Defaults will automatically terminate.
(b) In consideration of Lenders' waiver of the Specified Defaults and
certain other good and valuable consideration, the Borrower hereby expressly
acknowledges and agrees that neither it nor any Guarantor or Grantor has any
setoffs, counterclaims, adjustments, recoupments, defenses, claims or actions of
any character, whether contingent, non-contingent, liquidated, unliquidated,
fixed, matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured, known or unknown, against any Lender, Co-Agent or Agent or any
grounds or cause for reduction, modification or subordination of the Obligations
under the Loan Documents or any liens or security interests of any Lender or the
Agent. To the extent the Borrower or any Guarantor or Grantor may possess any
such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds
or causes, the Borrower and each Guarantor and Grantor hereby waive, and hereby
release each Lender, Co-Agent and Agent from, any and all such setoffs,
counterclaims, adjustments, recoupments, claims, actions, grounds and causes,
such waiver and release being with full knowledge and understanding of the
circumstances and effects of such waiver and release and after having consulted
counsel with respect thereto.
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall not be
---------------------------
effective until all proceedings of the Borrower taken in connection herewith and
the transactions contemplated hereby shall be satisfactory in form and substance
to Agent and Required Lenders, and each of the following conditions precedent
shall have been satisfied (the "Effective Date"):
3
<PAGE>
(a) the Agent has executed this Amendment and has received
counterparts of this Amendment executed by the Borrower and the Required
Lenders and counterparts of the Consent appended hereto (the "Consent")
executed by each of the Guarantors and Grantors (as defined in the Security
Agreement) listed therein (such Guarantors and Grantors, together with the
Borrower, each a "Loan Party" and, collectively, the "Loan Parties");
(b) the Borrower has paid to the Agent in accordance with Section
2.09(a) of the Credit Agreement for the account of each Lender, a fee equal
to 0.15% of the sum of the principal amount of all outstanding Advances
owed to such Lender, the Unused Revolving Commitment, if any, of such
Lender and, in the case of each Revolving Lender, such Lender's Pro Rata
share of the aggregate outstanding Letter of Credit Obligations as of such
date;
(c) All fees and expenses, including legal and other professional fees
and expenses incurred, payable on or prior to the date of this Amendment to
Agent, including, without limitation, the fees and expenses of its counsel,
shall have been paid to the extent that some had been billed prior to the
date of this Amendment; and
(d) Agent and each Lender shall have received each of the following:
(1) a certificate of the Borrower certifying (i) as to the
accuracy, after giving effect to this Amendment, of the
representations and warranties set forth in Article V of the Credit
Agreement, the other Loan Documents and in this Amendment, and (ii)
that there exists no Default or Event of Default, after giving effect
to this Amendment and the execution, delivery and performance of this
Amendment will not cause a Default or Event of Default; and
(2) such other documents, instruments, and certificates, as Agent
or Required Lenders shall deem necessary or appropriate in connection
with this Amendment and the transactions contemplated hereby,
including without limitation copies of resolutions of the board of
directors of the Borrower authorizing the transactions contemplated by
this Amendment.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
------------------------------
warrants as follows:
(a) AUTHORITY. The Borrower and each other Loan Party has the
---------
requisite corporate power and authority to execute and deliver this
Amendment or the Consent, as applicable, and to perform its obligations
hereunder and under the Loan Documents (as modified hereby) to which it is
a party. The execution, delivery and performance by the Borrower of this
Amendment and by each other Loan Party of the Consent, and the performance
by each Loan Party of each Loan Document to which it is a party have been
duly approved by all necessary corporate action of such Loan Party and no
other corporate proceedings on the part of such Loan Party are necessary to
consummate such transactions.
4
<PAGE>
(b) ENFORCEABILITY. This Amendment has been duly executed and
--------------
delivered by the Borrower. The Consent has been duly executed and delivered
by each Guarantor and Grantor. This Amendment and each Loan Document (as
modified hereby) is the legal, valid and binding obligation of each Loan
Party hereto or thereto, enforceable against such Loan Party in accordance
with its terms, and is in full force and effect.
(c) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties contained in each Loan Document (other than any such
representations or warranties that, by their terms, are specifically made
as of a date other than the date hereof) are correct on and as of the date
hereof as though made on and as of the date hereof.
(d) NO DEFAULT. After giving effect to this Amendment, no event has
----------
occurred and is continuing that constitutes a Default or Event of Default.
SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) Upon
---------------------------------------------
and after the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the other Loan
Documents to "the Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as modified hereby.
(b) Except as specifically modified above, the Credit Agreement and
all other Loan Documents, are and shall continue to be in full force and effect
and are hereby in all respects ratified and confirmed. Without limiting the
generality of the foregoing, the Collateral Documents and all of the Collateral
described therein do and shall continue to secure the payment of all Secured
Obligations under and as defined therein, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as an amendment of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute an amendment of any provision of any of the Loan Documents.
SECTION 6. FURTHER ASSURANCES. The Borrower shall execute and
------------------
deliver such further agreements, documents, instruments, and certificates in
form and substance satisfactory to Agent, as Agent or any Lender may deem
necessary or appropriate in connection with this Amendment.
SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement. Delivery of an executed counterpart of a signature page to this
Amendment or the Consent by telefacsimile shall be effective as delivery of a
manually executed counterpart of this Amendment or such Consent.
SECTION 8. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
--------------------
LAW, THE BORROWER HEREBY WAIVES ANY RIGHT THAT IT
5
<PAGE>
MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT,
EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE SHALL
BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
SECTION 9. GOVERNING LAW. This Amendment shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK. SIGNATURE PAGES FOLLOW.]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
WHITTAKER CORPORATION,
A Delaware corporation
By: /s/ John K. Otto
------------------
John K. Otto
Treasurer
NATIONSBANK OF TEXAS, N.A.,
as Agent
By: /s/ William E. Livingstone, IV
--------------------------------
William E. Livingstone, IV
Senior Vice President
CIBC INC.,
as Co-Agent
By: /s/ Robert N. Greer
---------------------
Robert N. Greer
Vice President
<PAGE>
Lenders:
-------
NATIONSBANK OF TEXAS, N.A.
By: /s/ William E. Livingstone, IV
--------------------------------
William E. Livingstone, IV
Senior Vice President
CIBC INC.
By: /s/ Robert N. Greer
---------------------
Robert N. Greer
Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Kori Y. Kannegieter
-------------------------
Kori Y. Kannegieter
Managing Director
CITY NATIONAL BANK, N.A.
By: /s/ Gregory Meis
-------------------------
Gregory Meis
Vice President
COMERICA BANK-CALIFORNIA
By:
-------------------------
Title:
IMPERIAL BANK
By: /s/ Ray Vadalma
-----------------
Ray Vadalma
Senior Vice President
<PAGE>
KREDIETBANK N.V.
By: /s/ Michael V. Curran
-----------------------
Michael V. Curran
Vice President
By: /s/ Robert Snauffer
---------------------
Robert Snauffer
Vice President
SANWA BANK CALIFORNIA
By: /s/ E. Leigh Irwin
--------------------
E. Leigh Irwin
Vice President - Section Manager
SUMITOMO BANK OF CALIFORNIA, N.A.
By: /s/ Robert M. Iritani
-----------------------
Robert M. Iritani
Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Perry Vavoules
--------------------
Perry Vavoules
Senior Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Scott Lane
----------------
Scott Lane
Vice President
<PAGE>
CONSENT
Each of the undersigned, as Guarantors under the "Guaranty" and as grantors
under the "Security Agreement" (as such terms are defined in the Credit
Agreement referred to in the foregoing Amendment), each hereby consents and
agrees to the foregoing Amendment and to be bound by the terms and provisions
thereof, and agrees that (i) the Guaranty and the Security Agreement is and
shall continue to be in full force and effect and is hereby ratified and
confirmed in all respects except that, upon the effectiveness of and on and
after the date of such Amendment each reference to the Credit Agreement,
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Credit Agreement as amended by
such Amendment, and (ii) the collateral described in the Security Agreement
shall continue to secure the payment of the indebtedness therein described.
AVIANT INFORMATION, INC. (formerly BLUE BELL
LEASE, INC.), a California corporation, METROPOLITAN
FINANCIAL SERVICES CORPORATION,
a Colorado corporation, PARK CHEMICAL COMPANY, a
Michigan corporation, WHITTAKER COMMUNICATIONS,
INC., a California corporation, WHITTAKER CONTROLS,
INC., a California corporation, WHITTAKER CORP., a
Maine corporation, WHITTAKER ORDNANCE, INC., a Delaware
corporation, WHITTAKER PORTA BELLA DEVELOPMENT, INC., a
California corporation, WHITTAKER SERVICES CORPORATION,
a California corporation, WHITTAKER TECHNICAL PRODUCTS,
INC., a Colorado corporation, WHITTAKER DEVELOPMENT
CO., a Delaware corporation, and XYPLEX, INC., a
Massachusetts corporation
By: /s/ John K. Otto
-------------------
John K. Otto
Treasurer of each of the foregoing Loan Parties
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> OCT-31-1996
<PERIOD-END> JAN-31-1997
<CASH> 1,866
<SECURITIES> 0
<RECEIVABLES> 60,359
<ALLOWANCES> 0
<INVENTORY> 45,195
<CURRENT-ASSETS> 132,758
<PP&E> 91,019
<DEPRECIATION> 49,253
<TOTAL-ASSETS> 359,784
<CURRENT-LIABILITIES> 211,833
<BONDS> 418
0
1
<COMMON> 111
<OTHER-SE> 113,784
<TOTAL-LIABILITY-AND-EQUITY> 359,784
<SALES> 50,055
<TOTAL-REVENUES> 50,055
<CGS> 32,980
<TOTAL-COSTS> 32,980
<OTHER-EXPENSES> 10,188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,859
<INCOME-PRETAX> (18,083)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18,083)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,083)
<EPS-PRIMARY> ($1.63)
<EPS-DILUTED> 0
</TABLE>
