<PAGE> 1
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 27, 1998
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 November 5, 1998, there were outstanding 63,052,035 shares of common
stock, par value $.01 per share.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 27 Sept. 28 Sept. 27 Sept. 28
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 360,398 $ 324,453 $ 1,129,593 $ 955,852
Cost of sales 249,329 221,472 821,333 650,284
--------- --------- ----------- ---------
Gross profit 111,069 102,981 308,260 305,568
Selling and administrative 54,968 53,787 180,097 162,692
--------- --------- ----------- ---------
Operating income 56,101 49,194 128,163 142,876
Gain on divestiture -- -- 56,194 --
Interest expense and other, net (12,620) (13,859) (40,930) (38,905)
--------- --------- ----------- ---------
Earnings before income taxes, minority
interest and extraordinary item 43,481 35,335 143,427 103,971
Income taxes (14,783) (12,014) (48,765) (35,350)
Minority interest in net loss of
subsidiaries (1,300) -- (2,385) --
--------- --------- ----------- ---------
Earnings before extraordinary item 27,398 23,321 92,277 68,621
Extraordinary item (net of tax) -- -- (4,326) --
--------- --------- ----------- ---------
Net earnings $ 27,398 $ 23,321 $ 87,951 $ 68,621
========= ========= =========== =========
Basic earnings per common share
Before extraordinary item $ .42 $ .36 $ 1.40 $ 1.04
Extraordinary item -- -- (.07) --
--------- --------- ----------- ---------
Net earnings $ .42 $ .36 $ 1.33 $ 1.04
========= ========= =========== =========
Basic weighted-average common
shares 65,050 65,428 65,639 65,977
========= ========= =========== =========
Diluted earnings per common share
Before extraordinary item $ .41 $ .35 $ 1.36 $ 1.03
Extraordinary item -- -- (.06) --
--------- --------- ----------- ---------
Net earnings $ .41 $ .35 $ 1.30 $ 1.03
========= ========= =========== =========
Diluted weighted-average common
and common equivalent shares 70,419 66,596 69,620 67,007
========= ========= =========== =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 3
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Sept. 27 Dec. 31
1998 1997
---------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,032 $ 14,693
Accounts and notes receivable, net of
allowance of $3,078 in 1998 and $2,394 in 1997 180,956 120,311
Inventories
Finished goods 40,927 53,748
Work in process and finished parts 159,615 158,937
Raw materials and supplies 37,096 44,051
---------- --------
237,638 256,736
Deferred income taxes 17,218 15,195
Other current assets 14,475 20,508
---------- --------
Total current assets 468,319 427,443
Property, plant and equipment, net 298,799 287,619
Costs in excess of net assets acquired, net 216,826 157,751
Other assets 101,863 60,221
---------- --------
$1,085,807 $933,034
========== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
Sept. 27 Dec. 31
1998 1997
---------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 3,220 $ 1,811
Accounts payable 93,463 93,799
Accrued expenses 226,077 138,969
Current portion of liabilities of
discontinued operations 4,999 4,999
---------- --------
Total current liabilities 327,759 239,578
Long-term debt 607,583 757,578
Deferred income taxes 88,828 79,229
Other liabilities 81,973 60,892
Liabilities of discontinued operations 146,671 154,918
Commitments and contingencies -- --
Company-obligated, mandatorily redeemable
convertible preferred securities of subsidiary
Coltec Capital Trust holding solely convertible
junior subordinated debentures of the Company 144,966 --
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, 70,595,495 and
70,501,948 shares issued at September 27, 1998
and December 31, 1997, respectively (excluding
25,000,000 shares held by a wholly-owned
subsidiary) 705 705
Capital surplus 643,729 642,828
Retained deficit (824,535) (912,029)
Unearned compensation (3,370) (2,721)
Minimum pension liability (1,646) (1,646)
Foreign currency translation adjustments (16,755) (6,745)
---------- --------
(201,872) (279,608)
Less cost of 6,461,985 and 4,666,406 shares
of common stock in treasury at
September 27, 1998 and December 31, 1997,
respectively (110,101) (79,553)
---------- --------
(311,973) (359,161)
---------- --------
$1,085,807 $933,034
========== ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------
