<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, 1998
COMMISSION FILE NUMBER 0-20609
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: 11,204,658 shares,
par value $.01 per share, as of January 31, 1998.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITTAKER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
($ in 000, except for per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended January 31,
1998 1997
--------- ---------
(restated)
<S> <C> <C>
Sales..................................................................... $ 31,799 $ 19,690
Costs and expenses
Cost of sales......................................................... 18,689 12,253
Engineering and development........................................... 337 224
Selling, general and administrative................................... 7,275 6,077
--------- ---------
Operating Profit.......................................................... 5,498 1,136
Interest expense...................................................... 4,906 3,828
Interest income....................................................... (218) (149)
Other expense......................................................... 482 6
--------- ---------
Income (loss) from continuing operations before provision for taxes....... 328 (2,549)
Provision for taxes....................................................... 6 --
--------- ---------
Income (loss) from continuing operations.................................. 322 (2,549)
Discontinued operations
Loss from discontinued operations..................................... -- (15,534)
Gain on disposal of discontinued operations........................... 10,085 --
--------- ---------
Net income (loss)......................................................... $ 10,407 $ (18,083)
========= =========
Average common shares outstanding (000)................................... 11,205 11,116
========= =========
Basic income (loss) per share
Continuing operations................................................. $ .03 $ (.23)
Discontinued operations
Loss from discontinued operations.................................. -- (1.40)
Gain on disposal of discontinued operations........................ .90 --
--------- ---------
Net income (loss) per share............................................... $ .93 $ (1.63)
========= =========
Diluted income (loss) per share
Continuing operations................................................. $ .03 $ (.23)
Discontinued operations
Loss from discontinued operations.................................. -- (1.40)
Gain on disposal of discontinued operations........................ .88 --
--------- ---------
Net income (loss) per share............................................... $ .91 $ (1.63)
========= =========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
(2)
<PAGE>
WHITTAKER CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
($ IN 000)
<TABLE>
<CAPTION>
AT JANUARY 31, AT OCTOBER 31,
1998 1997
-------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
- --------------
Cash......................................................................... $ 37,550 $ 6,366
Receivables.................................................................. 24,597 27,337
Inventories.................................................................. 38,194 37,032
Other current assets......................................................... 1,777 914
Income taxes recoverable..................................................... 3,238 3,238
Deferred income taxes........................................................ 11,291 11,244
Net current assets of discontinued operations................................ (428) 7,766
----------- -----------
Total Current Assets......................................................... 116,219 93,897
----------- -----------
Property and equipment, at cost.............................................. 31,850 31,381
Less accumulated depreciation and amortization............................... (22,060) (21,550)
----------- -----------
Net Property and Equipment................................................... 9,790 9,831
----------- -----------
Other Assets
- ------------
Goodwill, net of amortization................................................ 13,942 14,032
Other intangible assets, net of amortization................................. 1,070 1,119
Notes and other noncurrent receivables....................................... 3,380 3,443
Other noncurrent assets...................................................... 9,081 7,672
Net assets held for sale or development...................................... 15,214 15,214
Net noncurrent assets of discontinued operations............................. -- 22,234
----------- -----------
Total Other Assets........................................................... 42,687 63,714
----------- -----------
Total Assets................................................................. $ 168,696 $ 167,442
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
- -------------------
Current maturities of long-term debt......................................... $ 127,313 $ 129,353
Accounts payable............................................................. 10,126 9,579
Accrued liabilities.......................................................... 25,876 31,331
----------- -----------
Total Current Liabilities.................................................... 163,315 170,263
----------- -----------
Other Liabilities
- -----------------
Long-term debt............................................................... 91 222
Other noncurrent liabilities................................................. 12,174 12,603
Deferred income taxes........................................................ 13,432 15,077
----------- -----------
Total Other Liabilities...................................................... 25,697 27,902
----------- -----------
Stockholders' Equity (Deficit)
- ------------------------------
Capital stock
Preferred stock............................................................ 1 1
Common Stock............................................................... 112 112
Additional paid-in capital................................................... 72,041 72,041
Retained earnings (deficit).................................................. (92,470) (102,877)
----------- -----------
Total Stockholders' Equity (Deficit)......................................... (20,316) (30,723)
----------- -----------
Total Liabilities and Stockholders' Equity................................... $ 168,696 $ 167,442
=========== ===========
