UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 28, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________ to __________________
Commission file number: 1-7568
COLTEC INDUSTRIES INC
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 13-1846375
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, North Carolina 28217 28217
(Address of principal executive offices) (Zip code)
(704)423-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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 ( )
________________________________________
On October 31, 1997, there were outstanding 65,485,707 shares of common
stock, par value $.01 per share.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Nine Months Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
(in thousands, except per share data)
Net sales $324,453 $287,216 $955,852 $861,429
Cost of sales 221,472 201,358 650,284 611,274
Gross profit 102,981 85,858 305,568 250,155
Selling and administrative 53,787 43,718 162,692 141,796
Special charges - - - -
Operating income 49,194 42,140 142,876 108,359
Interest expense and other, net 13,859 17,045 38,905 58,503
Earnings from continuing operations
before income taxes and
extraordinary item 35,335 25,095 103,971 49,856
Income taxes 12,014 8,533 35,350 16,950
Earnings from continuing operations
before extraordinary item 23,321 16,562 68,621 32,906
Discontinued operations
(net of tax) - 1,509 - 52,665
Extraordinary item (net of tax) - (59) - (1,881)
Net earnings $23,321 $18,012 $68,621 $83,690
Earnings per common share
Before extraordinary item $.35 $.24 $1.03 $.47
Discontinued operations - .02 - .76
Extraordinary item - - - (.03)
Net earnings $.35 $.26 $1.03 $1.20
Weighted average number of common
and common equivalent shares 66,596 68,997 67,007 69,835
See notes to consolidated financial statements.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Sept. 28, Dec. 31,
1997 1996
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $11,769 $15,029
Accounts and notes receivable, net of
allowance of $2,705 in 1997 and $2,007 in 1996 142,383 190,325
Inventories
Finished goods 51,787 48,813
Work in process and finished parts 150,304 122,817
Raw materials and supplies 34,395 32,568
236,486 204,198
Deferred income taxes 8,998 10,524
Other current assets 13,951 12,769
Total current assets 413,587 432,845
Property, plant and equipment, net 246,240 214,790
Costs in excess of net assets acquired, net 140,558 132,872
Other assets 63,827 58,869
$864,212 $839,376
See notes to consolidated financial statements.
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COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Sept. 28, Dec. 31,
1997 1996
(In thousand, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $565 $2,528
Accounts payable 68,496 55,410
Accrued expenses 151,869 145,104
Current portion of liabilities of
discontinued operations 5,345 14,229
Total current liabilities 226,275 217,271
Long-term debt 738,625 717,722
Deferred income taxes 58,864 50,646
Other liabilities 70,912 100,004
Liabilities of discontinued operations 160,428 170,740
Commitments and contingencies - -
Shareholders' equity:
Preferred stock, $.01 par value,
2,500,000 shares authorized,
shares outstanding - none - -
Common stock, $.01 par value,
100,000,000 shares authorized, 70,501,948 and
70,398,661 shares issued at September 28, 1997
and December 31, 1996, respectively (excluding
25,000,000 shares held by a wholly owned
subsidiary) 705 704
Capital surplus 642,828 643,221
Retained deficit (938,282) (1,006,903)
Unearned compensation (3,177) (2,136)
Minimum pension liability (3,200) (3,200)
Foreign currency translation adjustments
(5,213) (1,151)
(306,339) (369,465)
Less cost of 4,999,741 and 3,182,822 shares
of common stock in treasury at
September 28, 1997 and December 31, 1996,
respectively
(84,553) (47,542)
(390,892) (417,007)
$864,212 $839,376
See notes to consolidated financial statements.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
Sept. 28, Sept. 29,
1997 1996
Cash flows from operations activities:
Net earnings $68,621 $83,690
Adjustments to reconcile net earnings to cash
provided by operating activities:
Extraordinary item - 1,881
Depreciation and amortization 28,327 27,720
Deferred income taxes 10,209 15,106
Gain on sale of Automotive Business - (57,487)
Payments of liabilities of discontinued
operations (19,196) (1,556)
Foreign currency translation adjustment (4,062) 978
Other operating items (30,825) (18,402)
Changes in assets and liabilities:
Accounts and notes receivable (10,604) (67,802)
Inventories (28,314) (642)
Other current assets (504) (256)
Accounts payable 11,934 (10,094)
Accrued expenses 4,748 41,411
Cash provided by operating activities 30,334 14,547
Cash flows from investing activities:
Capital expenditures (46,004) (29,662)
Acquisition of business (23,778) -
Proceeds from sale of Automotive Business - 296,522
Cash provided by (used in) investing
activities (69,782) 266,860
Cash flows from financing activities:
Increase in revolving facility, net 25,000 65,000
Sale of accounts receivable 62,000 -
Repayment of long-term debt (8,117) (300,390)
Purchase of treasury stock (42,695) (37,545)
Cash provided by (used in) financing
activities 36,188 (272,935)
Increase (decrease) in cash and cash equivalents (3,260) 8,472
Cash and cash equivalents - beginning of period 15,029 3,971
Cash and cash equivalents - end of period $11,769 $12,443
Supplemental cash flow data:
Cash paid of interest $35,025 $44,577
Cash paid for income taxes, net 13,827 22,131
See notes to consolidated financial statements.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
1. SUMMARY OF ACCOUNTING POLICIES
Financial Information: The unaudited consolidated financial
statements included herein reflect in the opinion of management of
Coltec Industries Inc (the Company) all normal recurring adjustments
necessary to present fairly the consolidated financial position and
results of operations for the periods indicated. The unaudited
consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The Consolidated
Balance Sheet as of December 31, 1996 has been extracted from the
audited consolidated financial statements as of that date. For
further information, refer to the consolidated financial statements
and footnotes included in the Company's annual report to
shareholders for the year ended December 31, 1996.
2. SALE OF ACCOUNTS RECEIVABLE
In September 1997, the Company and certain of its subsidiaries sold
$77,500 of their U.S. and Canadian customer trade receivables to CNC
Finance LLC (CNC Finance) a bankruptcy remote subsidiary of the
Company. CNC Finance entered into a three-year agreement to sell,
on a revolving basis, an undivided fractional ownership interest in
the receivables, based on the level of eligible receivables, up to a
maximum of $85,000. At September 28, 1997, $62,000 of the Company's
receivables were sold under this agreement and the sale has been
reflected as a reduction of accounts receivable in the Consolidated
Balance Sheet. The undivided interests were sold at a discount
which was included in Interest expense and other, net in the
Consolidated Statement of Earnings.
3. SPECIAL CHARGES
In the third quarter of 1995, the Company recorded a special charge
of $27,000, primarily to cover the costs of closing the Walbar
compressor blade facility in Canada. The facility was closed during
1996. The special charge included costs to cover the cancellation
of contractual obligations resulting from the decision to close the
Walbar facility, asset write-downs, severance and employee-related
costs and other costs necessary to implement the shutdown of the
Walbar facility and selected workforce reductions throughout the
Company. At September 28, 1997
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
all related costs had been charged and the remaining accrual was
reversed. The activity in the related reserve through September 28,
1997 was as follows:
Contractual Asset
Obligations Writedowns Severance Other Total
1995 charge $9,065 $7,845 $5,084 $5,006 $27,000
1995 activity (65) (4,549) (1,778) (2,553) (8,945)
December 31,1995 9,000 3,296 3,306 2,453 18,055
1996 activity (961) (1,875) (1,876) (1,597) (6,309)
December 31, 1996 $8,039 $1,421 $1,430 $856 $11,746
1997 activity
year to date (1,200) - (517) (29) (1,746)
Reversal (6,839) (1,421) (913) (827) (10,000)
September 28, 1997 $ - $ - $ - $ - $ -
In the third quarter of 1997, the Company recorded a special charge
of $10,000, to cover the restructuring of its Industrial Segment.
This special charge included the costs of closing its FMD
Electronics operations in Roscoe, Illinois and its Ortman Fluid
Power operations in Hammond, Indiana. The special charge also
included the costs to restructure the Company's Industrial Segment
businesses in Canada and Germany and certain termination costs
related to the relocation of the Delavan Commercial divisional
headquarters to North Carolina. The third quarter 1997 charge
included costs resulting from cancellation of contractual
obligations, asset write-downs, severance and employee-related costs
and other costs to shut-down these facilities that will not benefit
future operations. The related reserve activity for year to date
1997 was as follows:
Contractual Asset
Obligations Writedowns Severance Other Total
1997 charge $641 $1,049 $5,425 $2,885 $10,000
1997 activity
year to date (50) (590) (1,706) (381) (2,727)
September 28, 1997 $591 $459 $3,719 $2,504 $7,273
4. DISCONTINUED OPERATIONS
In June 1996, the Company sold Holley Automotive, Coltec Automotive
and Performance Friction Products to Borg-Warner Automotive, Inc.
