<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Quarter Ended March 31, 1998 Commission File No. 33-78922
--------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
-------------------------
AXIA INCORPORATED
(Exact name of Registrant as specified in its charter)
Delaware 13-3205251
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 West 22nd Street, Suite 134, Lombard, Illinois 60148 (630) 629-3360
--------------------------------------------------------------------------
(Address and telephone number of principal executive offices)
------------------------
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 _______
-------
------------------------
Title of each class of Registered Securities
11% Series B Senior Subordinated Notes due 2001
Guarantee of 11% Series B Senior Subordinated Notes due 2001
<PAGE>
PART I
Item 1. Financial Statements
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- -------------
ASSETS (Unaudited)
- ------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 541 $ 1,310
Accounts receivable, net 13,930 12,759
Inventories, net 9,474 9,155
Prepaid income taxes and other current assets 604 436
Deferred income tax benefits 2,638 2,593
------- -------
Total Current Assets $27,187 $26,253
------- -------
PLANT AND EQUIPMENT, AT COST:
Land $ 508 $ 508
Buildings and improvements 6,622 6,620
Machinery and equipment 25,672 24,741
Equipment leased to others 7,360 7,139
------- -------
$40,162 $39,008
Less: Accumulated depreciation 15,793 14,938
------- -------
Net Plant and Equipment $24,369 $24,070
------- -------
OTHER ASSETS:
Goodwill, net $33,280 $33,505
Intangible assets, net 824 703
Deferred charges, net 12,321 12,182
Other assets 42 60
------- -------
Total Other Assets $46,467 $46,450
------- -------
TOTAL ASSETS $98,023 $96,773
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 9,832 $10,925
Accounts payable 4,190 4,021
Accrued liabilities 6,321 7,219
Accrued income taxes 1,575 264
------- -------
Total Current Liabilities $21,918 $22,429
------- -------
NON-CURRENT LIABILITIES:
Long-term debt, less current maturities $19,172 $20,439
Other non-current liabilities 10,916 10,883
Deferred income taxes 3,072 2,955
------- -------
Total Non-Current Liabilities $33,160 $34,277
------- -------
STOCKHOLDER'S EQUITY:
Common stock ($.01 par value; 100 shares
authorized, issued and outstanding) $ - $ -
Additional paid-in capital 16,723 16,723
Retained earnings 26,744 23,818
Accumulated other comprehensive income (522) (474)
------- -------
Total Stockholder's Equity $42,945 $40,067
------- -------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $98,023 $96,773
======= =======
</TABLE>
The accompanying Notes to the Unaudited Interim Consolidated Financial
Statements are an integral part of these balance sheets.
1
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
January 1, 1998 January 1, 1997
to to
March 31, 1998 March 31, 1997
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $21,096 $18,644
Net rentals 7,049 6,483
------- -------
Net revenues $28,145 $25,127
Cost of sales 13,264 11,794
Cost of rentals 2,523 2,336
Selling, general and administrative expenses 6,553 6,357
------- -------
Income from operations $ 5,805 $ 4,640
Interest expense 733 1,060
Interest income (7) (12)
Other expense (income), net 69 (467)
------- -------
Income before income taxes $ 5,010 $ 4,059
Provision for income taxes 2,084 1,749
------- -------
Net income $ 2,926 $ 2,310
======= =======
</TABLE>
The accompanying Notes to the Unaudited Interim Consolidated Financial
Statements are an integral part of these statements.
2
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Other Comprehensive Income
----------------------------------------
Common Additional Minimum Cumulative Accumulated Compre-
Stock Paid-in Retained Pension Translation Other Compre- hensive
Par Value Capital Earnings Liability Adjustments hensive Income Income
--------- ---------- -------- ---------- ----------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $ - $ 16,723 $ 15,395 $ (324) $ 324 $ - $ -
Net income - - 2,310 - - - 2,310
Cumulative translation adjustment - - - - (294) (294) (294)
--------- ---------- -------- ---------- ----------- -------------- -------
BALANCE, MARCH 31, 1997 (unaudited) $ - $ 16,723 $ 17,705 $ (324) $ 30 $ (294) $ 2,016
========= ========== ======== ========== =========== ============== =======
BALANCE, DECEMBER 31, 1997 $ - $ 16,723 $ 23,818 $ (182) $ (292) $ (474) $ -
Net income - - 2,926 - - - 2,926
Cumulative translation adjustment - - - - (48) (48) (48)
--------- ---------- -------- ---------- ----------- -------------- -------
BALANCE, MARCH 31, 1998 (unaudited) $ - $ 16,723 $ 26,744 $ (182) $ (340) $ (522) $ 2,878
========= ========== ======== ========== =========== ============== =======
</TABLE>
The accompanying Notes to the Unaudited Interim Consolidated Financial
Statements are an integral part of these statements.
3
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
January 1, 1998 January 1, 1997
to to
March 31, 1998 March 31, 1997
--------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,926 $ 2,310
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 1,254 1,249
Deferred income tax provision (benefit) 72 (64)
Loss (gain) on disposal of fixed assets 19 35
Gain on sale of investment - (500)
Provision for losses on accounts receivable 500 567
Provision for obsolescence of inventories (104) (21)
Credit to pension expense (95) -
Changes in assets and liabilities:
Accounts receivable (1,725) (1,805)
Inventories (244) (170)
Accounts payable 179 96
Accrued liabilities (880) (1,369)
Other current assets (170) (233)
Income taxes payable 1,311 1,255
Other non-current assets (223) (83)
Other non-current liabilities 33 97
------- -------
Net Cash Provided by Operating Activities $ 2,853 $ 1,364
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used for capital expenditures $(1,237) $ (863)
Proceeds from sale of fixed assets - 6
Proceeds from sale of investment - 1,400
------- -------
Net Cash Provided by (Used in) Investing Activities $(1,237) $ 543
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Revolving Credit Loan $ (700) $ -
Payments of other long-term debt (1,696) (2,568)
Other equity transactions 27 (16)
------- -------
Net Cash (Used in) Financing Activities $(2,369) $(2,584)
EFFECT OF EXCHANGE RATE CHANGES ON CASH $ (16) $ (44)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (769) $ (721)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,310 1,716
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 541 $ 995
======= =======
</TABLE>
The accompanying Notes to the Unaudited Interim Consolidated Financial
Statements are an integral part of these statements.