</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,
------------------------------------
1998 1997
-------------- --------------
(Dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Continuing Operations
Net income (loss)............................................................. $ 322 $ (2,549)
Adjustments to reconcile net income (loss) to net cash provided
(used) by operations:
Depreciation and amortization............................................... 691 753
Income taxes recoverable.................................................... -- 1,404
Deferred taxes.............................................................. (1,692) 1,230
Changes in operating assets and liabilities:
Receivables............................................................... 2,568 5,690
Inventories and prepaid expenses.......................................... (2,025) (3,995)
Accounts payable and other liabilities.................................... (4,435) (726)
---------- ----------
Total from continuing operations............................................ (4,571) 1,807
---------- ----------
Discontinued Operations
Net loss.................................................................... -- (15,534)
Adjustments to reconcile net loss to net cash provided (used) by
operations:
Depreciation and amortization............................................. 2,557 5,009
Deferred taxes............................................................ 1,023 (1,019)
Changes in operating assets and liabilities............................... 2,373 18,366
---------- ----------
Total from discontinued operations.......................................... 5,953 6,822
---------- ----------
Net cash provided by operating activities..................................... 1,382 8,629
---------- ----------
INVESTING ACTIVITIES
Continuing Operations
Proceeds on sale of business................................................ 35,000 --
Purchase of property, plant and equipment................................... (507) (879)
Collections of notes receivable............................................. 235 313
Increase in assets held for sale or development............................. -- (697)
Other items, net............................................................ (3,051) (889)
---------- ----------
Total from continuing operations............................................ 31,677 (2,152)
---------- ----------
Discontinued Operations
Net proceeds relating to discontinued operations............................ (440) 580
---------- ----------
Net cash provided (used) by investing activities.............................. 31,237 (1,572)
---------- ----------
FINANCING ACTIVITIES
Net decrease in debt.......................................................... (2,171) (7,612)
Reduction in deferred debt costs.............................................. 736 139
Proceeds from shares issued under stock option plans.......................... -- 716
---------- ----------
Net cash used by financing activities......................................... (1,435) (6,757)
---------- ----------
Net increase in cash.......................................................... 31,184 300
Cash at beginning of year..................................................... 6,366 1,566
---------- ----------
Cash at end of period......................................................... $ 37,550 $ 1,866
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.................................................................... $ 3,869 $ 3,435
========== ==========
Income taxes................................................................ $ 72 $ 59
========== ==========
</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 condensed financial statements of Whittaker
Corporation and its subsidiaries ("Whittaker" or the "Company") 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, 1997. 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 affect
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, 1997. The results of operations for interim periods are not
necessarily indicative of the results of operations for the full year.
During 1997 the Financial Accounting Standards Board issued Financial
Accounting Standards No. 128 "Earnings Per Share" which is effective for the
Company beginning with the first quarter of fiscal 1998. Statement 128 replaced
the previously reported primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes the potential dilutive effect of common stock
equivalents such as stock options, warrants and convertible securities. Diluted
earnings per share is similar to the previously reported primary and fully
diluted earnings per share. Earnings per share amounts for all periods have been
presented, and where necessary, restated to conform to Statement 128
requirements. See Note 3 for the computation of basic and diluted earnings per
share.
NOTE 2. DISCONTINUED OPERATIONS
During the fourth quarter of 1997, the Company, in connection with its
strategy to reduce debt and explore strategic options, sold its defense
electronics unit and discontinued its Communications segment. During the first
quarter of 1998 the Company completed the sale of Whittaker Xyplex, Inc.
("Xyplex") to MRV Communications, Inc. ("MRV"), for $35,000,000 in cash plus
warrants to purchase 421,402 shares of common stock of MRV. Under the terms of
its agreement with MRV, Whittaker shall be entitled to receive warrants to
purchase an additional 78,598 shares of common stock of MRV upon Whittaker's
timely performance of certain covenants. The net proceeds from the sale were
used in February to reduce Whittaker's bank debt. The Company's financial
statements report the operating results and balance sheet items of these
discontinued operations separately from its continuing operations. Previously
reported financial statements have been restated to reflect the discontinuance
of these businesses.
The gain on disposal of discontinued operations of $10,085,000 includes the
gain on sale of Xyplex of $12,089,000, (net of estimated selling costs of
$532,000), $1,432,000 of 1998 operating losses of Xyplex through the date of
sale which where in excess of the estimate of these losses previously recorded,
and certain other items. In calculating the gain on the sale of Xyplex, the
421,402 warrants were valued at $2,200,000 based on their estimated market value
at January 31, 1998. No value was placed on the 78,598 warrants. The warrants
have an initial exercise price of $35 and expire on January 29, 2001. The
exercise price of the warrants may be adjusted in the future upon the occurrence
of certain events.