In December 1996, the Company sold Farnam Sealing Systems Division
to Meillor SA. The sale of these businesses represented a disposal
of the Company's Automotive Segment. Accordingly, the Consolidated
Statements of Earnings for the three months and nine months ended
September 29, 1996 have been restated to reflect the operations of
the automotive original equipment components businesses as a
discontinued operation.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
Liabilities of discontinued operations at September 28, 1997 of
$165,773 relate to contingent contractual obligations, environmental
matters, reserves for postretirement benefits and other future
estimated costs for various discontinued operations.
5. EXTRAORDINARY ITEM
The Company incurred an extraordinary charge of $1,821, net of
income taxes of $937, in the first quarter of 1996 in connection
with early retirement of debt.
6. COMMITMENTS AND CONTINGENCIES
The Company and certain of its subsidiaries are defendants in
various lawsuits, including actions involving asbestos-containing
products and certain environmental proceedings.
With respect to asbestos product liability and related litigation
costs, as of September 28, 1997, two subsidiaries of the Company
were among a number of defendants (typically 15 to 40) in
approximately 110,300 actions (including approximately 3,600 actions
in advanced stages of processing) filed in various states by
plaintiffs alleging injury or death as a result of exposure to
asbestos fibers.
During the first nine months of 1997, two subsidiaries of the
Company received approximately 31,400 new actions compared to
approximately 32,400 new actions received during the first nine
months of 1996. Through September 28, 1997, approximately 193,700
of the approximately 304,000 total actions brought have been settled
or otherwise disposed.
The damages claimed for personal injury or death vary from case to
case, and in many cases plaintiffs seek $1,000 or more in
compensatory damages and $2,000 or more in punitive damages.
Although the law in each state differs to some extent, it appears,
based on advice of counsel, that liability for compensatory damages
would be shared among all responsible defendants, thus limiting the
potential monetary impact of such judgments on any individual
defendant.
Following a decision of the Pennsylvania Supreme Court, in a case
in which neither the Company or any or its subsidiaries were
parties, that held insurance carriers are obligated to cover
asbestos-related bodily injury actions if any injury or disease
process, from first exposure through manifestation, occurred during
a covered policy period (the "continuous trigger theory of
coverage"), the Company settled litigation with its primary and
most of its first-level excess insurance carriers, substantially on
the basis of the Court's ruling. The Company has negotiated a
final agreement with most of its excess carriers that are in the
layers of coverage immediately above its first layer. The Company
is currently receiving payments pursuant to this agreement. The
Company believes that, with respect to the remaining carriers, a
final agreement can be achieved without litigation and on
substantially the same basis that it has resolved the issues with
its other carriers. Settlements are generally made on a group
basis with payments made to individual claimants over periods of
one to four years.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
Payments were made with respect to asbestos liability and related
costs aggregating $47,572 and $53,642 for the first nine months of
1997 and 1996, respectively, substantially all of which were covered
by insurance. Related to payments not covered by insurance, the
Company recorded charges to operations amounting to $6,000 and
$6,125 for the first nine months of 1997 and 1996, respectively.
In accordance with the Company's internal procedures for the
processing of asbestos product liability actions and due to the
proximity to trial or settlement, certain outstanding actions have
progressed to a stage where the Company can reasonably estimate the
cost to dispose of these actions. As of September 28, 1997, the
Company estimates that the aggregate remaining cost of the
disposition of the settled actions for which payments remain to be
made and actions in advanced stages of processing, including
associated legal costs, is approximately $56,300 and the Company
expects that this cost will be substantially covered by insurance.
With respect to the 106,700 outstanding actions as of September 28,
1997, which are in preliminary procedural stages, the Company lacks
sufficient information upon which judgments can be made as to the
validity or ultimate disposition of such actions, thereby making it
difficult to estimate with reasonable certainty the potential
liability or costs to the Company. When asbestos actions are
received, they are typically forwarded to local counsel to ensure
that the appropriate preliminary procedural response is taken. The
complaints typically do not contain sufficient information to permit
a reasonable evaluation as to their merits at the time or receipt,
and in jurisdictions encompassing a majority of the outstanding
actions, the practice has been that little or no discovery or other
action is taken until several months prior to the date set for
trial. Accordingly, the Company generally does not have the
information necessary to analyze the actions in sufficient detail to
estimate the ultimate liability or costs to the Company, if any,
until the actions appear on a trial calendar. A determination to
seek dismissal, to attempt to settle or proceed to trial is
typically not made prior to the receipt of such information.
It is also difficult to predict the number of asbestos lawsuits that
the Company's subsidiaries will receive in the future. The Company
has noted that, with respect to recently settled actions or actions
in advanced stages of processing, the mix of the injuries alleged
and the mix of the occupations of the plaintiffs have been changing
from those traditionally associated with the Company's asbestos-
related actions. The Company is not able to determine with
reasonable certainty whether this trend will continue. Based upon
the foregoing, and due to the unique factors inherent in each of the
actions, including the nature of the disease, the occupation of the
plaintiff, the presence or absence of other possible causes of a
plaintiff's illness, the availability of legal defenses, such as the
statute of limitations or state of the art, and whether the lawsuit is
an individual one or part of a group, management is unable to estimate
with reasonable certainty the cost of disposing of outstanding
actions in preliminary procedural stages or of actions that may be filed
in the future. However, the Company believes that its subsidiaries are in
a favorable position compared to many other defendants because,
among other things, the asbestos fibers in its asbestos-containing
products were encapsulated. Considering the
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
foregoing, as well as the experience of the Company's subsidiaries
and other defendants in asbestos litigation, the likely sharing of
judgements among multiple responsible defendants, and the substantial
amount of insurance coverage that the Company expects to be available
from its solvent carriers, the Company believes that pending and
reasonably anticipated future actions are not likely to have a material
effect on the Company's consolidated results of operations and financial
condition.
Although the insurance coverage which the Company has is
substantial, it should be noted that insurance coverage for asbestos
claims is not available to cover exposures initially occurring on
and after July 1, 1984. The Company's subsidiaries continue to be
named as defendants in new cases, some of which allege initial
exposure after July 1, 1984.
In addition to claims for personal injury, the Company's
subsidiaries have been involved in an insignificant number of
property damage claims based upon asbestos-containing materials
found in schools, public facilities and private commercial
buildings. Based upon proceedings to date, the overwhelming
majority of these claims have been resolved without a material
adverse impact on the Company. Likewise, the insignificant number
of claims remaining to be resolved are not expected to have a
material effect on the Company's consolidated results of operations
and financial condition.
The Company has recorded an accrual for its liabilities for asbestos-
related matters that are deemed probable and can be reasonably
estimated (settled actions and actions in advanced stages of
processing), and has separately recorded an asset equal to the
amount of such liabilities that is expected to be recovered by
insurance. In addition, the Company has recorded a receivable for
that portion of payments previously made for asbestos product
liability actions and related litigation costs that is recoverable
from its insurance carriers.
Liabilities for asbestos-related matters and the receivable from
insurance carriers included in the Consolidated Balance Sheets are
as follows:
Sept. 28, Dec. 31,
1997 1996
Accounts and notes receivable $68,439 $67,012
Other assets 16,553 18,728
Accrued expenses 49,942 60,659
Other liabilities 6,396 10,879
With respect to environmental proceedings, the Company has been
notified that it is among the Potentially Responsible Parties under
federal environmental laws, or similar state laws, relative to the
costs of investigating and in some cases remediating contamination
by hazardous materials at several sites. Such laws impose joint
and several liability for the costs of investigating and
remediating properties contaminated by hazardous materials.
Liability for these costs can be imposed on present and former
owners or operators of the properties or on parties who generated
the wastes that contributed to the contamination. The Company's
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
policy is to accrue environmental remediation costs when it is both
probable that a liability has been incurred and the amount can
be reasonably estimated. While it is often difficult to
reasonably quantify future environmental-related expenditures,
the Company currently estimates its future non-capital
expenditures related to environmental matters to range between $28,000
and $52,000. In connection with these expenditures, the Company has
accrued $33,000 at September 28, 1997, representing management's best
estimate of probable non-capital environmental expenditures.
These non-capital expenditures are estimated to be incurred over
the next 10 to 20 years. In addition, capital expenditures
aggregating $5,000 may be required during the next two years
related to environmental matters. Although the Company is pursuing
insurance recovery in connection with certain of these matters, no
receivable has been recorded with respect to any potential recovery
of costs in connection with any environmental matters.
7. ACQUISITION OF BUSINESS
On June 30 1997, the Company acquired the assets of AMI Industries
Inc. (AMI), a Colorado-based manufacturer of flight attendant and
cockpit seats for commercial aircraft for approximately $24,000.
The purchase agreement also includes contingent payments based on
earning levels for the years ended December 31, 1997 - 2000. These
contingent payments will be recorded as additional purchase price
and amortized over the remaining life of goodwill. For financial
statement purposes, the acquisition was accounted for as a purchase
and, accordingly, AMI's results are included in the Company's
consolidated financial statements since the date of acquisition.
The purchase price, which was financed through available cash
resources, has been allocated to the assets of AMI, based upon their
fair market values. The excess of the purchase price over net
assets acquired approximate $10,700 and is being amortized over
twenty-five years.