4
<PAGE>
AXIA INCORPORATED AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1 FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. In the opinion of management, these statements contain all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the financial position as of March 31, 1998 and December 31,
1997, results of operations for the three month periods ended March 31, 1998 and
March 31, 1997, and cash flows for the three month periods ended March 31, 1998
and March 31, 1997. The 1998 interim results reported herein may not necessarily
be indicative of the results of operations for the full year 1998.
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income," which requires companies
to report all changes in equity during a period, except those resulting from
investment by owners and distribution to owners, in a financial statement for
the period in which they are recognized. The Company has chosen to disclose
Comprehensive Income, which encompasses net income, minimum pension liability
and foreign currency translation adjustments, in the Consolidated Statements of
Stockholder's Equity. The prior period has been restated to conform with SFAS
130 requirements.
NOTE 2 INVENTORIES
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market. The cost elements included in inventories are material, labor and
factory overhead.
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Raw materials $4,256 $4,146
Work in process 1,125 1,058
Finished goods 4,093 3,951
------ ------
Total inventories $9,474 $9,155
====== ======
</TABLE>
NOTE 3 LONG-TERM DEBT
Long-term debt, inclusive of capital lease obligations which are not
material, consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
11.00% Senior Subordinated Notes $ 9,785 $ 9,749
Term Loan 14,228 15,732
Revolving Credit Loan 3,800 4,500
Other 1,191 1,383
------- --------
Total Debt $29,004 $ 31,364
Less Current Maturities (9,832) (10,925)
------- --------
Total Long-Term Debt $19,172 $ 20,439
======= ========
</TABLE>
The Senior Subordinated Notes above are stated net of unamortized discounts
of $465,000 and $501,000
5
<PAGE>
Current maturities of long-term debt as of March 31, 1998 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
Scheduled Payment
Date Amount
------------------ -------
<S> <C> <C>
Term Loan June 30, 1998 $1,294
Term Loan September 30, 1998 1,294
Term Loan December 31, 1998 1,294
Term Loan March 31, 1999 1,294
Revolving Credit Loan 3,800
Other Various 856
------
Total Current Maturities $9,832
======
</TABLE>
Bank Credit Agreement
On June 27, 1996, the Company and its domestic subsidiaries entered into a
credit agreement (the "Bank Credit Agreement") which included a term loan ("Term
Loan") with an original principal amount of $25,000,000 and a non-amortizing
revolving credit loan ("Revolving Credit Loan") of up to $15,000,000, including
up to $1,000,000 of letters of credit. The Bank Credit Agreement was amended in
March 1997 to increase the Revolving Credit Loan availability to $20,000,000.
Under the Bank Credit Agreement, the loans may, at the option of the
Company, be either Base Rate borrowings, Eurodollar borrowings or a combination
thereof. Base Rate borrowings bear interest at the prime rate or the Federal
Funds rate plus 1.00%, whichever is higher, and Eurodollar borrowings bear
interest at a rate of LIBOR plus 1.50%. Upon certain events defined in the
agreement, the Eurodollar borrowing interest rate may be increased to LIBOR plus
1.75%. The Company pays a fee of .38% per annum on the unused balance of the
line of credit. The Company can repay any borrowings at any time without
penalty. The weighted average interest rates on all amounts outstanding under
the Bank Credit Agreement as of March 31, 1998 was 7.28%. Substantially all of
the assets of the Company and its domestic subsidiaries, Ames Taping Tool
Systems, Inc. and TapeTech Tool Co., Inc., act as collateral under the Bank
Credit Agreement.
The Term Loan has scheduled maturities, subject to adjustment for any
prepayments, of $1,294,000 quarterly, maturing with a final payment of
$1,288,000 on December 31, 2000. The Revolving Credit Loan also terminates on
December 31, 2000. The amount outstanding on the Revolving Credit Loan is
classified within current maturities in the accompanying Consolidated Balance
Sheets. Interest payments are generally due quarterly. The Company is required
to prepay portions of the Term Loan in the event of a major asset sale as
defined in the Bank Credit Agreement.
11.00% Senior Subordinated Notes
The 11.00% Senior Subordinated Notes were issued pursuant to a trust
indenture (the "Indenture") between the Company, certain guarantors and a
trustee bank and were sold to a group of private investors. Interest on the
notes is payable semi-annually and the notes mature on March 15, 2001. The notes
may be redeemed, at the Company's option, in full or in part, at a decreasing
premium rate of 102.2% at March 15, 1998. A change of control of the Company, as
defined, would require the Company to offer to redeem all notes at a 101%
premium.
In July 1994, the Company filed a Registration Statement with the
Securities and Exchange Commission to register the Senior Subordinated Notes
under the Securities Act of 1933. The Notes are guaranteed by all of the
Company's domestic subsidiaries. See Note 5 for further information regarding
these guarantees.
The Company has notified the trustee of its intention to redeem and
extinguish $5,250,000 in principal of the Senior Subordinated Notes on May 15,
1998. Upon completion of this transaction, $5,000,000 in principal amount will
remain outstanding. The Company will utilize its Revolving Credit Loan to
facilitate the repurchase of the notes.