Sept. 27 Sept. 28
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 87,951 $ 68,621
Adjustments to reconcile net earnings to cash
provided by operating activities:
Gain on divestiture (56,194) --
Extraordinary item 6,554 --
Depreciation and amortization 36,948 28,327
Deferred income taxes 8,781 10,209
Payments of liabilities of discontinued
operations (8,247) (19,196)
Foreign currency translation adjustment (10,010) (4,062)
Other operating items (12,453) (30,825)
Changes in assets and liabilities (net of effects
from acquisitions and divestiture):
Accounts and notes receivable (60,525) (10,604)
Inventories 16,141 (28,314)
Other current assets 3,268 (504)
Accounts payable (1,114) 11,934
Accrued expenses 77,404 4,748
--------- --------
Cash provided by operating activities 88,504 30,334
--------- --------
Cash flows from investing activities:
Capital expenditures (36,700) (46,004)
Proceeds from divestiture 100,000 --
Acquisition of businesses, net (93,842) (23,778)
--------- --------
Cash used in investing activities (30,542) (69,782)
--------- --------
Cash flows from financing activities:
Increase (decrease) in revolving facility, net (432,000) 25,000
Repayment of long-term debt (22,067) (8,117)
Issuance of long-term debt, net 292,151 --
Issuance of convertible preferred securities, net 144,472 --
Sale of accounts receivable -- 62,000
Purchase of treasury stock (33,308) (42,695)
Payments for unclaimed stock (3,871) --
--------- --------
Cash provided by (used in)
investing activities (54,623) 36,188
--------- --------
Increase (decrease) in cash and cash equivalents 3,339 (3,260)
Cash and cash equivalents - beginning of period 14,693 15,029
--------- --------
Cash and cash equivalents - end of period $ 18,032 $ 11,769
========= ========
Supplemental cash flow data:
Cash paid for interest $ 32,412 $ 35,025
Cash paid for income taxes 21,589 13,827
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 27 Sept. 28 Sept. 27 Sept. 28
1998 1997 1998 1997
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net earnings $ 27,398 $ 23,321 $ 87,951 $ 68,621
--------- --------- ----------- ---------
Other comprehensive income (loss), net of
tax:
Foreign currency translation adjustment (1,603) 978 (10,010) (4,062)
Unearned compensation (1,220) (712) (649) (1,041)
Amortization of preferred stock issuance
costs (196) -- (494) --
--------- --------- ----------- ---------
Other comprehensive income (loss),
net of tax (3,019) 266 (11,153) (5,103)
--------- --------- ----------- ---------
Comprehensive income $ 24,379 $ 23,587 $ 76,798 $ 63,518
========= ========= =========== =========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
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 the 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, 1997 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, 1997.
2. ACQUISITIONS AND DIVESTITURES
On January 30, 1998, the Company acquired certain Marine and Petroleum
Mfg. Inc.'s manufacturing facilities based in Texas for approximately
$17,000. The plants acquired produce flexible graphite and
polytetrafluoroethylene (PTFE) fluid sealing products used in the
petrochemical industry. Combined annual sales for these facilities are
expected to approximate $18,000. The Company also acquired Tex-o-Lon
and Repro-Lon for approximately $25,000. These two Texas businesses
have combined annual sales of $15,000. Tex-o-Lon manufactures,
machines and distributes PTFE products, primarily for the
semiconductor industry. Repro-Lon reprocesses PTFE compounds for the
chemical and semiconductor industries. The acquisitions were accounted
for as purchases; accordingly, the purchase price, which was financed
through available cash resources, was allocated to the acquired assets
based upon their fair market values.
On February 2, 1998, the Company purchased the Sealing Division of
Groupe Carbone Lorraine for $45,600. This division, with facilities in
France and South Carolina, produces high-technology metallic gaskets
used in the nuclear, petroleum and chemical industries. Sales are
expected to approximate $38,000. This acquisition was accounted for as
a purchase and the purchase price, also financed through available
cash resources, was allocated to the acquired assets based upon their
fair market values.