If AMI's results of operations had been combined with the Company
for year to date 1997 and 1996, the Company's consolidated pro forma
net sales, net earnings and net earnings per common share would not
have been materially different from reported amounts. AMI's 1997
sales are expected to approach $28,000, $15,000 of such sales
subsequent to June 30, 1997.
In July 1997, the Company signed a letter of intent to acquire the
sheet rubber and conveyor belt business of Dana Corporation's Boston
Weatherhead division based in Paragould, Arkansas. The transaction
is scheduled to close in the fourth quarter of 1997. Annual sales
are expected to approximate $35 million.
In September 1997, the Company reached an agreement in principle to
acquire Marine and Petroleum Mfg. Inc's (M&P) manufacturing
facilities based in Houston, Burnet and Freeport, Texas. The plants
being acquired produce flexible graphite and Teflon sealing
products used in the petrochemical industry. Combined annual sales
for these facilities are expected to approximate $18 million. The
Company also reached an agreement in principle to acquire Tex-o-Lon
and Repro-Lon. These two Texas businesses have combined annual sales of
$15 million. Tex-o-Lon, with
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(dollars in thousands)
operations in Houston and Burnet, Texas manufactures, machines and
distributes Teflon products, primarily for the semiconductor
industry. Repro-Lon, based in Burnet, reprocesses Teflon compounds
for the chemical and semiconductor industries.
On October 1, 1997, the Company acquired Danti Tool and Die, Inc.
which designs, engineers and manufactures tooling. Danti, which
has approximately $5,000 in annual sales, operates plants in
Saginaw and Standish, Michigan.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table shows financial information by industry segment
for the three months and nine months ended Sept. 28, 1997 and Sept.
29, 1996.
Three Months Ended Nine Months Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
(in thousands)
Sales:
Aerospace $142,775 $111,590 $390,532 $308,781
Industrial 181,923 176,045 565,940 553,862
Intersegment elimination (245) (419) (620) (1214)
Total $324,453 $287,216 $955,852 $861,429
Operating income:
Aerospace $22,077 $19,226 $60,974 $28,452
Industrial 36,619 33,125 112,054 110,636
Total segments 58,696 52,351 173,028 139,088
Corporate unallocated (9,502) (10,211) (30,152) (30,729)
Operating income $49,194 $42,140 $142,876 $108,359
Operating income for the nine months ended September 29, 1996 included
a charge of $14.2 million relating to the bankruptcy of a major
aerospace customer (Fokker). Excluding this charge, operating income
for the nine months ended September 29, 1996 for the Aerospace Segment
and the Company would have been $42.7 million and $122.6 million,
respectively.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Results of Operations
Company Review
Net sales for the third quarter of 1997 increased 13.0% to $324.5
million from $287.2 million for the third quarter of 1996 primarily
driven by increases in the Aerospace Segment. Gross profit increased
to $103.0 million for the third quarter 1997 from $85.9 million in
third quarter 1996. The increase in gross profit margin to 31.7% in
the third quarter 1997 from 29.9% in the third quarter 1996 resulted
from higher margins in the Aerospace Segment. Selling and
administrative expenses totaled $53.8 million, or 16.6% of sales, in
third quarter 1997 compared to 43 million, or 15.2% sales, in third
quarter 1996.
Net sales for the nine months ended September 28, 1997 increased 11.0%
to $955.9 million from $861.4 million for the nine months ended
September 29, 1996 as a result of continued sales increases in the
Aerospace Segment. Gross profit increased to $305.6 million for the
first nine months of 1997 from $250.2 million for the first nine
months of 1996. The increase in gross profit margin to 32.0% for year
to date 1997 from 29.0% for year to date 1996 resulted from higher
margins in the Aerospace Segment and the first quarter 1996 bankruptcy
of Fokker. Although selling and administrative expenses totaled
$162.7 million for year to date 1997 compared to $141.8 million for
year to date 1996, selling and administrative expenses as a percentage
of sales increased slightly to 17.0% for year to date 1997 as compared
to 16.5% for year to date 1996.
Operating income increased to $49.2 million in third quarter 1997 from
$42.1 million in the third quarter of 1996. Operating margin
increased slightly to 15.2% for third quarter 1997 from 14.7% for the
second quarter 1996.
Operating income increased to $142.9 million for the first nine months
of 1997 from $108.4 million for the first nine months of 1996. The
1996 amount includes the effect of the $14.2 million charge relating
to the Fokker bankruptcy. Operating margin for year to date 1997 was
14.9% compared to 12.6% for year to date 1996 (14.0% excluding the
effect of Fokker).
Interest expense decreased 18.2% to $13.9 million in third quarter
1997 from $17.0 million for third quarter 1996 and decreased 33.5% to
$38.9 million for year to date 1997 as compared to $58.5 million for
year to date 1996. These decreases were a direct result of
significant debt reduction in June 1996 and the December 1996
refinancing of substantially all of the Company's high-cost, fixed-rate
debt with lower-cost, variable-rate bank debt.
The results of discontinued operations for the three months and nine
months ended September 29, 1996 reflect the net earnings for those
periods for the automotive original equipment components operations
which were sold in 1996.
As a result of the foregoing, earnings from continuing operations for
the three months and nine months ended September 28, 1997 were $23.3
million and $68.6 million, respectively, as compared to $16.6 million
and $32.9 million for the three months and nine months ended September
29, 1996, respectively. Net earnings were $23.3 million in third
quarter 1997, or $0.35 per share, compared to net earnings of $18.0
million, or $0.26 per share, in third quarter 1996. 1997 year to date
net earnings were $68.6
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
million, or $1.03 per share, as compared to $83.7 million, or $1.20 per
share for 1996. The decrease in interest expense increased 1997 third
quarter earnings by $0.03 per share and 1997 year to date earnings by
$0.17 per share.
Segment Review - Aerospace
Sales in third quarter 1997 for the Aerospace Segment totaled $142.8
million increasing 28.0% from $111.6 million in the third quarter 1996.
For the nine months ended September 28, 1997 Aerospace sales increased
26.5% to $390.5 million from $308.8 million for the comparable 1996
period. At Menasco, sales increased significantly due to rising
commercial aircraft production as well as improved military sales.
Menasco deliveries of main landing gear systems for the Boeing 737
increased from 27 and 44 shipsets in the three months and nine months
ended September 29, 1996, respectively, to 42 and 114 shipsets in the
three months and nine months ended September 28, 1997, respectively,
while military sales benefited primarily from higher shipset deliveries
for the F-15 and F-16 programs. At Chandler Evans, significantly
higher sales were primarily due to higher sales of spare parts while
original equipment sales also improved.
Operating income for the Aerospace Segment increased 15.1% to $22.1
million in third quarter 1997 from $19.2 million in third
quarter of 1996. Operating margin for the third quarter 1997 decreased
to 15.5% from 17.2% for third quarter 1996. Operating income for year
to date 1997 was $61.0 million, increasing from $28.5 million for year
to date 1996. The year to date 1996 amount includes the effect of the
$14.2 million charge relating to the Fokker bankruptcy. Excluding such
charge, operating margin for year to date 1996 would have been 13.8%
compared to 15.6% for year to date 1997. At Menasco's Aerospace
Division, operating margin for the nine months ended September 28, 1997
was impacted by a favorable mix of landing gear systems for certain
commercial airline programs as well as improved manufacturing
efficiencies due to higher production. Chandler Evans realized higher
margins due to a higher profit sales mix and selling price increases
for certain products. The increases were also driven by generally
higher sales volumes and improved margins for the Segment's other
businesses. Third quarter 1996 was favorably impacted by gains
recognized on foreign exchange contracts.
Segment Review - Industrial
Industrial sales increased to $181.9 million and $565.9 million in the
three months and nine months ended September 28, 1997, respectively,
from $176.0 and $553.9 million in the three months and nine months
ended September 29, 1996, respectively. The Garlock Bearings, Stemco,
Delavan Commercial, and Quincy Compressor Divisions all experienced
solid sales volume increases. Sales for Garlock Sealing Technologies
increased primarily due to selling price increases and new product
sales. Holley Performance Products sales decreased due to curtailed
orders by one major customer and the bankruptcy of one major
customer.
Operating income for the Industrial Segment increased to $36.6 million
and $112.1 million in the three months and nine months ended September
28, 1997, respectively, from $33.1 million and 110.6 million in the
three and nine months ended September 29, 1996, respectively.
Operating income increased for the Stemco, Delavan Commercial and
Quincy Compressor Divisions due to higher sales volumes. Operating
results at Holley Performance Products were lower due to decreased
sales volumes while Garlock Sealing Technologies was negatively
impacted by increased costs related to various international
initiatives.
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Liquidity and Capital Resources
The Company generated $30.3 million of operating cash flows for the
nine months ended September 28, 1997 compared with $14.5 million for
the nine months ended September 29, 1996. The higher operating cash
flows in 1997 were primarily due to increased cash flow from earnings
from continuing operations and decreased accounts receivable, partially
offset by increased payments related to liabilities of discontinued
operations and payments related to asbestos claims.