6
<PAGE>
Restrictive Loan Covenants
The Bank Credit Agreement and the Indenture contain certain covenants
which, among other things and all as defined in the applicable agreement,
require the Company to maintain a minimum net worth, current ratio, interest
coverage ratio, and fixed charge coverage ratio, and maximum leverage ratio of
indebtedness to net worth. In addition, the Company may not create or incur
certain types of additional debt or liens, declare dividends except as defined,
or make capital expenditures or other restricted payments, as defined, during
the term of the agreements in excess of varying amounts, as defined. The Company
was in compliance with its loan covenants as of March 31, 1998.
NOTE 4 STOCKHOLDER'S EQUITY
The Company has 100 shares of common stock, par value $.01 per share,
authorized, issued and outstanding, all of which are owned by Holdings.
NOTE 5 SUBSIDIARY GUARANTEES
The Company's payment obligations under the Subordinated Notes are fully
and unconditionally guaranteed on a joint and several basis (collectively, the
"Subsidiary Guarantees") by Ames Taping Tool Systems, Inc., and TapeTech Tool
Co., Inc., each a wholly-owned subsidiary of the Company and each a "Guarantor."
These subsidiaries, together with the operating divisions of the Company,
represent all of the operations of the Company conducted in the United States.
The remaining subsidiaries of the Company are foreign subsidiaries.
The Company's payment obligations under the Bank Credit Agreement are fully
and unconditionally guaranteed on a joint and several basis by the Company and
each Guarantor. The obligations of each Guarantor under its Subsidiary Guarantee
are subordinated to all senior indebtedness of such Guarantor, including the
guarantee by such Guarantor of the Company's borrowings under the Bank Credit
Agreement.
With the intent that the Subsidiary Guarantees not constitute fraudulent
transfers or conveyances under applicable state or federal law, the obligation
of each Guarantor under its Subsidiary Guarantee is also limited to the maximum
amount as will, after giving effect to such maximum amount and all other
liabilities (contingent or otherwise) of such Guarantor that are relevant under
such laws, and after giving effect to any rights to contribution of such
Guarantor pursuant to any agreement providing for an equitable contribution
amount such Guarantor and other affiliates of the Company of payments made by
guarantees by such parties, result in the obligations of such Guarantor in
respect of such maximum amount not constituting a fraudulent conveyance.
The following consolidating condensed financial data illustrates the
composition of the combined Guarantors. Management believes separate complete
financial statements of the respective Guarantors would not provide additional
material information which would be useful in assessing the financial
composition of the Guarantors. No single Guarantor has any significant legal
restrictions on the ability of investors or creditors to obtain access to its
assets in event of default on the Subsidiary Guarantee other than its
subordination to senior indebtedness described above.
Investments in subsidiaries are accounted for by the parent on the equity
method for purposes of the supplemental consolidating presentation. Earnings of
subsidiaries are therefore reflected in the parent's investment accounts and
earnings. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
7
<PAGE>
CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 1998
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
--------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ (374) $ 667 $ 248 $ - $ 541
Accounts receivable, net 6,306 5,197 3,232 (805) 13,930
Inventories, net 6,289 1,721 1,939 (475) 9,474
Prepaid income taxes and other current assets 373 133 98 - 604
Deferred income tax benefits 2,638 - - - 2,638
------- ------- ------ -------- -------
Total Current Assets $15,232 $ 7,718 $5,517 $ (1,280) $27,187
PLANT AND EQUIPMENT, AT COST:
Land $ 508 $ - $ - $ - $ 508
Buildings and improvements 6,295 20 307 - 6,622
Machinery and equipment 24,576 618 478 - 25,672
Equipment leased to others 7,349 - 11 - 7,360
------- ------- ------ -------- -------
$38,728 $ 638 $ 796 $ - $40,162
Less: Accumulated depreciation 14,813 419 561 - 15,793
------- ------- ------ -------- -------
Net Plant and Equipment $23,915 $ 219 $ 235 $ - $24,369
------- ------- ------ -------- -------
OTHER ASSETS:
Goodwill, net $30,715 $ 2,553 $ 12 $ - $33,280
Intangible assets, net 805 19 - - 824
Deferred charges, net 11,309 1,009 3 - 12,321
Investment in wholly-owned subsidiaries 16,709 - - (16,709) -
Other assets 42 - - - 42
------- ------- ------ -------- -------
Total Other Assets $59,580 $ 3,581 $ 15 $(16,709) $46,467
------- ------- ------ -------- -------
TOTAL ASSETS $98,727 $11,518 $5,767 $(17,989) $98,023
======= ======= ====== ======== =======
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 9,803 $ 29 $ - $ - $ 9,832
Accounts payable 3,265 546 1,184 (805) 4,190
Accrued liabilities 5,294 537 490 - 6,321
Accrued income taxes 1,424 - 151 - 1,575
Advance account 2,042 (1,243) (799) - -
------- ------- ------ -------- -------
Total Current Liabilities $21,828 $ (131) $1,026 $ (805) $21,918
------- ------- ------ -------- -------
NON-CURRENT LIABILITIES:
Long-term debt, less current maturities $19,152 $ 20 $ - $ - $19,172
Other non-current liabilities 10,916 - - - 10,916
Deferred income taxes 3,072 - - - 3,072
------- ------- ------ -------- -------
Total Non-Current Liabilities $33,140 $ 20 $ - $ - $33,160
------- ------- ------ -------- -------
STOCKHOLDER'S EQUITY:
Common stock and
additional paid-in capital $16,723 $ 5,098 $1,770 $ (6,868) $16,723