(5)
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings (loss) per share in thousands except per share amounts:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JANUARY 31,
---------------------------------------
1998 1997
<S> <C> <C>
Basic Earnings (Loss) Per Share
- -------------------------------
Net income (loss) from continuing operations available
to common stockholders $ 322 $ (2,549)
=========== ==========
Weighted average common shares outstanding 11,205 11,116
=========== ==========
Basic income (loss) per share from continuing operations $ 0.03 $ (0.23)
=========== ==========
Diluted Earnings (Loss) Per Share
- ---------------------------------
Net income (loss) from basic earnings per share calculation, above $ 322 $ (2,549)
Adjustments -- --
----------- ---------
Net income (loss) from continuing operations for diluted earnings per
share calculation $ 322 $ (2,549)
=========== ==========
Weighted average common shares outstanding for basic earnings per
share calculation, above 11,205 11,116
Effect of dilutive securities:
Series D Convertible Preferred Stock 188 --
Employee Stock Options 63 --
----------- ---------
Denominator for diluted earnings per share calculation 11,456 11,116
=========== ==========
Diluted earnings (loss) per share from continuing operations $ 0.03 $ (0.23)
=========== ==========
</TABLE>
Options to purchase 589,437 shares of common stock at prices ranging from
$10.32 to $26.25 per share were outstanding at January 31, 1998 but were not
included in the computation of diluted earnings per share because their
inclusion would be antidilutive. In addition, 618,556 shares of common stock
issuable upon conversion of convertible subordinated debt are not included in
the computation of diluted earnings per share because their inclusion would be
antidilutive.
NOTE 4. INVENTORIES
Inventories consisted of the following ($ in thousands):
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1998 1997
------------- --------------
<S> <C> <C>
Parts and materials $ 19,143 $ 19,620
Work in process 17,185 15,595
Finished goods 1,866 1,817
------------- --------------
$ 38,194 $ 37,032
============= ==============
</TABLE>
(6)
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5. 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, 1998, 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 but 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 $0.1
million for these environmental matters during the three months ended January
31, 1998. 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 represent 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.
As prescribed by SOP 96-1, the Company has accrued for its estimated costs,
including certain employee compensation costs, for the environmental remediation
where the Company is a potentially responsible party under CERCLA and similar
state laws. These accruals are adjusted as further information develops or
circumstances change. The total remediation costs for the sites associated with
these federal and state actions is estimated to be $4.6 million. As of January
31, 1998, all of these estimated costs have been accrued and are reflected in
accrued liabilities and, in the case of those costs to be incurred beyond one
year, other noncurrent liabilities in the Consolidated Balance Sheet of the
Company. The Company, at this time, does not anticipate any additional
significant costs, beyond those already recognized, will be incurred in the
remediation efforts for these sites. Costs of future expenditures for
environmental remediation efforts are not discounted to their present value.
(7)
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 6. LONG-TERM DEBT
On April 10, 1996, the Company increased the amount of its bank credit
facility to $170.0 million. At January 31, 1998, the credit facility consisted
of an $85.0 million revolving credit facility that expires in April 2001, of
which the Company was permitted to utilize $83.0 million and a $31.9 million
term loan payable in quarterly installments until 2001. At January 31, 1998, the
interest rate on loans outstanding under the credit agreement was equal to the
agent bank's prime rate plus 4.25% with interest payable monthly. At that time,
the Company was obligated to pay letter of credit fees which ranged between
4.875% per annum and 5.375% 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 credit facility will be used to
fund future working capital and other corporate requirements. At January 31,
1998, the Company had $2.1 million of letters of credit outstanding and unused
and available credit of $0.8 million under its revolving credit facility.
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 four financial ratio covenants with
respect to financial leverage, cash flow, and net worth. Since July 31, 1996,
the Company has not been in compliance with one or more of the four financial
ratio covenants and at January 31, 1998 the Company was not in compliance with
any of such covenants. The Company has obtained successive waivers of these
defaults. The latest waiver dated January 31, 1998 waives the defaults up to but
not including March 31, 1998.
There can be no assurance that in future periods the Company will be in
compliance with any of the financial ratio covenants contained in its credit
agreement, or that, after expiration of the latest waiver on March 31, 1998,
additional waivers of the financial covenants will be obtained. There can be no
assurance that any future waivers would contain terms which would be as
favorable to the Company as, or would materially differ from, waivers granted in
the past. Consequently, bank debt in the amount of $103.1 million, which
otherwise would have been classified as noncurrent, has been classified as
current. Acceleration of the debt under the credit agreement by the bank
lending group upon the Company's failure, after March 30, 1998, to comply with
any of the financial ratio covenants noted above would be an event of default
under the Company's $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 also been classified as current debt.