The current ratio of current assets to current liabilities at
September 28, 1997 was 1.83, decreasing from 1.99 at December 31, 1996.
Cash and cash equivalents decreased to $11.8 million at September 28,
1997 from $15.0 million at December 31, 1996.
In the first nine months of 1997 the Company invested $46.0 million in
capital expenditures compared to $29.7 million during the same prior
year period. Debt increased by $18.9 million at September 28, 1997
compared to December 31, 1996 through additional borrowings and
additional cash provided by operations under the Company's revolving
credit facility. The increased borrowings were used to repurchase
2,160,900 shares of the Company's common stock at a cost of $42.7
million and to acquire AMI Industries Inc.(see note 7 to consolidated
financial statements).
<PAGE>
COLTEC INDUSTRIES INC AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain of its subsidiaries are defendants in various
lawsuits involving asbestos-containing products. In addition, the
Company has been notified that it is among Potentially Responsible
Parties under federal environmental laws, or similar state laws,
relative to the costs of investigating and in some cases remediating
contamination by hazardous materials at several sites. See note 4 to
consolidated financial statements.
Item 6.Exhibits and Reports on Form 8-K.
(a) 4.1 First Amendment to Credit Agreement dated August 22,
1997.
4.2 Second Amendment to Credit Agreement dated as of
October 14, 1997.
10.1 Form of Amendment No. 1 to Employment Agreement between
the Company and John W. Guffey, Jr., adopted by the
Board of Directors of the Company on July 10, 1997 and
effective as of September 12, 1997.
10.2 Form of Amendment No. 1 to Employment Agreements
between the Company and Laurence H. Polsky, David D.
Harrison, Robert J. Tubbs and John M. Cybulski, adopted
by the Board of Directors on July 10, 1997 and
effective as of September 12, 1997.
10.3 Amendment No. 2 to the Company's 1992 Stock Option and
Incentive Plan.
10.4 Amendment No. 1 to the 1994 Stock Option Plan for
Outside Directors.
10.5 1997 Restricted Stock Plan for Outside Directors of the
Company filed on March 26, 1997 as Exhibit A to the
Company's proxy statement for the 1997 Annual
Meeting of Shareholders and incorporated herein
by reference.
27.1 Consolidated Financial Data Schedule.
(b) No reports on Form 8-K were filed by the Company
during the quarter ended September 28, 1997.
<PAGE>
S I G N A T U R E
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.
COLTEC INDUSTRIES INC
(Registrant)
by
David D. Harrison
Executive Vice President
and Chief Financial Officer
Date: November 12, 1997
EXHIBIT 4.1
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT (this "First Amendment"), dated as of August 22, 1997,
among COLTEC INDUSTRIES INC, a corporation organized and existing under
the laws of the State of Pennsylvania (the "Company"), the various
Banks from time to time party to the Credit Agreement referred to
below, BANK OF AMERICA ILLINOIS, as Documentation Agent, THE CHASE
MANHATTAN BANK, as Syndication Agent, and BANKERS TRUST COMPANY, as
Administrative Agent, and acknowledged and agreed to by each of the
Subsidiary Guarantors. All capitalized terms used herein and nor
otherwise defined herein shall have the respective meanings provided
such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Company, the Banks, the Documentation Agent, the
Syndication Agent and the Administrative Agent are parties to a Credit
Agreement, dated as of March 24, 1992, amended and restated as of
January 11, 1994 and further amended and restated as of December 18,
1996, (as amended, modified or supplemented to the date hereof, the
"Credit Agreement");
WHEREAS, the Company desires to consummate a transaction (the
"Proposed Receivables Transaction") to effect the sale of accounts
receivable of the Company and certain of its Subsidiaries to Atlantic
Asser Securitization Corp., an asset-backed commercial paper issuer
administered by Credit Lyonnais:
WHEREAS, subject to the terms and conditions set forth herein, the
Banks desire to permit the Company and its Subsidiaries to consummate
the Proposed Receivables Transaction and to amend the Credit Agreement
in connection therewith; and
WHEREAS, subject to the terms and conditions set forth below, the
parties hereto agree as follows.
NOW, THEREFORE, it is agreed:
1. Section 9.02 of the Credit Agreement is hereby amended by (1)
deleting the word "and" at the end of clause (xviii), (2) deleting the
period at the end of clause (xix) and inserting a semicolon in lieu
thereof and (3) inserting the following new clauses (xx) and (xxi):
"(xx) so long as the Intangibles Subsidiary shall have executed and
delivered the documentation required by the penultimate sentence of
Section 9.15, and so long as no Event of Default exists at such time or
would result therefrom, the Company and/or any of its Subsidiaries
shall be permitted to contribute or otherwise transfer accounts
receivable to the Intangibles Subsidiary, and the Intangibles
Subsidiary shall be permitted to contribute or otherwise transfer such
accounts receivable to the Receivables SPC, in each case pursuant to a
Permitted Receivables Transaction; and
(xxi) so long as the Intangibles Subsidiary shall have executed and
delivered the documentation required by the penultimate sentence of
Section 9.15, the Company and/or any of its Subsidiaries shall be
permitted to contribute or otherwise transfer patents, trademarks,
copyrights and know-how to the Intangibles Subsidiary."
2. Section 9.02 (xii) of the Credit Agreement is hereby further
amended by inserting the text "the Receivables SPC, CNC Member,"
immediately before the word "Garlock" appearing in clause (t) of the
proviso appearing therein.
<PAGE>
3. Section 9.05 of the Credit Agreement is hereby amended by (1)
deleting the word "and" at the end of clause (xviii), (2) deleting the
period at the end of clause (xix) and inserting the text"; and" in lieu
thereof and (3) inserting the following new clause (xx);
"(xx) so long as no Default or Event of Default exists at such
time or would result therefrom, the Company and/or any of its
Subsidiaries shall be permitted to contribute accounts receivable to
the Intangibles Subsidiary and the Intangibles Subsidiary shall be
permitted to contribute such accounts receivable to the Receivables
SPC, in each case pursuant to a Permitted Receivables Transaction."
4. Section 9.06 of the Credit Agreement is hereby amended by (1)
deleting the word "and" at the end of clause (ii) of the first sentence
and inserting a comma in lieu thereof and (2) inserting the following
new text at the end of such sentence:
"(iv) transaction between the Company, the Intangibles Subsidiary
and any other Subsidiary of the Company shall be permitted to the
extent expressly permitted by Sections 9.02 (xx) and (xxi) and 9.05
(xx)."
5. Section 11 of the Credit Agreement is hereby amended by inserting
the following new definitions in the appropriate alphabetical order:
"`CNC Member' shall mean CNC Member Inc, a North Carolina
corporation, special purpose Wholly-Owned Subsidiary of the Company,
which was created for the sole purpose of holding a 1% interest in the
Receivables SPC and which shall engaged in no other business or
activities except as reasonably related thereto, it being understood
that CNC Member shall not be required to be a party to any Guaranty or
Security Document as otherwise provided in this Agreement.
`Intangibles Subsidiary' shall mean Coltec North Carolina Inc. a
North Carolina corporation, which is a Wholly-Owned Subsidiary of the
Company created, in accordance with Section 9.15, for the purpose of
receiving (i) accounts receivable pursuant to a Permitted Receivables
Transaction and (ii) patents, trademarks, copyrights and know-how, in
each case from the Company and any of its other Subsidiaries.
`Receivables SPC' shall mean CNC Finance LLC, a North Carolina
limited liability company, which is a special purpose Wholly-Owned
Subsidiary of the Company, directly owned by the Intangibles Subsidiary
and CNC Member Inc, which was created for the sole purpose of acquiring
accounts receivable from the Intangibles Subsidiary and selling such
accounts receivable or interest therein to one or more third parties
pursuant to a Permitted Receivables Transaction and which shall engage
in no other business or activities except as reasonable related
thereto, it being understood that the Receivables SPC shall not be
required to be a party to any Guaranty or Security Document as
otherwise provided in this Agreement."
6. The definition of Permitted Receivables Transaction appearing in
Section 11 of the Credit Agreement is hereby amended by inserting the
text "and/or the Intangibles Subsidiary and/or the Receivables SPC"
immediately after the word "Company" the first place it appears
therein.
7. Notwithstanding anything to the contrary contained in the
definition of Permitted Receivables Transaction contained in the Credit
Agreement, the Banks hereby consent to the Company and its relevant
Subsidiaries consummation the Proposed Receivables Transaction and
agree that the Proposed Receivables Transaction shall constitute a
Permitted Receivables Transaction under the Credit Agreement so long as
(i) the aggregate amount outstanding under the Proposed Receivables
Transaction facility shall in no event exceed $85,000.000 at any time
and (ii) the receivables purchase agreement and related documentation
evidencing the Proposed Receivables Transaction shall be consistent
with the term sheet therefor attached hereto as Annex I and otherwise
be in form and substance satisfactory to the Administrative Agent:
provided, however, that in connection with the Proposed Receivables
Transaction, the Company shall not be required to (x) provide the
Administrative Agent and the Banks with at least 30 days' prior notice
of the Proposed Receivables Transaction or (y) apply the proceeds
received pursuant to the Proposed Receivables Transaction as a
mandatory commitment reduction otherwise in accordance with Section
3.03 (f) of the Credit Agreement.