Retained earnings 27,218 6,531 3,311 (10,316) 26,744
Accumulated other comprehensive income (182) - (340) - (522)
------- ------- ------ -------- -------
Total Stockholder's Equity $43,759 $11,629 $4,741 $(17,184) $42,945
------- ------- ------ -------- -------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $98,727 $11,518 $5,767 $(17,989) $98,023
======= ======= ====== ======== =======
</TABLE>
8
<PAGE>
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
---------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $16,110 $ 4,174 $2,723 $(1,911) $21,096
Net rentals 3,878 6,808 238 (3,875) 7,049
------- ------- ------ ------- -------
Net revenues $19,988 $10,982 $2,961 $(5,786) $28,145
Cost of sales $10,851 $ 2,447 $1,851 $(1,885) $13,264
Cost of rentals 830 5,423 145 (3,875) 2,523
Selling, general and administrative expenses 3,707 2,127 719 - $ 6,553
------- ------- ------ ------- -------
Income from operations $ 4,600 $ 985 $ 246 $ (26) $ 5,805
Interest expense $ 728 $ 2 $ 3 $ - $ 733
Intercompany interest expense (income) 20 (20) - - -
Other expense (income), net (746) 18 120 670 62
------- ------- ------ ------- -------
Income before income taxes $ 4,598 $ 985 $ 123 $ (696) $ 5,010
Provision for income taxes 1,646 382 56 - 2,084
------- ------- ------ ------- -------
Net income $ 2,952 $ 603 $ 67 $ (696) $ 2,926
======= ======= ====== ======= =======
</TABLE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
---------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 2,578 $ 109 $ 166 $ - $ 2,853
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used for capital expenditures (1,173) (49) (15) - (1,237)
Proceeds from sale of fixed assets - - - - -
------- ------- ------ ------- -------
Net Cash Provided by (Used In) Investing
Activities $(1,173) $ (49) $ (15) $ - $(1,237)
------- ------- ------ ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Revolving Credit Loan $ (700) $ - $ - $ - $ (700)
Payments of other long-term debt (1,360) (12) (324) - (1,696)
Net increase (decrease) in advance account 316 (306) (10) - -
Other equity transactions - - 27 - 27
------- ------- ------ ------- -------
Net Cash Provided by (Used In) Financing Activities $(1,744) $ (318) $ (307) $ - $(2,369)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - (16) - (16)
------- ------- ------ ------- -------
NET INCREASE (DECREASE) IN CASH $ (339) $ (258) $ (172) $ - $ (769)
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD (35) 925 420 - 1,310
------- ------- ------ ------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ (374) $ 667 $ 248 $ - $ 541
======= ======= ====== ======= =======
</TABLE>
9
<PAGE>
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
---------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ (88) $ 925 $ 420 $ 53 $ 1,310
Accounts receivable, net 5,121 5,018 3,110 (490) 12,759
Inventories 6,175 1,641 1,789 (450) 9,155
Prepaid income taxes and other current assets 208 144 84 - 436
Deferred income tax assets 2,593 - - - 2,593
------- ------- ------ -------- -------
Total Current Assets $14,009 $ 7,728 $5,403 $ (887) $26,253
------- ------- ------ -------- -------
PLANT AND EQUIPMENT, AT COST:
Land $ 508 $ - $ - $ - $ 508
Buildings and improvements 6,293 18 309 - 6,620
Machinery and equipment 23,703 571 467 - 24,741
Equipment leased to others 7,128 - 11 - 7,139
------- ------- ------ -------- -------
$37,632 $ 589 $ 787 $ - $39,008
Less: Accumulated depreciation 13,994 395 549 - 14,938
------- ------- ------ -------- -------
Net Plant and Equipment $23,638 $ 194 $ 238 $ - $24,070
------- ------- ------ -------- -------
OTHER ASSETS:
Goodwill, net $30,922 $ 2,571 $ 12 $ - $33,505
Intangible assets, net 678 25 - - 703
Deferred charges, net 11,187 992 3 - 12,182
Investment in wholly-owned subsidiaries 16,038 - - (16,038) -
Investment in affiliates - - - - -
Other assets 60 - - - 60
------- ------- ------ -------- -------
Total Other Assets $58,885 $ 3,588 $ 15 $(16,038) $46,450
------- ------- ------ -------- -------
TOTAL ASSETS $96,532 $11,510 $5,656 $(16,925) $96,773
======= ======= ====== ======== =======
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $10,565 $ 36 $ 324 $ - $10,925
Accounts payable 3,124 410 924 (437) 4,021
Accrued liabilities 5,920 950 349 - 7,219
Accrued income taxes 138 - 126 - 264
Advance account 1,726 (937) (789) - -
------- ------- ------ -------- -------
Total Current Liabilities $21,473 $ 459 $ 934 $ (437) $22,429
------- ------- ------ -------- -------
NON-CURRENT LIABILITIES:
Long-term debt, less current maturities $20,414 $ 25 $ - $ - $20,439
Other non-current liabilities 10,883 - - - 10,883
Deferred income taxes 2,955 - - - 2,955
------- ------- ------ -------- -------
Total Non-Current Liabilities $34,252 $ 25 $ - $ - $34,277
------- ------- ------ -------- -------
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock and
additional paid-in capital $16,723 $ 5,098 $1,770 $ (6,868) $16,723
Retained earnings 24,266 5,928 3,244 (9,620) 23,818
Accumulated other comprehensive income (182) - (292) - (474)
------- ------- ------ -------- -------
Total Stockholder's Equity (Deficit) $40,807 $11,026 $4,722 $(16,488) $40,067
------- ------- ------ -------- -------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY (DEFICIT) $96,532 $11,510 $5,656 $(16,925) $96,773
======= ======= ====== ======== =======
</TABLE>
10
<PAGE>
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $14,069 $3,652 $2,568 $(1,645) $18,644
Net rentals 3,570 6,241 233 (3,561) 6,483
------- ------ ------ ------- -------
Net revenues $17,639 $9,893 $2,801 $(5,206) $25,127
Cost of sales $ 9,694 $2,231 $1,550 $(1,681) $11,794
Cost of rentals 722 5,026 149 (3,561) 2,336