In May 1998, the Company sold the capital stock of its Holley
Performance Products subsidiary to Kohlberg & Co., L.L.C., a private
merchant banking firm located in Mount Kisco, New York, for $100
million in cash. The sale resulted in a pre-tax gain of $56,194, net
of liabilities retained.
In August 1998, the Company acquired from Federal-Mogul Corporation
the 20% of Garlock Bearings that it did not previously own for
approximately $12,000. Garlock Bearings, a producer of
self-lubricating bearings, has annual sales of approximately $50,000.
3. FINANCINGS
In April 1998, the Company privately placed, with institutional
investors, $300,000 principal amount of 7 1/2% Senior Notes due 2008
("Senior Notes") and $150,000 (3,000,000 shares at liquidation value
of $50 per Convertible Preferred
7
<PAGE> 8
Security) of 5 1/4% Trust Convertible Preferred Securities
("Convertible Preferred Securities"). The placement of the Convertible
Preferred Securities was made through the Company's wholly-owned
subsidiary, Coltec Capital Trust ("Trust"), a newly-formed Delaware
business trust. The Convertible Preferred Securities represent
undivided beneficial ownership interests in the Trust. Substantially
all the assets of the Trust are the 5 1/4% Convertible Junior
Subordinated Deferrable Interest Debentures Due April 15, 2028 which
were acquired with the proceeds from the private placement of the
Convertible Preferred Securities. The Company's obligations under the
Convertible Junior Subordinated Debentures, the Indenture pursuant to
which they were issued, the Amended and Restated Declaration of Trust
of the Trust, and the Guarantee of the Company, taken together,
constitute a full and unconditional guarantee by the Company of
amounts due on the Convertible Preferred Securities. The Convertible
Preferred Securities are convertible at the option of the holders at
any time into the common stock of the Company at an effective
conversion price of $29 5/16 per share and are redeemable at the
Company's option after April 20, 2001 at 102.63% of the liquidation
amount declining ratably to 100% after April 20, 2004.
The net proceeds of the Senior Notes and the Convertible Preferred
Securities of approximately $436,623 were used by the Company to
reduce indebtedness under its credit facility. Dividends on the
Convertible Preferred Securities were $1.3 million and $2.4 million
after tax, in the three months and nine months ended September 27,
1998, respectively.
4. EXTRAORDINARY ITEM
The Company incurred an extraordinary charge of $4,326, net of income
taxes of $2,228, in the second quarter of 1998 in connection with
early debt repayment.
5. EARNINGS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings per Share, effective December 15,
1997. The Company's reported earnings per common share for the three
months and nine months ended September 27, 1997 equaled diluted
earnings per share as set forth in SFAS No. 128. As a result, the
Company's reported earnings per share for the three months and nine
months ended September 27, 1997 were not restated.
Basic earnings per common share are computed by dividing net income by
the weighted-average number of shares of common stock outstanding
during the year.
8
<PAGE> 9
Diluted earnings per common share is computed by using the treasury
stock method to determine shares related to stock options and
restricted stock.
<TABLE>
<CAPTION>
(in thousands) Three Months Ended Nine Months Ended
Sept. 27 Sept. 28 Sept. 27 Sept. 28
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income available to common
shareholders before
extraordinary item $ 27,398 $ 23,321 $ 92,277 $ 68,621
Dividends on convertible
preferred securities, net
of tax 1,300 -- 2,385 --
--------- --------- ----------- ---------
Income available to common
shareholders before
extraordinary item plus
assumed conversions 28,698 23,321 94,662 68,621
Extraordinary item, net of
tax -- -- (4,326) --
--------- --------- ----------- ---------
Net income available to
common shareholders plus
assumed conversions $ 28,698 $ 23,321 $ 90,336 $ 68,621
========= ========= =========== =========
Basic weighted-average
common shares 65,050 65,428 65,639 65,977
Stock options and
restricted stock issued 252 1,168 854 1,030
Convertible preferred
securities 5,117 -- 3,127 --
--------- --------- ----------- ---------
Diluted weighted-average
common and common
equivalent shares 70,419 66,596 69,620 67,007
========= ========= =========== =========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Asbestos
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 27, 1998 two subsidiaries of the Company were
among a number of defendants (typically 15 to 40) in approximately
102,000 actions (including approximately 17,400 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 1998, two subsidiaries of the Company received
approximately 28,700 new actions compared to approximately 31,400 new
actions received during the first nine months of 1997. Through
September 27, 1998, approximately 237,300 of the approximately 339,300
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 from an extensive list
of defendants. Although the law in each state differs to some extent,
it appears, based on advice of counsel,
9
<PAGE> 10
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 nor any of 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.