<PAGE>
8. Notwithstanding anything to the contrary contained in the Credit
Agreement or the Security Agreements, the Banks hereby consent to the
release of the receivables sold to Receivables SPC at any time pursuant
to the Proposed Receivables Transaction from any and all security
interests created by the Security Agreements, and, on and after the
First Amendment Effective Date, such receivables are hereby released.
In connection therewith. the Collateral Agent is hereby authorized to
(1) amend any Security Agreement to exclude such receivables from the
security interests granted thereby and (2) execute and deliver such
documentation (including UCC amendment/termination statements and the
like) deemed necessary or desirable by it in connection therewith.
9. Notwithstanding anything to the contrary contained in Section 9.15
of the Credit Agreement, in respect of the Company's new Subsidiaries
Coltec North Carolina Inc, CNC Member Inc, CNC Finance LLC and AMI
Industries Inc., (x) the Banks hereby waive (A) the requirement of ten
Business Days prior written notice of the creation thereof and (B) the
requirement that CNC Member Inc and CNC Finance LLC become parties to
the Additional Security Documents otherwise required by Section 9.15 of
the Credit Agreement and (y) the parties hereto agree (and the Banks
hereby consent) that each of Coltec North Carolina Inc and AMI
Industries Inc. shall become a party to the Subsidiaries Guaranty, the
Subsidiaries Pledge Agreement and the Subsidiaries Security Agreement
within thirty days after the First Amendment Effective Date.
10. Notwithstanding anything to the contrary contained in Section
13.16 of the Credit Agreement, the Company shall, within 30 days after
the First Amendment Effective Date (as defined below), deliver to the
Collateral Agent, as Pledgee, the capital stock constituting Pledged
Securities of Coltec Industries Pacific Pte Ltd together with executed
and undated stock powers related thereto, and the Banks hereby waive
any Default or Event of Default, if any, that may have arisen solely
from the Company's failure to deliver such capital stock and stock
powers as of the date hereof. The Company hereby represents and
warrants that the capital stock of Coltec do Brasil Products Industrias
LTDA is uncertificated and, accordingly, is not required to be
delivered pursuant to Section 13.16 of the Credit Agreement.
11. In order to induce the Banks to enter into this First
Amendment, the Company hereby represents and warrants that (i) all
representations and warranties contained in the Section 7 of the Credit
Agreement are true and correct in all material respects on and as of
the First Amendment Effective Date and after giving effect to the First
Amendment (unless such representations and warranties relate to a
specific earlier date, in which case such representations and
warranties shall be true and correct as of such as of such earlier
date) and (ii) there exists no Default or Event of Default on the First
Amendment Effective Date after giving effect to this Consent.
12. This First Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision
of the Credit Agreement or any other Credit Document.
13. This First Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one
and the same instrument. A complete set of counterparts shall be
lodged with the Company and the Administrative Agent.
14. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
15. This First Amendment shall become effective on the date (the
"First Amendment Effective Date") when each Credit Party and the
Required Banks shall have signed a counterpart hereof (whether the same
or different counterparts) and shall have delivered (including by way
of facsimile transmission) the same to the Administrative Agent at its
Notice Office.
16. From and after the First Amendment Effective Date, all
references in the Credit Agreement and each of the Credit Documents to
the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused a counter part of
this First Amendment to be duly executed and delivered as of the date
first above written.
COLTEC INDUSTRIES INC
By_____________________
Title:
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By_____________________
Title:
BANK OF AMERICA NATIONAL TRUST
& SAVING ASSOCIATION
Individually and as
Documentation Agent
By____________________
Title:
THE CHASE MANHATTAN BANK
Individually and as Syndication Agent
By____________________
Title:
ABN AMRO BANK N.V.
NEW YORK BRANCH
By___________________
Title:
ALLIED IRISH BANK, PLC,
CAYMAN ISLANDS BRANCH
By___________________
Title:
<PAGE>
BANK OF IRELAND
By___________________
Title:
BANK COMMERCIALE ITALIANA
NEW YORK BRANCH
By____________________
Title:
BANK LEUMI TRUST COMPANY
OF NEW YORK
By___________________
Title:
THE BANK OF NEW YORK
By___________________
Title:
THE BANK OF MONTREAL
By__________________
Title:
BANK OF SCOTLAND
By__________________
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By__________________
Title:
<PAGE>
BANQUE FRANCAISE
DU COMMERCE EXTERIEUR
By_________________
Title:
CIBC INC.
By_________________
Title:
COMMERCIAL LOAN FUNDING TRUST
By________________
Title:
CORESTATES BANK
By________________
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By________________
Title:
CREDIT LYONNAIS NEW YORK
BRANCH
By________________
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By________________
Title:
<PAGE>
FIRST UNION NATIONAL BANK
(f/k/a First Union National Bank of
North Carolina)
By________________
Title:
THE FUJI BANK, LIMITED,
ATLANTA AGENCY
By________________
Title:
GIROCREDIT BANK AG
DER SPARKASSEN,
GRAND CAYMAN ISLAND BRANCH
By________________
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By________________
Title:
LEHMAN COMMERCIAL PAPER INC.
By________________
Title:
LLOYDS BANK PLC
By_________________
Title:
MELLON BANK, N.A.
By_________________
Title:
<PAGE>
NATIONSBANK, N.A.
By_________________
Title:
THE SAKURA BANK, LTD
By________________
Title:
THE SANWA BANK, LIMITED
By_________________
Title:
SOCIETE GENERALE
By________________
Title:
THE SUMITOMO BANK, LIMITED
By_________________
Title:
WACHOVIA BANK, N.A.
By_________________
Title:
THE YASUDA TRUST & BANKING
COMPANY, LTD.
By_________________
Title:
<PAGE>
Acknowledged and agreed:
CII HOLDINGS INC
COLTEC CANADA INC
COLTEC INDUSTRIAL PRODUCTS INC
COLTEC TECHNICAL SERVICES INC
DELAVAN-DELTA INC.
DELAVAN INC
GARLOCK INC
GARLOCK INTERNATIONAL INC
GARLOCK OVERSEAS CORPORATION
HOLLEY PERFORMANCE PRODUCTS INC
MENASCO AEROSYSTEMS INC
COLTEC INTERNATIONAL SERVICES CO.
STEMCO INC
WALBAR INC
By_____________________
Title:
On behalf of each of the above
Subsidiary Guarantors
<PAGE>
ANNEX I
Proposed Receivables Transaction Term Sheet.
EXHIBIT 4.2
SECOND AMENDMENT TO CREDIT AGREEMENT
SECOND AMENDMENT (this "Amendment"), dated as of October 14, 1997,
among Coltec Industries Inc. a corporation organized and existing under
the laws of the State of Pennsylvania (the "Company"), the various
Banks from time to time party to the Credit Agreement referred to
below, BANK OF AMERICA ILLINOIS, as Documentation Agent. THE CHASE
MANHATTAN BANK, as Syndication Agent, and BANKERS TRUST COMPANY, as
Administrative Agent, and acknowledged and agreed to by each of the
Subsidiary Guarantors. All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings provided
such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Company, the Banks, the Documentation Agent, the
Syndication Agent and the Administrative Agent are parties to the
Credit Agreement, dated as of March 24, 1992, amended and restated as
of January 11, 1994 and further amended and restated as of December 18,
1996, (as amended, modified or supplemented to the date hereof, the
"Credit Agreement");
WHEREAS, the Company desires to consummate a transaction in which
the Company and Jamco Products, LLC ("Jamco"), a limited liability
company indirectly wholly-owned by the Company, would purchase
substantially all of the assets of Marine & Petroleum Manufacturing,
Inc., Tex-o-lon, Inc. and Repro-lon, Inc. (collectively, the "M&P
Acquisition") for a purchase price of up to $42,000,000:
WHEREAS, the Company desires to sell or otherwise dispose (the "Alco
Asset Sale") of certain inventory, intellectual property (it being
understood that the Company may also license certain intellectual
property in accordance with Section 9.02 (xv) of the Credit Agreement)
and certain other assets previously identified (including, patterns,
dyes, tooling, drawings and plans), in each case which was previously
acquired by the Company pursuant to the purchase, dated as of September
27, 1997, of the Alco locomotive business from General Electric Co.;
WHEREAS, subject to the terms and conditions set forth herein, the
Banks desire to (i) permit the Company to consummate the M&P Acquisition,
the Alco Asset Sale and (ii) further amend the Credit Agreement as
provided herein; and
WHEREAS, subject to the terms and conditions set forth below, the
parties hereto agree as follows.