Selling, general and administrative expenses 3,744 1,927 686 - 6,357
------- ------ ------ ------- -------
Income from operations $ 3,479 $ 709 $ 416 $ 36 $ 4,640
Interest expense $ 1,058 $ 2 $ - $ - $ 1,060
Intercompany interest expense (income) (18) 18 - - -
Other expense (income), net (1,118) 8 (1) 632 (479)
------- ------ ------ ------- -------
Income before income taxes $ 3,557 $ 681 $ 417 $ (596) $ 4,059
Provision for income taxes 1,283 305 161 - 1,749
------- ------ ------ ------- -------
Net income $ 2,274 $ 376 $ 256 $ (596) $ 2,310
======= ====== ====== ======= =======
</TABLE>
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Parent
and its Guarantor Non-guarantor Consolidated
Divisions Subsidiaries Subsidiaries Eliminations Totals
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 1,604 $ (101) $ (139) $ - $ 1,364
------- ------ ------ ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used for capital expenditures (826) (29) (8) - (863)
Proceeds from sale of fixed assets 6 - - - 6
Proceeds from sale of investment 1,400 - - - 1,400
------- ------ ------ ------- -------
Net Cash Provided by (Used In) Investing Activities $ 580 $ (29) $ (8) $ - $ 543
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Revolving Credit Loan - - - - -
Payments of other long-term debt (2,558) (10) - - (2,568)
Net increase (decrease) in advance account (216) 243 (27) - -
Other equity transactions 2 - (18) - (16)
------- ------ ------ ------- -------
Net Cash Provided by (Used In)
Financing Activities $(2,772) $ 233 $ (45) $ - $(2,584)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH - - (44) - (44)
------- ------ ------ ------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ (588) $ 103 $ (236) $ - $ (721)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 407 507 802 - 1,716
------- ------ ------ ------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ (181) $ 610 $ 566 $ - $ 995
======= ====== ====== ======= =======
</TABLE>
11
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AXIA Incorporated, the "Company," is a diversified manufacturer and
marketer of (i) formed and coated wire products and material handling and
storage equipment (Metal Products Segment), (ii) specialized packaging machinery
(Packaging Products Segment), and (iii) tools and other products for finishing
drywall in new and renovated housing and commercial construction (Construction
Tool Segment).
During the periods discussed below, except as may be noted, inflation and
changing prices have not had, and are not expected to have, a material impact on
the Company's net revenues or its income from operations.
The following Table 1 summarizes the Company's Consolidated Statements of
Income for the three-month periods ended March 31, 1998 and March 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
Table 1
Summary Income Statement
-----------------------------------
Three Months Ended
March 31, 1998 March 31, 1997
------------------ ---------------
<S> <C> <C>
Net revenues $28,145 $25,127
Cost of revenues 15,787 14,130
Selling, general and administrative expenses 6,553 6,357
------- -------
Income from operations $ 5,805 $ 4,640
Interest expense 733 1,060
Other expense (income), net 62 (479)
------- -------
Income before income taxes $ 5,010 $ 4,059
Provision for income taxes 2,084 1,749
------- -------
Net income $ 2,926 $ 2,310
======= =======
</TABLE>
The following Table 2 presents, for the periods indicated, certain items in
the Company's Consolidated Statements of Income as a percentage of total net
revenues for the three-month periods ended March 31, 1998 and March 31, 1997:
<TABLE>
<CAPTION>
Table 2
Percentage of Total Net Revenues
-----------------------------------
Three Months Ended
March 31, 1998 March 31, 1997
------------------ ---------------
<S> <C> <C>
Net Revenues...................................... 100.0% 100.0%
Costs and expenses
Cost of revenues.............................. 56.1 56.2
Selling, general and administrative expenses.. 23.3 25.3
Interest expense.............................. 2.6 4.2
Other expense (income), net................... .2 (1.9)
Provision for income taxes.................... 7.4 7.0
----- -----
Net income........................................ 10.4% 9.2%
</TABLE>
12
<PAGE>
Results of Operations
AXIA Consolidated net revenues for the three-month period ended March 31,
1998, increased 12.0% to $28,145,000 from $25,127,000 in the comparable period
in 1997. The increase was attributable to growth in revenues from dishracks and
other formed wire products, bag closing equipment, the rentals and sales of
automatic drywall taping and finishing tools, and merchandise sales to
professional contractors. Currency translation changes reduced revenues by
$233,000 from 1997.
Consolidated cost of revenues for the three-month period ended March 31,
1998, increased 11.7% to $15,787,000 from $14,130,000 in the comparable period
in 1997. The increase in cost of revenues was attributable to the net revenue
increase discussed above.
Consolidated selling, general and administrative expenses ("SG&A") for the
three-month period ended March 31, 1998, increased 3.1% to $6,553,000 from
$6,357,000 in the comparable period in 1997. Reduction of bad debt expense and
an increase in the credit to pension expense partially offset increased selling
and administrative expenses necessary to support revenue growth.
Interest expense for the three-month period ended March 31, 1998, decreased
30.8% to $733,000 from $1,060,000 in the comparable period in 1997. The decrease
was the result of both a reduction in outstanding debt and the repurchase of
$9,250,000 of the Company's 11% Senior Subordinated Notes in May 1997 utilizing
the Revolving Credit Loan with a lower variable interest rate.