Under the Company's 7% convertible subordinated note, 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.
In order to reduce the risk of higher interest expense under the Company's
credit agreement that could result from an increase in the level of market
interest rates, 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, 1998, the unamortized
cost was $129,000.
On January 30, 1998, the Company sold Whittaker Xyplex, Inc. On February 2,
1998 the net cash proceeds of $34.5 million from the sale were used to prepay
all of the $31.9 million of term debt under the Company's credit agreement and
$2.6 million of loans outstanding under the Company's revolving credit facility.
Also on February 2, 1998, commitments under the revolving credit facility were
reduced to $82.4 million.
(8)
<PAGE>
WHITTAKER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7. BUSINESS SEGMENTS
The Company develops and provides specialized aerospace and data network
services to create products and customer solutions for aircraft, defense and
industrial markets and hospitals and other enterprises. The Company operates in
two business segments: Aerospace, which designs, manufactures, and distributes a
wide variety of fluid control devices and fire detection systems, and
Integration Services, which provides professional services for the integration
of data networks for hospitals and other enterprises. Prior to the second
quarter of 1997, the Company's Integration Services operation did not exist.
Operating profit is total revenue less operating expenses. General
corporate expenses have not been allocated to the business segments and are
shown as a separate expense element of operating profit to reconcile to
consolidated operating income.
Information about the Company's operations by business segment for the
periods ended January 31, 1998 and 1997 follows ($ in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JANUARY 31,
1998 1997
--------- ---------
<S> <C> <C>
SALES:
Aerospace....................... $ 28,980 $ 19,690
Integration Services............ 2,819 --
--------- ---------
$ 31,799 $ 19,690
========= =========
OPERATING PROFIT (LOSS):
Aerospace....................... $ 8,078 $ 3,485
Integration Services............ (538) --
Corporate and Other............. (2,042) (2,349)
--------- ---------
$ 5,498 $ 1,136
========= =========
</TABLE>
The financial statements for prior periods have been restated to reflect
the segregation of continuing and discontinued operations. The information
presented above for 1997 reflects the removal from the Aerospace segment of
amounts relating to the discontinued defense electronics business and the
removal of the discontinued Communications segment.
(9)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
- -------------------
During the first quarter of 1998 the Company completed the sale of
Whittaker Xyplex, Inc. ("Xyplex") to MRV Communications, Inc. ("MRV"), for $35.0
million in cash plus warrants to purchase 421,402 shares of common stock of MRV.
Under the terms of its agreement with MRV, Whittaker shall be entitled to
receive warrants to purchase an additional 78,598 shares of common stock of MRV
upon Whittaker's timely performance of certain covenants. The net proceeds from
the sale were used in February to reduce Whittaker's bank debt.
RESULTS OF OPERATIONS
- ---------------------
COMPARISON OF THREE MONTHS ENDED JANUARY 31, 1998 AND 1997
Sales. The Company's first quarter 1998 sales from continuing operations of
$31.8 million increased by $12.1 million (61.5%) over first quarter sales in the
prior year. The Company's Aerospace segment sales for the first quarter of 1998
were up $9.3 million (47.2%) from the same period in 1997 reflecting increased
sales of fluid and pneumatic control devices, fire and overheat detectors and
cable products. The increase in sales of fire and overheat detectors reflects
the successful resolution, in 1998, of the production inefficiencies associated
with the 1997 move of operations from Concord, California to Simi Valley,
California. Also impacting the overall increase in 1998 sales was the Company's
Integration Services Segment which did not exist prior to the second quarter of
1997.
Gross Margin. The Company's gross margin from continuing operations for the
first quarter of 1998 as a percentage of sales was 41.2%, compared with 37.8%
for the first quarter of 1997. The first quarter 1998 gross margin consists of
Aerospace segment gross margin of $12.1 million (41.6% of sales), and
Integration Services gross margin of $1.0 million (36.9% of sales). Aerospace
gross margin as a percentage of sales increased from 37.0% in the first quarter
of 1997 due primarily to the efficiencies associated with higher sales volume
and the successful resolution in 1998 of the production inefficiencies
associated with the 1997 move from Concord, California to Simi Valley,
California of the fire and overheat detector business.
Engineering and Development. Engineering and development expenses for
continuing operations for the first quarter of 1998 increased slightly from the
first quarter of 1997, from $0.2 million to $0.3 million.