NOW, THEREFORE, it is agreed:
1. Notwithstanding anything to the contrary contained in Section 8.14
of the Credit Agreement, the Banks hereby (i) consent to the Company
consummating the M&P Acquisition, (ii) waive (solely in connection with
the M&P Acquisition) the limitation on transaction consideration set
forth in Section 8.14 (a) (A) of the Credit Agreement and (iii) agree
that (A) the M&P Acquisition shall constitute a Permitted Acquisition
under the Credit Agreement, (B) the aggregate principal amount of all
Permitted Acquired Debt incurred, and the aggregate amount of cash
expended, in each case pursuant to the M&P Acquisition, shall not be
included for purposes of calculating the Company's compliance (whether
in connection with the M&P Acquisition or Permitted Acquisitions
consummated thereafter) with the aggregate amount of transaction
consideration permitted by Section 8.14 (a) (B) of the Credit Agreement
and (C) the notice regarding the M&P Acquisition previously made by the
Company to the Administrative Agent shall constitute sufficient notice
for purposes of Section 8.14 (a) (E) of the Credit Agreement, so long
as (i) any Liens or Indebtedness issued or assumed in connection with
the M&P Acquisition are otherwise permitted under the Credit Agreement,
(ii) promptly after (but in no event later than 30 days after) the
consummation of the M&P Acquisition, 100% (or, in the case of a Foreign
Subsidiary, 65%) of the capital stock of, or membership interests in,
as the case may be, Jamco and any Subsidiary acquired pursuant to the
M&P Acquisition is pledged and delivered to the
<PAGE>
Collateral Agent for the benefit of the Secured Creditors under the
Pledge Agreement, (iii) within 10 days after the M&P Acquisition, each
such new Domestic Subsidiary (including, without limitation, Jamco) (x)
executes and delivers a counterpart of the Subsidiaries Guaranty and
(y) secures the Company's obligations pursuant to the Credit Agreement
and the other Credit Documents (or such Subsidiary's obligations
pursuant to a Subsidiaries Guaranty) by executing a counterpart of the
Subsidiaries Security Agreement and the Subsidiaries Pledge Agreement
and (iv) no Default or Event of Default then exists or would result
therefrom.
2. Notwithstanding anything to the contrary contained in Section 9.02
of the Credit Agreement, the Banks hereby consent to the Company
consummating the Alco Asset Sale so long as the Net Sale proceeds
therefrom do not exceed $3,700,000. provided that, the Company shall
not be required to apply the proceeds of the Alco Asset Sale as a
mandatory commitment reduction as otherwise required by Section 3.03
(c).
3. Notwithstanding anything to the contrary contained in Section 9.04
of the Credit Agreement, the Banks hereby consent to Jamco incurring
Indebtedness, in aggregate principal amount not to exceed $2.6 million
outstanding at any time, consisting of seller note issued in connection
with the M&P Acquisition, which note shall be unsecured and otherwise
on terms and conditions satisfactory to Administrative Agent.
4. Section 11 of the Credit Agreement is hereby amended by inserting
at the end of the definition of "Consolidated ERITDA" appearing therein
the following new sentence:
"Notwithstanding anything to the contrary contained above.
Consolidated EBITDA shall be determined on a pro forma basis to
give effect to the consummation of all Permitted Acquisitions
effected during the respective such period as if such Permitted
Acquisitions had accrued on the first date of such period."
5. Section 11 of the Credit Agreement is hereby further amended by
inserting at the end of the definition of "Consolidated Interest
Expense" appearing therein the following new sentence:
"Notwithstanding anything to the contrary contained above,
Consolidated Interest Expense shall be determined on a pro forma
basis to give effect to the consummation of all Permitted
Acquisitions effected during the respective such period as if such
Permitted Acquisitions had occurred on the first day of such
period."
6. The Banks hereby waive any Default or Event of Default arising
solely from the Company's failure to deliver the officer's
certificates, otherwise required to be delivered pursuant to Sections
8.14 (a) (B) and 8.14 (c), in connection with the Permitted
Acquisitions effected prior to the date hereof, so long as, within 10
days after the Second Amendment Effective Date (as defined below), the
Company shall deliver to the Administrative Agent a certificate of the
Company's chief financial officer showing (in reasonable detail) that
after giving effect to all Permitted Acquisitions effected prior to the
date hereof, the Company is in compliance with the requirements of
Section 8.14 (a) (B) and 8.14 (c).
7. In order to induce the Banks to enter into this Amendment, the
Company hereby represents and warrants that (i) all representations and
warranties contained in the Section 7 of the Credit Agreement are true
and correct in all material respects on as of the Second Amendment
Effective Date and after giving effect to the Amendment (unless such
representations and warranties relate to a specific earlier date, in
which case such representations and warranties shall be true and
correct as of such earlier date) and (ii) there exists no Default or
Event or Default on the Second Amendment Effective Date after giving
effect to this Amendment.
8. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
9. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A
complete set of counterparts shall be lodged with the Company and the
Administrative Agent.
<PAGE>
10. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
11. This Amendment shall become effective on the date (the "Second
Amendment Effective Date") when each Credit Party and the Required
Banks shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered (including by way of
facsimile transmission) the same to the Administrative Agent at its
Notice Office.
12. From and after the Second Amendment Effective Date, all
references in the Credit Agreement and each of the Credit Documents to
the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused a counter part of
this Amendment to be duly executed and delivered as of the date first
above written.
COLTEC INDUSTRIES INC
By_____________________
Title:
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By_____________________
Title:
BANK OF AMERICA NATIONAL TRUST
& SAVING ASSOCIATION
Individually and as
Documentation Agent
By____________________
Title:
THE CHASE MANHATTAN BANK
Individually and as Syndication Agent
By____________________
Title:
ABN AMRO BANK N.V.
NEW YORK BRANCH
By___________________
Title:
ALLIED IRISH BANK, PLC,
CAYMAN ISLANDS BRANCH
By___________________
Title:
<PAGE>
BANK OF IRELAND
By___________________
Title:
BANK COMMERCIALE ITALIANA
NEW YORK BRANCH
By____________________
Title:
BANK LEUMI TRUST COMPANY
OF NEW YORK
By___________________
Title:
THE BANK OF NEW YORK
By___________________
Title:
THE BANK OF MONTREAL
By__________________
Title:
BANK OF SCOTLAND
By__________________
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By__________________
Title:
<PAGE>
BANQUE FRANCAISE
DU COMMERCE EXTERIEUR
By_________________
Title:
CIBC INC.
By_________________
Title:
COMMERCIAL LOAN FUNDING TRUST
By________________
Title:
<PAGE>
CORESTATES BANK
By________________
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By________________
Title:
CREDIT LYONNAIS NEW YORK
BRANCH
By________________
Title:
THE DAI-ICHI KANGYO BANK, LTD.
By________________
Title:
FIRST UNION NATIONAL BANK
(f/k/a First Union National Bank of
North Carolina)
By________________
Title:
THE FUJI BANK, LIMITED,
ATLANTA AGENCY
By________________
Title:
GIROCREDIT BANK AG
DER SPARKASSEN,
GRAND CAYMAN ISLAND BRANCH
By________________
Title:
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By________________
Title:
LEHMAN COMMERCIAL PAPER INC.
By________________
Title:
LLOYDS BANK PLC
By_________________
Title:
MELLON BANK, N.A.
By_________________
Title:
NATIONSBANK, N.A.
By_________________
Title:
THE SAKURA BANK, LTD
By________________
Title:
THE SANWA BANK, LIMITED
By_________________
Title:
SOCIETE GENERALE
By________________
Title:
<PAGE>
THE SUMITOMO BANK, LIMITED
By_________________
Title:
WACHOVIA BANK, N.A.
By_________________
Title:
THE YASUDA TRUST & BANKING
COMPANY, LTD.
By_________________
Title:
<PAGE>
Acknowledged and agreed:
CII HOLDINGS INC
COLTEC CANADA INC
COLTEC INDUSTRIAL PRODUCTS INC
COLTEC TECHNICAL SERVICES INC
DELAVAN-DELTA INC.
DELAVAN INC
GARLOCK INC
GARLOCK INTERNATIONAL INC
GARLOCK OVERSEAS CORPORATION
HOLLEY PERFORMANCE PRODUCTS INC
MENASCO AEROSYSTEMS INC
COLTEC INTERNATIONAL SERVICES CO.
STEMCO INC
WALBAR INC
By_____________________
Title:
On behalf of each of the above
Subsidiary Guarantors
<PAGE>
ANNEX I
Proposed Receivables Transaction Term Sheet.
EXHIBIT 10.1
FIRST AMENDMENT TO THE
JUNE 1, 1995 EMPLOYMENT AGREEMENT
This First Amendment dated as of this ______________ of ______________,
1997 between John W. Guffey, Jr. (the "Executive") and Coltec
Industries Inc, a Pennsylvania Corporation (the "Corporation").
WHEREAS, the Executive and the Corporation desire to continue the
relationship established by the employment agreement dated June 1, 1995
between the Executive and the Corporation (the "Agreement") but to
amend the terms and conditions thereof to reflect modifications and
clarifications to the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises herein contained, the parties agree to amend the Agreement as
follows:
1.The address, 430 Park Avenue, New York, New York 10022, appearing in
section 2.3 shall be replaced with 3 Coliseum Center, 2550 West Tyvola
Road, Charlotte, North Carolina 28217.