Other expense was $62,000 for the three-month period ended March 31, 1998,
compared to other income of $479,000 in 1997. In February 1997, the Company sold
its investment in Andamios Atlas, S.A. de C.V. which resulted in a non-recurring
gain of approximately $500,000.
Income before income taxes (IBT) for the three-month period ended March 31,
1998, increased 23.4% to $5,010,000 from $4,059,000 in the comparable period in
1997. As discussed in the preceding paragraphs, this improvement was primarily
the result of revenue growth and lower interest expense.
Income taxes for the period ended March 31, 1998, were 41.6% of IBT
compared to 43.1% in the comparable period in 1997.
Liquidity and Capital Resources
The Company generated cash from operations of $2,853,000 for the three-
month period ended March 31, 1998, compared to $1,364,000 for the three-month
period ended March 31, 1997, and had cash on hand of $541,000. Cash from
operations and cash on hand were utilized to fund capital expenditures of
$1,237,000 and paydown $2,396,000 of debt. Management believes its cash flow
from operations, together with its revolving loan capacity, will be sufficient
to meet its capital expenditure requirements for the remainder of 1998 and 1999.
At March 31, 1998, the Company had working capital of $5,269,000 compared
to working capital of $3,824,000 at December 31, 1997. Working capital growth
was due to an increase in accounts receivable of $1,171,000 related to improved
revenue and a $1,093,000 reduction in current maturities primarily due to
payments made against the Revolving Credit Loan which is classified as current
liability. Inventories also increased $319,000 from the level of December 31,
1997.
The Company has the option of redeeming all or a portion of its
Subordinated Notes with a 2.2% premium. The Company has notified the trustee of
the Company's intent to repurchase and extinguish $5,250,000 on the amount
outstanding of its Subordinated Notes on May 15, 1998. Upon completion of the
transaction, $5,000,000 in principal of the notes will remain outstanding. The
Company intends on utilizing its Revolving Credit Loan to finance the
transaction.
13
<PAGE>
As discussed in Note 3 in the accompanying financial statements, the Bank
Credit Agreement and the Indenture of AXIA Incorporated, issuer, governing the
Notes, restrict the Company's ability to incur additional indebtedness.
Management believes that its cash flow from operations and its revolving loan
capacity will be sufficient to meet its operational requirements, loan
maturities, and capital needs for 1998 and 1999.
The Company was in compliance with all terms and restrictive covenants of
its credit agreements as of March 31, 1998.
Accounting Changes
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income," which requires companies
to report all changes in equity during a period, except those resulting from
investment by owners and distribution to owners, in a financial statement for
the period in which they are recognized. The Company has chosen to disclose
Comprehensive Income, which encompasses net income, minimum pension liability
and foreign currency translation adjustments, in the Consolidated Statements of
Stockholder's Equity. The prior period has been restated to conform with SFAS
130 requirements.
Year 2000
With the coming of the year 2000, there has been a great deal of publicity
concerning computer hardware's and software's use of two-digit dates which might
result in information reporting and equipment failure ("Year 2000"). Management
is responsible for identifying the Company's computer systems affected by the
Year 2000 issue and developing and executing a compliance plan. All of the
Company's business units have prepared and are in the process of implementing
plans to replace current management information systems due to current hardware
and software language obsolescence and the need to upgrade system capacities to
management requirements. As a result, the Company expects to be Year 2000
compliant by the end of 1998.
Privite Securities Litigation Reform Act Disclosure
This report contains various forward-looking statements, including
financial, operating and other projections. There are many factors that could
cause actual results to differ materially, such as: adoption of new
environmental laws and regulations and changes in the way such laws and
regulations are interpreted and enforced; general business conditions, such as
the level of competition, changes in demand for the Company's services and the
strength of the economy in general. These and other factors are discussed in
this report and other documents the Company has filed with the Securities and
Exchange Commission.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to various federal, state and local laws and
regulations governing the use, discharge and disposal of hazardous materials.
Including the item discussed below, compliance with current laws and regulations
has not had, and is not expected to have, a material adverse effect on the
Company's financial condition or operating results.
In 1991, the New York State Department of Environmental Conservation (the
"NYSDEC") sent a notice letter to the Company alleging that it had documented
the release and/or threatened release of "hazardous substances" and/or the
presence of "hazardous wastes" at a property located in Buffalo, New York,
formerly owned by Bliss and Laughlin Steel Company, a predecessor of the
Company.
A feasibility study, prepared in 1994 by environmental consultants engaged
by the Company, established a range of estimated remediation costs of $.7
million to $2.9 million, plus or minus 30% of those costs, with the most
probably method of remediation being at the high end of the range. The Company
established an accrual of $3.9 million for the costs of remediation.
In 1997, the Company entered into an agreement with the party responsible
for an adjoining site who also has been in the process of addressing concerns
raised by NYSDEC which will transfer responsibility to remediate the formerly-
owned property to the party remediating the adjoining site. The Company paid
$520,000 payable under the agreement and has an exposure of up to an additional
$120,000 if pond sediment contamination is higher than estimated by the
Company's environmental consultants. In the event the party responsible for the
remediation of the adjoining site is unable to consummate an agreement with
NYSDEC within one year of its agreement with the Company, the Company has the
option of the return of its contribution to the remediation of the sites and
pursuing its own remediation plan. Should NYSDEC not approve the joint
remediation plan for both sites, the agreement can be nullified and funds
returned to the Company. The Company has maintained its accruals pending
finalization of the remediation plan of the adjoining site. The Company is
pursuing contributions from directors and officers of other users of the
previously owned property. No estimate can be given as to possible recovery.