Selling, General and Administrative. Selling, general and administrative
expenses (SG&A) for continuing operations for the first quarter of 1998
increased by $1.2 million from the first quarter of 1997, from $6.1 million in
1997 to $7.3 million in 1998. The Integration Services business, which did not
exist in the first quarter of 1997, incurred SG&A costs of $1.5 million in the
first quarter of 1998. The Aerospace segment SG&A expenses for the first
quarter of 1998 and the first quarter of 1997 were $3.7 million. Higher
management incentive costs in 1998 were substantially offset by lower
allocations of support services costs in 1998 and the absence in 1998 of costs
associated with the 1997 move of the fire and overheat detector business from
Concord, California to Simi Valley, California.
Interest Expense. Interest expense increased $1.1 million to $4.9 million
for the first quarter of 1998 from $3.8 million for the first quarter of 1997.
This increase was the result of higher interest rates in 1998 compared to 1997
partially offset by lower levels of debt in the first quarter of 1998 as
compared to the first quarter of 1997.
Income Taxes. In compliance with FASB 109, the Company has established a
full valuation allowance against its current potential carry forward benefits.
Sales from discontinued operations for the first quarter of 1998 were $16.9
million lower as compared to the first quarter of 1997. The discontinued
Communications segment sales were $13.5 million for the first quarter of 1998
compared to $24.7 million for the first quarter of 1997. Sales for the
discontinued defense electronics unit which was sold in September of 1997 were
$5.6 million for the first quarter of 1997.
(10)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Gross margin from the discontinued operations for the first quarter of 1998
was lower by $1.0 million as compared to the first quarter of 1997. The effect
of the sale of the defense electronics business in 1997 and lower margins in the
Communications segment were substantially offset by the absence in the first
quarter of 1998 of restructuring and integration costs incurred in the first
quarter of 1997.
The gain on disposal of discontinued operations of $10,085,000 includes the
gain on sale of Xyplex of $12,089,000, (net of estimated selling costs of
$532,000), $1,432,000 of 1998 operating losses of Xyplex through the date of
sale which where in excess of the estimate of these losses previously recorded,
and certain other items.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
On April 10, 1996, the Company increased the amount of its bank credit
facility to $170.0 million. At January 31, 1998, the credit facility consisted
of an $85.0 million revolving credit facility that expires in April 2001, of
which the Company was permitted to utilize $83.0 million and a $31.9 million
term loan payable in quarterly installments until 2001. At January 31, 1998, the
interest rate on loans outstanding under the credit agreement was equal to the
agent bank's prime rate plus 4.25% with interest payable monthly. At that time,
the Company was obligated to pay letter of credit fees which ranged between
4.875% per annum and 5.375% 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 credit facility will be used to
fund future working capital and other corporate requirements. At January 31,
1998, the Company had $2.1 million of letters of credit outstanding and unused
and available credit of $0.8 million under its revolving credit facility.
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 four financial ratio covenants with
respect to financial leverage, cash flow, and net worth. Since July 31, 1996,
the Company has not been in compliance with one or more of the four financial
ratio covenants and at January 31, 1998 the Company was not in compliance with
any of such covenants. The Company has obtained successive waivers of these
defaults. The latest waiver dated January 31, 1998 waives the defaults up to but
not including March 31, 1998.
There can be no assurance that in future periods the Company will be in
compliance with any of the financial ratio covenants contained in its credit
agreement, or that, after expiration of the latest waiver on March 31, 1998,
additional waivers of the financial covenants will be obtained. There can be no
assurance that any future waivers would contain terms which would be as
favorable to the Company as, or would materially differ from, waivers granted in
the past. Consequently, bank debt in the amount of $103.1 million, which
otherwise would have been classified as noncurrent, has been classified as
current. Acceleration of the debt under the credit agreement by the bank
lending group upon the Company's failure, after March 30, 1998, to comply with
any of the financial ratio covenants noted above would be an event of default
under the Company's $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 also been classified as current debt.
Under the Company's 7% convertible subordinated note, 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.
In order to reduce the risk of higher interest expense under the Company's
credit agreement that could result from an increase in the level of market
interest rates, 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, 1998, the unamortized
cost was $129,000.
(11)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
FINANCIAL CONDITION AND LIQUIDITY - CONTINUED
- ---------------------------------------------
The Company believes that its existing cash and available credit under its
revolving credit facility will be adequate to meet future operating cash needs.
On January 30, 1998, the Company sold Whittaker Xyplex, Inc. On February 2,
1998 the net proceeds of $34.5 million from the sale were used to prepay all of
the $31.9 million of term debt under the Company's credit agreement and $2.6
million of loans outstanding under the Company's revolving credit facility. Also
on February 2, 1998, commitments under the revolving credit facility were
reduced to $82.4 million.