2.Section 7.1(c) shall be modified by renumbering subsection (v) to
become (vi) and changing the words New York City to be Charlotte, NC.
3. Section 7.1(c) shall be modified by the insertion of a new
Subsection (v) reading as follows:
"The Corporation during the two year period following a Change-in-
Control delivers to the Executive a Notice of Termination Other
than for Cause or takes any other action which purports to
terminate the Executive's Employment Other than for Cause."
4. Section 7.6 of the Agreement shall be modified by the insertion of
Subsections (e) and (f) reading as follows:
e)For purposes of Section 7.6(d) Executive's participation in respect
to the Corporation's 1994 Long Term Incentive Plan (the "LTIP") shall
be as follows (the defined terms within this section and not otherwise
defined within this agreement being the same as defined in the LTIP):
i) all of the Executive's Restricted Shares previously issued under the
LTIP and not yet vested by the Date of Termination shall become 100%
vested, nonforfeitable and fully transferable as of such date, and
ii) the Corporation will pay the Executive as soon as practicable
following the Date of Termination an amount in cash equal to three
times the product of (x) the number of Performance Units previously
granted under the LTIP to the Executive and still outstanding
times (y) the Award Value at the Threshold Target level.
f)For purposes of Section 7.6(d) Executive's benefits with respect to
the Corporation's Retirement Plan for Salaried Employees and the BE
Plan or any equivalent or superior plans or arrangements in which the
Executive participated prior to the Date of Termination (any such Plan
or arrangement, the "Pension Plans") and the Corporation's welfare
benefit plans in which the Executive participates on the date hereof or
any equivalent or superior successor plans or arrangements in which the
Executive participates prior to the Date of Termination ("Welfare
Benefit Plans") the contemplated continued participation shall require
the Corporation to pay or provide the executive with the benefits which
the Executive would have received under the Pension Plans and Welfare
Benefit Plans if (x) the Executive's employment and his coverage under
the Pension Plans and the Welfare Benefit Plans had continued during
the relevant damage period, and (y) the compensation described in
Section 7.6(b) which would have been credited under the Pension Plans
and/or the Welfare Plans were paid to the Executive ratably over the
relevant damage period.
<PAGE>
5. Section 7.7 of the Agreement shall be notified by the insertion of
Subsections (f) and (g) reading as follows:
f)For purposes of Section 7.7(e) Executive's participation in respect
to the LTIP shall be as follows (the defined terms within this section
and not otherwise defined within this agreement being the same as
defined in the LTIP):
i) all of the Executive's Restricted Shares previously issued under the
LTIP and not yet vested by the Date of Termination shall become 100%
vested, nonforfeitable and fully transferable as of such date; and
ii) the Corporation will pay the Executive as soon as practicable
following the Date of Termination an amount in cash equal to three
times the product of (x) the number of Performance Units previously
granted under the LTIP to the Executive and still outstanding, times
(y) the Award Value at the Threshold Target level.
g)For purposes of Section 7.7(e) Executive's benefits with respect to
the Pension Plans and the Welfare Benefit Plans, the contemplated
continued participation shall require the Corporation to pay or provide
the Executive with the benefits, earnings credits for benefits and
service credits for benefits which the Executive would have received
under the Pension Plans and Welfare Benefit Plans if (x) the
Executive's employment and his coverage under the Pension Plans and the
Welfare Benefit Plans had continued during the relevant damage period,
and (y) the compensation described in Section 7.7(b) which would have
been credited under the Pension Plans and/or the Welfare Plans were
paid to the Executive ratably over the relevant damage period.
6. Section 7.9 of the Agreement shall be modified by rewording the
second sentence of such section to read in its entirety as follows:
"Upon receipt of written notice from Executive that Executive has
been reemployed by another company or entity on a full-time basis
(or would have been reemployed but for the non-competition
provisions of Section 1 of the Agreement) benefits otherwise
receivable by Executive pursuant to Sections 7.6(d) or 7.7(e)
related solely to life, health disability and accident insurance
plans and programs and other similar benefits (but not Incentive
Compensation, LTIP, Pension Plans or other similar plans and
programs) shall be reduced to the extent comparable benefits are
made available to Executive at his new employment and any such
benefits actually received by Executive shall be reported to the
Corporation.
7. Section 9 of the Agreement shall be modified by inserting the words,
"the last home address of the Executive provided to the Corporation by
the Executive", in place of the Executive's address now appearing in
Section 9. Section 9 shall be further modified by replacing the
address, 430 Park Avenue, New York, New York 10022, with the address, 3
Coliseum Center, 2550 West Tyvola Road, Charlotte, North Carolina
28217.
<PAGE>
8.In all other respects, the Agreement shall remain in full force and
effect and unmodified except as set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this amendment as
of the date and year first above written.
COLTEC INDUSTRIES INC
By: ______________________________
Name
______________________________
Title
EXECUTIVE
By: ________________________________
Name
________________________________
Title
EXHIBIT 10.2
FIRST AMENDMENT TO THE
___________________ EMPLOYMENT AGREEMENT
This First Amendment dated as of this ______________ of ______________,
1997 between ___________________ (the "Executive") and Coltec
Industries Inc, a Pennsylvania Corporation (the "Corporation").
WHEREAS, the Executive and the Corporation desire to continue the
relationship established by the employment agreement dated
___________________ between the Executive and the Corporation (the
"Agreement") but to amend the terms and conditions thereof to reflect
modifications and clarifications to the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises herein contained, the parties agree to amend the Agreement as
follows:
1. The address, 430 Park Avenue, New York, New York 10022, appearing in
section 2.3 shall be replaced with 3 Coliseum Center, 2550 West Tyvola
Road, Charlotte, North Carolina 28217.
2. Section 6.1(c) shall be modified by the renumbering of Subsection
(v) to become (vi) and the insertion of a new Subsection (v) reading as
follows:
"The Corporation during the two year period following a Change-in-
Control delivers to the Executive a Notice of Termination Other
than for Cause or takes any other action which purports to
terminate the Executive's Employment Other than for Cause."
3. Section 6.6 of the Agreement shall be modified by the insertion of
Subsections (e) and (f) reading as follows:
e)For purposes of Section 6.6(d) Executive's participation in respect
to the Corporation's 1994 Long Term Incentive Plan (the "LTIP") shall
be as follows (the defined terms within this section and not otherwise
defined within this agreement being the same as defined in the LTIP):
i) all of the Executive's Restricted Shares previously issued under the
LTIP and not yet vested by the Date of Termination shall become 100%
vested, nonforfeitable and fully transferable as of such date, and
ii) the Corporation will pay the Executive as soon as practicable
following the Date of Termination an amount in cash equal to three
times the product of (x) the number of Performance Units previously
granted under the LTIP to the Executive and still outstanding
times (y) the Award Value at the Threshold Target level.
f)For purposes of Section 6.6(d) Executive's benefits with respect to
the Corporation's Retirement Plan for Salaried Employees and the BE
Plan or any equivalent or superior plans or arrangements in which the
Executive participated prior to the Date of Termination (any such Plan
or arrangement, the "Pension Plans") and the Corporation's welfare
benefit plans in which the Executive participates on the date hereof or
any equivalent or superior successor plans or arrangements in which the
Executive participates prior to the Date of Termination ("Welfare
Benefit Plans") the contemplated continued participation shall require
the Corporation to pay or provide the executive with the benefits which
the Executive would have received under the Pension Plans and Welfare
Benefit Plans if (x) the Executive's employment and his coverage under
the Pension Plans and the Welfare Benefit Plans had continued during
the relevant damage period, and (y) the compensation described in
Section 6.6(b) which would have been credited under the Pension Plans
and/or the Welfare Plans were paid to the Executive ratably over the
relevant damage period.
4. Section 6.7 of the Agreement shall be notified by the insertion of
Subsections (f) and (g) reading as follows:
<PAGE>
f)For purposes of Section 6.7(e) Executive's participation in respect
to the LTIP shall be as follows (the defined terms within this section
and not otherwise defined within this agreement being the same as
defined in the LTIP):
i) all of the Executive's Restricted Shares previously issued under the
LTIP and not yet vested by the Date of Termination shall become 100%
vested, nonforfeitable and fully transferable as of such date; and
ii) the Corporation will pay the Executive as soon as practicable
following the Date of Termination an amount in cash equal to three
times the product of (x) the number of Performance Units previously
granted under the LTIP to the Executive and still outstanding, times
(y) the Award Value at the Threshold Target level.
g)For purposes of Section 6.7(e) Executive's benefits with respect to
the Pension Plans and the Welfare Benefit Plans, the contemplated
continued participation shall require the Corporation to pay or provide
the Executive with the benefits,
earnings credits for benefits and service credits for benefits which
the Executive would have received under the Pension Plans and Welfare
Benefit Plans if (x) the Executive's employment and his coverage under
the Pension Plans and the Welfare Benefit Plans had continued during
the relevant damage period, and (y) the compensation described in
Section 6.7(b) which would have been credited under the Pension Plans
and/or the Welfare Plans were paid to the Executive ratably over the
relevant damage period.