The Company and certain of its subsidiaries are currently involved in civil
litigation relating to the conduct of their business. Although the outcome of
any particular lawsuit cannot be predicted with certainty, the Company believes
that these matters, individually or in the aggregate, will not have a material
adverse effect on its results of operations or financial condition.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
15
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of AXIA Incorporated./(1)/
3.2 By-Laws of AXIA Incorporated./(1)/
3.3 Certificate of Incorporation of Ames Taping Tool Systems, Inc./(1)/
3.4 By-Laws of Ames Taping Tool Systems, Inc./(1)/
3.7 Certificate of Incorporation of TapeTech Tool Co., Inc./(1)/
3.8 By-Laws of TapeTech Tool Co., Inc./(1)/
4.1 AXIA Incorporated, Issuer, Ames Taping Tool Systems Inc., TapeTech
Tool Co., Inc., Mid America Machine Corp., Guarantors, Series A and
Series B 11% Series Subordinated Notes Due 2001, Indenture, dated as
of March 15, 1994./(1)/
4.2 Purchase Agreement 21,000 Units Consisting of $21,000,000 Principal
Amount of 11% Subordinated Notes due 2001 of AXIA Incorporated and
63,000 Shares of Class A Common Stock of Axia Holdings Corp., March
15, 1994./(1)/
4.3 A/B Exchange Registration Rights Agreement, dated as of March 15, 1994
by, and among, AXIA Incorporated, Ames Taping Tool Systems, Inc.,
TapeTech Tool Co., Inc., Mid America Machine Corp., and Each of the
Purchasers Listed on the Signature Pages of the Purchasers
Agreement./(1)/
4.5 Specimen Certificate of 11% Series B Senior Notes due 2001 (the
Exchange Notes)./(1)/
4.7 Guarantee of Exchange Notes./(1)/
4.7.1 Release of Guarantee Mid America Machine Corp./(4)/
10.1 AXIA Management Agreement, dated as of March 15, 1994 by, and among,
AXIA Incorporated and Cortec Capital Corporation./(2)/
10.4 Lease Agreement between G.L. Building Company and AXIA Incorporated
executed as of January 8, 1993./(2)/
10.5 Form of Employee Bonus Agreement./(2)/
10.6 Form of Stock Option Agreement./(2)/
10.7 Form of the Stock Purchase Agreement./(2)/
10.8 Form of Employment and Non-competition Agreement./(2)/
10.10 Exec-U-Care Medical Reimbursement Insurance./(2)/
10.11 Key Employee Posthumous Salary Continuation Plan./(2)/
10.12 AXIA Incorporated Management Incentive Compensation Plan./(2)/
10.15 Purchasing Partnering Agreement between Maytag-Jackson Dishwash
Products and Nestaway, Division of AXIA Incorporated, dated November
15, 1995./(4)/
10.15.1 First Amendment to the Purchasing Partnering Agreement dated September
11, 1997./(8)/
10.16 Loan Agreement dated as of June 27, 1996, among AXIA Incorporated,
Ames Taping Tool Systems, Inc., TapeTech Tool Co., Inc., as Borrowers,
and the Lenders named herein as Lenders, and American National Bank &
Trust Co. of Chicago, as Agent and Lender./(5)/
10.17 First Amendment to Loan Agreement dated as of March 10, 1997 among
AXIA Incorporated, Ames Taping Tool Systems, Inc., TapeTech Tool Co.,
Inc., and the Lenders named in the Loan Agreement./(6)/
10.18 Second Amendment to Loan Agreement dated September 11, 1997, among
AXIA Incorporated, Ames Taping Tool Systems, Inc., TapeTech Tool Co.,
Inc., and the Lenders named in the Loan Agreement./(7)/
10.19 Third Amendment to Loan Agreement dated March 2, 1998, among AXIA
Incorporated, Ames Taping Tool Systems, Inc., TapeTech Tool Co., Inc.,
and the Lenders named in the Loan Agreement.
21.1 Subsidiaries of the Registrant./(1)/
23.1 Consent of Kaye, Scholer, Fierman, Hays & Handler (included in Exhibit
5.1)./(3)/
23.3 Consent of Arthur Andersen LLP./(8)/
</TABLE>
16
<PAGE>
99.1 Form of Letter of Transmittal./(2)/
99.2 Form of Notice of Guaranteed Delivery./(2)/
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three months ended December
31, 1997.
/(1)/ Previously filed as an exhibit to Registration Statement No. 33-78922
filed with the Securities and Exchange Commission on May 13, 1994.
/(2)/ Previously filed as an exhibit to Amendment No. 1 to Registration
Statement No. 33-78922 filed with the Securities and Exchange Commission
on May 24, 1994.
/(3)/ Previously filed as an exhibit to Amendment No. 2 to Registration
Statement No. 33-78922 filed with the Securities and Exchange Commission
on June 30, 1994.
/(4)/ Previously filed as an exhibit to the Company's Form 10-K for the period
ended December 31, 1995 filed with the Securities and Exchange Commission
on March 29, 1996.
/(5)/ Previously filed as an exhibit to the Company's Form 10-Q for the period
ended June 30, 1996 filed with the Securities and Exchange Commission on
August 12, 1996.
/(6)/ Previously filed as an exhibit to the Company's Form 10-Q for the period
ended June 30, 1997 filed with the Securities and Exchange Commission on
August 11, 1997.
/(7)/ Previously filed as an exhibit to the Company's Form 10-Q for the period
ended September 30, 1997 filed with the Securities and Exchange Commission
on November 10, 1997.
/(8)/ Previously filed as an exhibit to the Company's Form 10-K for the period
ended December 31, 1997 filed with the Securities and Exchange Commission
on March 19, 1998.
17
<PAGE>
SIGNATURES
Pursuant to 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.