Debt as a percent of total capitalization (stockholders' equity plus debt)
was 119.0% at January 31, 1998, compared with 131.1% at October 31, 1997. The
current ratio at January 31, 1998 was 0.71, compared with 0.55 at October 31,
1997, while working capital was ($47.1) million at January 31, 1998, compared
with ($76.4) million at October 31, 1997. Excluding the debt reclassifications
discussed above, the current ratio would have been 2.57 and working capital
would have been $71.0 million at January 31, 1998 and at October 31, 1997 the
current ratio and working capital would have been 1.88 and $44.0 million,
respectively.
Cash flow used by continuing operations for the first three months of 1998
was $4.5 million, compared to cash flow provided by continuing operations of
$1.8 million for the same period in 1997. The $6.3 million decrease from 1997 to
1998 was due primarily to a decrease in accounts payable and accrued
liabilities, a smaller reduction in accounts receivable during the first quarter
of 1998 compared to the first quarter of 1997, no change in recoverable income
taxes in 1998, and an increase in deferred taxes in 1998 compared to a decrease
in 1997. Partially offsetting these items was net income in the first quarter of
1998 compared to a net loss in the first quarter of 1997 and smaller increases
in inventories and prepaids in 1998 as compared to 1997.
Capital expenditures of continuing operations during the first three months
of 1998 were $0.5 million, compared to $0.9 million for the same period of 1997.
At January 31, 1998, there were approximately $0.3 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 and advances under the
credit agreement. Capital expenditure amounts are a component of one of the
financial ratio covenants contained in the Company's credit agreement.
Included in the cash being reported by the Company at January 31, 1998 are
the proceeds of $35.0 million received on the sale of Whittaker Xyplex, Inc.
These proceeds, less estimated selling expenses, were used in February, to
reduce the Company's bank debt. Cash expenditures related to the environmental
remediation of a 996-acre parcel of land located in Santa Clarita, California
were $0.2 million during the first three months of 1998.
DISPOSITION
During the first quarter of 1998 the Company completed of the sale of
Whittaker Xyplex, Inc. to MRV Communications, Inc., for $35.0 million in cash
plus warrants to purchase 421,402 shares of common stock of MRV. Under the terms
of its agreement with MRV, Whittaker shall be entitled to receive warrants to
purchase an additional 78,598 shares of common stock of MRV upon Whittaker's
timely performance of certain covenants. The net proceeds from the sale were
used in February to reduce Whittaker's bank debt.
The gain on disposal of Xyplex recorded by Whittaker was $12.1 million is
net of estimated selling costs of $0.5 million. In calculating gain on disposal,
the 421,402 warrants were valued at $2.2 million based on their estimated market
value at January 31, 1998. No value was placed on the 78,598 warrants.
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,
1998 1997
---------- ----------
<S> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS)
Net income (loss) $ 10,407 $ (18,083)
Adjustments: -- --
---------- ----------
Net income (loss) used in basic
earnings per share calculations $ 10,407 $ (18,083)
========== ==========
Weighted average number of common
shares outstanding $ 11,205 $ 11,116
========== ==========
Basic Earnings (Loss) Per Share $ 0.93 $ (1.63)
========== ==========
</TABLE>
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,
1998 1997
--------- ---------
<S> <C> <C>
DILUTED EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS)
Net income (loss) used in basic earnings
per share calculation (above) $ 10,407 $ (18,083)
Adjustments: -- --
--------- ---------
Net income (loss) used in diluted
earnings per share calculations $ 10,407 $ (18,083)
========= =========
DENOMINATOR USED TO CALCULATE DILUTED
EARNINGS (LOSS) PER SHARE
Weighted average common shares outstanding for
basic earnings per share calculation (above) 11,205 11,116
Effect of diluted securities:
Series D Convertible Preferred Stock 188 --
Employee Stock Options 63 --
-------- --------
Denominator for diluted earnings
per share calculation 11,456 11,116
Diluted Earnings (Loss) Per Share $ 0.91 $ (1.63)
========= ========
</TABLE>
NOTES
Loss per share calculation for 1997 does not include the effect of the Series D
Convertible Preferred Stock or Employee Stock Options as such amounts would be
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 Tenth Amendment and Waiver dated as of January 31, 1998 among
Registrant, NationsBank of Texas, N.A., as Agent, and certain other
financial institutions as signatories thereto.