5. Section 6.9 of the Agreement shall be modified by rewording the
second sentence of such section to read in its entirety as follows:
"Upon receipt of written notice from Executive that Executive has
been reemployed by another company or entity on a full-time basis
(or would have been reemployed but for the non-competition
provisions of Section 10 of the Agreement) benefits otherwise
receivable by Executive pursuant to Sections 6.6(d) or 6.7(e)
related solely to life, health disability and accident insurance
plans and programs and other similar benefits (but not Incentive
Compensation, LTIP, Pension Plans or other similar plans and
programs) shall be reduced to the extent comparable benefits are
made available to Executive at his new employment and any such
benefits actually received by Executive shall be reported to the
Corporation.
6. Section 8 of the Agreement shall be modified by inserting the words,
"the last home address of the Executive provided to the Corporation by
the Executive", in place of the Executive's address now appearing in
Section 8. Section 8 shall be further modified by replacing the
address, 430 Park Avenue, New York, New York 10022, with the address, 3
Coliseum Center, 2550 West Tyvola Road, Charlotte, North Carolina
28217.
<PAGE>
7. In all other respects, the Agreement shall remain in full force and
effect and unmodified except as set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this amendment as
of the date and year first above written.
COLTEC INDUSTRIES INC
By: ______________________________
Name
______________________________
Title
EXECUTIVE
By: ________________________________
Name
________________________________
Title
EXHIBIT 10.3
AMENDMENT NO. 2 TO THE
COLTEC INDUSTRIES INC
1992 STOCK OPTION AND INCENTIVE PLAN
The Corporation hereby amends the Coltec Industries Inc 1992 Stock
Option and Incentive Plan in the manner hereinafter set forth.
1. Section 17 of the Plan entitled Non-Assignability of Awards shall
be amended in its entirety to read as follows:
"17. Non-Assignability of Awards. No Award shall be
assignable or transferable by the recipient except by will or
by the laws of descent and distribution. An Award shall be
exercisable only by the recipient or his or her personal
representatives, heirs or legatees. Notwithstanding the
foregoing, the Committee in its discretion, after making
suitable provision with the employee to provide for the
payment of any required withholding upon the option's
exercise, may authorize a recipient who is an employee of the
Corporation or one of its Subsidiaries to transfer a
Nonqualified Stock Option to any member of the employee's
immediate family, to a trust established solely for the
benefit of one or more members of the employee's immediate
family or to a partnership of which the only individuals or
entities who are or could be partners are members of the
employee's immediate family and/or a trust established solely
for the benefit of one or more members of the employee's
immediate family (collectively, `Permitted Transferee'). For
this purpose, `immediate family' shall mean the employee's
spouse, children, present or former stepchildren,
grandchildren, present or former stepgrandchildren, parents,
present or former stepparents, grandparents, siblings
(including half- brothers and sisters), in-laws and
relationships arising due to legal adoption. The Committee's
authorization to allow such a transfer must be evidenced by
the written Stock Option Agreement pursuant to which the
Nonqualified Stock Option is awarded, or by a written
amendment thereto. In the event of a transfer, the Permitted
Transferee may exercise the Nonqualified Stock Option
generally in accordance with the terms of this Plan and the
Stock Option Agreement, but may not subsequently assign or
transfer the Nonqualified Stock Option except by will or by
the laws of descent and distribution. The foregoing sentence
shall not be interpreted to prohibit a Permitted Transferee
that is either a trust or partnership from modifying or
expanding its beneficiaries or partners, respectively,
provided that such beneficiaries or partners also
independently would be considered Permitted Transferees."
"No Option shall be exercisable and no transfer of the shares
of Common Stock underlying such Option (the "Underlying Shares")
may be made to any Permitted Transferee; and any attempt to
exercise any Option or to transfer any Underlying Shares to any
Permitted Transferee shall be void and of no effect, unless and
until (i) a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), has been duly filed and
declared effective pertaining to the Underlying Shares and
the Underlying Shares have been duly qualified under applicable
state securities or blue sky laws or (ii) the Board, in its sole
discretion after securing the advice of counsel, determines, or
the Permitted Transferee provides an opinion of counsel satisfactory
to the Board, that such registration or qualification is not required
as a result of the availability of an exemption from registration or
qualification under such laws."
2. Section 18 of the Plan entitled Withholding Taxes shall be amended
in its entirety to read as follows:
"18. Withholding Taxes. Whenever under the Plan shares
are to be issued in satisfaction of Awards, the Corporation
shall have the right to require the employee (or if the
employee is not then living, the employee's estate) to remit
to the Corporation an amount sufficient to satisfy Federal,
state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares.
Whenever under the Plan payments are to be made in cash, such
payments shall not be net of an amount sufficient to satisfy
Federal, state and local withholding tax requirements."
<PAGE>
3. The foregoing Amendments shall be effective for all Nonqualified Stock
Options granted under the Plan; provided, however, that the amendment
to Section 17 shall not be effective for any Nonqualified Stock Option
granted under the Plan prior to July 10, 1997, until the employee
granted the Nonqualified Stock Option consents to the Amendment.
EXHIBIT 10.4
AMENDMENT NO. 1 TO THE
1994 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
OF COLTEC INDUSTRIES INC
The Corporation hereby amends the 1994 Stock Option Plan
for Outside Directors of Coltec Industries Inc in the manner
hereinafter set forth.
1. Article VI, Section 6.07 of the Plan entitled
Nontransferable shall be amended in its entirety to read as
follows:
"6.07 Non-Assignability of Options. No Option
shall be assignable or transferable by the
recipient except by will or by the laws of descent
and distribution. An Option shall be exercisable
only by the recipient or his or her personal
representatives, heirs or legatees.
Notwithstanding the foregoing, the Company in its
discretion, after making suitable provision with
the Outside Director to provide for the payment of
any required withholding upon the Option's
exercise, may authorize the Outside Director to
transfer a Nonqualified Stock Option to any member
of the Outside Director's immediate family, to a
trust established solely for the benefit of one or
more members of the Outside Director's immediate
family or to a partnership of which the only
individuals or entities who are or could be
partners are members of the Outside Director's
immediate family and/or a trust established solely
for the benefit of one or more members of the
Outside Director's immediate family (collectively,
`Permitted Transferee'). For this purpose,
`immediate family' shall mean the Outside
Director's spouse, children, present or former
stepchildren, grandchildren, present or former
stepgrandchildren, parents, present or former
stepparents, grandparents, siblings (including half-
brothers and sisters), in-laws and relationships
arising due to legal adoption. The Company's
authorization to allow such a transfer must be
evidenced by the written Stock Option Agreement
pursuant to which the Nonqualified Stock Option is
awarded, or by a written amendment thereto. In the
event of a transfer, the Permitted Transferee may
exercise the Nonqualified Stock Option generally in
accordance with the terms of this Plan and the
Stock Option Agreement, but may not subsequently
assign or transfer the Nonqualified Stock Option
except by will or by the laws of descent and
distribution. The foregoing sentence shall not be
interpreted to prohibit a Permitted Transferee that
is either a trust or partnership from modifying or
expanding its beneficiaries or partners,
respectively, provided that such beneficiaries or
partners also independently would be considered
Permitted Transferees."
A new Section of the Plan entitled Withholding Taxes shall
be added to read as follows:
"6.08 Withholding Taxes. Whenever under the
Plan shares are to be issued in satisfaction of
Options, the Corporation shall have the right to
require the Outside Director (or if the Outside
Director is not then living, the Outside Director's
estate) to remit to the Corporation an amount
sufficient to satisfy Federal, state and local
withholding tax requirements prior to the delivery
of any certificate or certificates for such shares.
Whenever under the Plan payments are to be made in
cash, such payments shall not be net of an amount
sufficient to satisfy Federal, state and local
withholding tax requirements."
<PAGE>
2. The foregoing Amendment shall be effective for all Stock
Options granted under the Plan; provided, however, that the
amendment to Article VI, shall not be effective for any Stock
Option granted under the Plan prior to July 10, 1997, until
the Outside Director granted the Stock Option consents to the
Amendment.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 28, 1997 CONSOLIDATED BALANCE SHEET AND STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-28-1997
<CASH> 11,769
<SECURITIES> 0
<RECEIVABLES> 145,088
<ALLOWANCES> 2,705
<INVENTORY> 236,486
<CURRENT-ASSETS> 413,587
<PP&E> 644,020
<DEPRECIATION> (397,780)
<TOTAL-ASSETS> 864,212
<CURRENT-LIABILITIES> 226,275
<BONDS> 27,567
0
0
<COMMON> 705
<OTHER-SE> (391,597)
<TOTAL-LIABILITY-AND-EQUITY> 864,212
<SALES> 955,852
<TOTAL-REVENUES> 955,852
<CGS> 650,284
<TOTAL-COSTS> 812,976
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,905
<INCOME-PRETAX> 103,971
<INCOME-TAX> 35,350
<INCOME-CONTINUING> 68,621
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,621
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