AXIA INCORPORATED
Date: May 12, 1998 \s\ Lyle J. Feye
------------------------------------------
Lyle J. Feye
Vice President Finance, Treasurer,
Chief Financial Officer
18
<PAGE>
EXHIBIT 10.19
THIRD AMENDMENT TO LOAN AGREEMENT
---------------------------------
THIS THIRD AMENDMENT TO LOAN AGREEMENT, dated as of March 2, 1998 (the
"Amendment"), is entered into among AXIA INCORPORATED, a Delaware corporation
("AXIA"), and its direct subsidiaries, AMES TAPING TOOL SYSTEMS, INC., a
Delaware corporation ("ATTS"), TAPETECH TOOL CO., INC., a Delaware corporation
("TapeTech") (AXIA, ATTS and TapeTech, individually, "Borrower" and
collectively, "Borrowers"), the lenders ("Lenders") named in the Loan Agreement
referred to below, and AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a
national banking association ("ANB"), as agent for Lenders under the Loan
Agreement (ANB, in such capacity, being "Agent").
RECITALS:
A. Borrowers, Lenders and Agent entered into that certain Loan Agreement,
dated as of June 27, 1996, as amended by a First Amendment to Loan Agreement,
dated as of March 10, 1997, and as further amended by a Second Amendment to Loan
Agreement, dated as of September 11, 1997 (the "Loan Agreement").
B. Borrowers have requested that Agent and Lenders enter into this
Amendment in order to amend certain provisions of the Loan Agreement to permit
Borrowers to purchase additional Subordinated Notes and Subordinated Note Units.
C. Capitalized terms used herein and not otherwise defined shall have the
meanings provided for in the Loan Agreement.
1. AMENDMENT
---------
1.1 Section 2.7(a) of the Loan Agreement is hereby deleted and the
following is inserted in its stead:
"(a) Borrowers shall apply the proceeds of the Term Loan to the
payment of their outstanding indebtedness and the proceeds of the Revolving
Credit Loan for working capital and general corporate purposes and to the
payment of outstanding indebtedness; provided, however, that not more than
$5,000,000 of the proceeds of the Revolving Credit Loan may be utilized for
the repayment of indebtedness of AXIA under the Credit Agreement, dated as
of March 15, 1994, among AXIA, Banque Indosuez, as agent, and the lenders
named therein. In addition to the foregoing, AXIA may apply proceeds of
Revolving Credit Advances to the payment of the purchase price of
Subordinated Notes or
<PAGE>
Subordinated Note Units; provided, however, that the maximum amount of
proceeds of Revolving Credit Advances which may be utilized for such
purpose shall not exceed in the aggregate at any date of determination
$16,000,000."
2. MISCELLANEOUS
-------------
2.1 Limited Nature of Amendments. The parties hereto acknowledge and agree
that the terms and provisions of this Amendment amend, add to and constitute a
part of the Loan Agreement. Except as expressly modified and amended by the
terms of this Amendment, all of the other terms and conditions of the Loan
Agreement and all documents executed in connection therewith or referred to or
incorporated therein remain in full force and effect and are hereby ratified,
reaffirmed, confirmed and approved.
2.2 Conflict. If there is an express conflict between the terms of this
Amendment and the terms of the Loan Agreement, or any of the other agreements or
documents executed in connection therewith or referred to or incorporated
therein, the terms of this Amendment shall govern and control.
2.3 Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original.
2.4 Representations and Warranties. Each Borrower represents and warrants
to Agent and Lenders as follows: (A) such Borrower has all necessary power and
authority to execute and deliver this Amendment and perform its obligations
hereunder; (B) this Amendment and the Loan Agreement, as amended hereby,
constitute the legal, valid and binding obligations of such Borrower and are
enforceable against such Borrower in accordance with their terms; and (C) all
representations and warranties of such Borrower contained in the Loan Agreement
and all other agreements, instruments and other writings relating thereto are
true and complete as of the date hereof.
2.5 Governing Law. This Amendment shall be construed in accordance with
and governed by and the internal laws of the State of Illinois, without giving
effect to choice of law principles.
2
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
AXIA INCORPORATED AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, as
By: /s/ Lyle J. Feye Agent and as Lender
--------------------------------
Name: Lyle J. Feye By:
Title: Vice President -------------------------------------
Name:
--------------------------------
AMES TAPING TOOL SYSTEMS, INC. Title:
-------------------------------
By: /s/ Lyle J. Feye
--------------------------------
Name: Lyle J. Feye THE NORTHERN TRUST COMPANY, as
Title: Vice President Lender
By:
TAPETECH TOOL CO., INC. -------------------------------------
Name:
By: /s/ Lyle J. Feye --------------------------------
-------------------------------- Title:
Name: Lyle J. Feye -------------------------------
Title: Vice President
NATIONAL CITY BANK, as Lender
By:
--------------------------------------
Name:
--------------------------------
Title:
-------------------------------
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 541
<SECURITIES> 0
<RECEIVABLES> 15,960
<ALLOWANCES> 2,030
<INVENTORY> 9,474
<CURRENT-ASSETS> 27,187
<PP&E> 40,162
<DEPRECIATION> 15,793
<TOTAL-ASSETS> 98,023
<CURRENT-LIABILITIES> 21,918
<BONDS> 9,785
0
0
<COMMON> 16,723
<OTHER-SE> 26,222
<TOTAL-LIABILITY-AND-EQUITY> 42,945
<SALES> 21,096
<TOTAL-REVENUES> 28,145
<CGS> 13,264
<TOTAL-COSTS> 22,340
<OTHER-EXPENSES> 69
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 733
<INCOME-PRETAX> 5,010
<INCOME-TAX> 2,084
<INCOME-CONTINUING> 2,926
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,926
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