11. Statements recomputation of pershare earnings for the three months
ended January 31, 1998 (Exhibit I(a) of Part I to this Form 10-Q).
27. Financial Data Schedule.
- -------------
* Exhibits followed by a parenthetical reference are incorporated by reference
to the documents described therein.
(b) Reports on Form 8-K.
During the quarter ended January 31, 1998, the following reports were filed
on Form 8-K:
1. A report on Form 8-K was filed on December 16, 1997. The form reports, in
Item 5 thereof, the Company's earnings for its fiscal year ended October
31, 1997 and its fourth quarter of 1997.
(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 11, 1998 By: /s/ John K. Otto
--------------------------------
John K. Otto
Vice President, Chief Financial Officer
and Treasurer
S-1
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. * DESCRIPTION
- ----------- -----------
10.1 Tenth Amendment and Waiver dated as of January 31, 1998 among Registrant,
NationsBank of Texas, N.A., as Agent, and certain other financial
institutions as signatories thereto.
11. Statements re computation of per share earnings for the three months
ended January 31, 1998 (Exhibit I(a) of Part I to 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
TENTH AMENDMENT AND WAIVER
TO WHITTAKER CORPORATION
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JANUARY 31, 1998
This TENTH 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"), and NATIONSBANK
OF TEXAS, N.A., as agent (the "Agent") for the Lenders thereunder.
PRELIMINARY STATEMENTS:
1. The Borrower, the Lenders, CIBC Inc., as co-agent, and the Agent
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,
waive, during the period starting on and including January 31, 1998 to (but not
including) March 31, 1998 (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.
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 5 hereof, the Credit Agreement is hereby amended as follows:
(a) During the Waiver Period, the definition of "Applicable Margin" is
amended and restated in its entirety as follows:
"APPLICABLE MARGIN" means 4.25% per annum.
-----------------
(b) 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
$500,000 or an integral multiple of $500,000 in excess thereof unless
such Revolving Borrowing is in the amount of the aggregate Unused
Revolving Commitment of each Revolving Lender and shall consist of
Revolving Advances made by the Revolving Lenders ratably according to
their respective Revolving Commitments."
<PAGE>
(c) During the Waiver Period, the proviso of Section 2.05(a) is hereby
amended to read as follows:
"provided, however, that each partial prepayment of Revolving
Advances shall be in the aggregate principal amount of $500,000 or any
multiple of $500,000 in excess thereof."
(d) 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 (i)
$83,000,000, minus (ii) any amounts by which the Revolving Commitments
shall be automatically and permanently reduced pursuant to Section 2.05(b)
on and after January 30, 1998.
(e) During the Waiver Period, Section 3.05(a) of the Credit Agreement
is hereby amended and restated in its entirety as follows:
"SECTION 3.05. LETTER OF CREDIT COMPENSATION.
-----------------------------
(a) The Borrower shall pay to the Agent:
(i) for the account of the Issuing Bank which Issues a
Letter of Credit, an issuance fee in an amount equal to 1/8 of 1%
per annum of the average daily Available Amount of such Letter of
Credit outstanding from time to time; and
(ii) for the account of each Revolving Lender, a letter
of credit fee with respect to each Letter of Credit, in each case
in an amount equal to
(A) with respect to each Financial Standby Letter
of Credit, a percentage per annum equal to the Applicable
Margin plus 1%, times the amount of such Lender's Revolving
Pro Rata Share of the average daily Available Amount of such
Letter of Credit outstanding from time to time;
(B) with respect to each Performance Standby
Letter of Credit, a percentage per annum equal to the
Applicable Margin plus 1/2%, times the amount of such
Lender's Revolving Pro Rata Share of the average daily
Available Amount of such Letter of Credit outstanding from
time to time; and
(C) with respect to each Commercial Letter of
Credit, 0.25% of the amount of such Lender's Revolving Pro
Rata Share of the Available Amount of such Letter of Credit
as of the date of Issuance thereof.
The letter of credit and issuance fees payable under this Section
3.05(a) shall be payable monthly on the last Business Day of each
month, commencing January 31, 1998, and on the Revolving
Commitment Termination Date except that the letter of credit fee
payable under Section 3.05(a)(ii)(C) shall be payable
2
<PAGE>
upon issuance of the applicable Letter of Credit. For purposes
of computing any fees under this Section 3.05(a), the
determination of the maximum amount available to be drawn under a
Letter of Credit at any time shall assume strict compliance with
all conditions for drawing. Any fees paid pursuant to this
Section 3.05(a) are nonrefundable."
(f) 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.
SECTION 2. CONSENT TO XYPLEX SALE. Lenders hereby consent, but only
----------------------
during the Waiver Period, to the sale by the Borrower of all of the issued and
outstanding shares of Whittaker Xyplex, Inc., a Delaware corporation, to MRV
Communications, Inc. pursuant to the terms of a Stock Purchase Agreement entered
into as of January 19, 1998, between the Borrower and MRV Communications, Inc.,
provided that the Net Cash Proceeds from such sale are not less than
$33,000,000. In that connection, simultaneously with the payment of the Net
Cash Proceeds of such sale to reduce the Obligation of the Borrower, as set
forth in the Credit Agreement, and the pledge of the warrants described in such
Stock Purchase Agreement and received by the Borrower at the closing of such
sale as part of the Collateral, Whittaker Xyplex, Inc. and Xyplex, Inc. shall be
released as Guarantors under the Guaranty and Grantors under the Security
Agreement, and all of the stock and assets of such corporations shall be
released as part of the Collateral. By this consent, and effective as set forth
above, the Collateral Documents shall be deemed amended to reflect such sale and
the consent thereto, and the Agent is authorized and directed to take such
actions as may be necessary to effect same and to release such Collateral.
SECTION 3. 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 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 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.
3
<PAGE>
SECTION 4. AMENDMENT AND WAIVER FEE. In consideration of the
------------------------
execution by and agreement to this Amendment by the Lenders, the Borrower shall
pay to the Agent for the account of each Lender such Lender's Revolving Pro Rata
Share of 0.35% of its Revolving Commitment outstanding on January 30, 1998, and
0.35% of its Term Advances outstanding on January 30, 1998.
SECTION 5. 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:
(a) The Agent has received counterparts of this Amendment executed by
the Borrower and 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 Agent shall have received for the account of the Lenders the
fee described in Section 4 above.
(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 same 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 6. 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 7. 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 8. 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 9. 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 10. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
--------------------
LAW, EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES
ANY RIGHT THAT IT 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.
5
<PAGE>
SECTION 11. 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
Lenders:
-------
NATIONSBANK OF TEXAS, N.A.
By:/s/ William E. Livingstone, IV
------------------------------
William E. Livingstone, IV
Senior Vice President
BT HOLDINGS (NEW YORK), INC.
By:/s/ Robert W. Hevner
-------------------------------
Robert W. Hevner
Vice President
DK ACQUISITION PARTNERS, L.P.
By: M.H. DAVIDSON & CO., its general partner
By:/s/ Michael J. Leffell
-------------------------------
Michael J. Leffell
General Partner
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS L.P.
By:/s/ John Urban
-------------------------------
John Urban
MERRILL LYNCH, PIERCE, FENNER, & SMITH
INCORPORATED
By:/s/ Neil Brisson
-------------------------------
Neil Brisson
Director
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By:/s/ Anthony R. Clemente
-------------------------------
Anthony R. Clemente
Authorized Signatory
MERRILL LYNCH SENIOR HIGH INCOME
PORTFOLIO, INC.
By:/s/ Anthony R. Clemente
-------------------------------
Anthony R. Clemente
Authorized Signatory
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By: MERRILL LYNCH ASSET
MANAGEMENT, L.P., as Investment Advisor
By:/s/ Anthony R. Clemente
-------------------------------
Anthony R. Clemente
Authorized Signatory
CANPARTNERS INVESTMENTS IV, LLC
By:
-------------------------------
Title:
<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 are and
shall continue to be in full force and effect and are 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) subject to Section 2 of the foregoing Amendment, 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, WHITTAKER XYPLEX, INC., 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-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 37,550
<SECURITIES> 0
<RECEIVABLES> 24,597
<ALLOWANCES> 1,468
<INVENTORY> 33,194
<CURRENT-ASSETS> 116,219
<PP&E> 31,850
<DEPRECIATION> 22,060
<TOTAL-ASSETS> 168,696
<CURRENT-LIABILITIES> 163,315
<BONDS> 91
0
1
<COMMON> 112
<OTHER-SE> (20,429)
<TOTAL-LIABILITY-AND-EQUITY> 168,696
<SALES> 31,799
<TOTAL-REVENUES> 31,799
<CGS> 18,689
<TOTAL-COSTS> 7,612
<OTHER-EXPENSES> 482
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,906
<INCOME-PRETAX> 328
<INCOME-TAX> 6
<INCOME-CONTINUING> 322
<DISCONTINUED> 10,085
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,407
<EPS-PRIMARY> 0.93
<EPS-DILUTED> 0.91
</TABLE>