Payments were made with respect to asbestos liability and related
costs aggregating $34,423 and $47,572 for the first nine months of
1998 and 1997, respectively, substantially all of which were covered
by insurance. Settlements are generally made on a group basis with
payments made to individual claimants over periods of one to four
years. Related to payments not covered by insurance, the Company
recorded charges to operations amounting to $6,000 for the first nine
months of 1998 and 1997. The average cost to the Company for
unreimbursed expenses and liability per case disposed was
approximately $.3 for the nine months ended September 27, 1998 and the
nine months ended September 28, 1997.
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 27, 1998, 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 $126,500 and the Company expects that this
cost will be substantially covered by insurance.
With respect to the 84,600 outstanding actions as of September 27,
1998, 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. The lawsuits are disposed of over a
period of one year to more than five years, with the majority being
disposed of by the third year after filing. 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 of 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.
10
<PAGE> 11
The Company believes that it will continue to receive some number of
asbestos lawsuits into the foreseeable future. It is also difficult,
however, to predict the number of asbestos lawsuits that the Company's
subsidiaries will receive or the timeframe in which they will be
received. The Company has noted that, with respect to recently settled
actions and 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, the jurisdiction in which
a lawsuit is filed, the pendency of tort reform, 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. Subsidiaries of the
Company continue to distribute encapsulated asbestos-bearing product
in the United States with annual sales of less than $1,500. All sales
are accompanied by appropriate warnings. The end users of such product
are sophisticated users, who utilize the product for critical
applications where no known substitutes exist or have been approved.
Insurance coverage of a small non-operating subsidiary formerly
distributing asbestos-bearing products is nearly depleted. Considering
the foregoing, as well as the experience of the Company's subsidiaries
and other defendants in asbestos litigation, the likely sharing of
judgments 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
11
<PAGE> 12
asbestos-related matters and the receivable from insurance carriers
included in the Consolidated Balance Sheets are as follows:
<TABLE>
<CAPTION>
Sept. 27 Dec. 31
1998 1997
-------- --------
<S> <C> <C>
Accounts and notes receivable $ 98,253 $ 56,039
Other assets 44,097 16,249
Accrued expenses 96,416 50,688
Other liabilities 32,834 2,682
</TABLE>
Environmental
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 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. The measurement
of liability is based on an evaluation of currently available facts
with respect to each individual situation and takes into consideration
factors such as existing technology, presently enacted laws and
regulations and prior experience in remediation of contaminated sites.
Investigations have been completed for approximately 17 sites and
continuing investigations are being done at approximately 11 sites.
Accruals are provided for all sites based on the factors discussed
above. As remediation plans are written and implemented, estimated
costs become more fact-based and less judgment-based. As assessments
and remediation progress at individual sites, these liabilities are
reviewed periodically and adjusted to reflect additional technical and
legal information. 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 $25,000 and $53,000. In connection with these
expenditures, the Company has accrued $37,000 at September 27, 1998
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. OTHER MATTERS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No 133 ("SFAS No. 133")
Accounting for Derivative Instruments and Hedging Activities. The
Statement established accounting and reporting standards requiring
that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be
recognized
12
<PAGE> 13
currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the
income statement, and requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive
hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement the Statement as of the beginning
of any fiscal quarter after issuance. SFAS No. 133 cannot be applied
retroactively. SFAS No. 133 must be applied to derivative instruments
and certain derivative instruments embedded in hybrid contracts that
were issued, acquired, or substantively modified after December 31,
1997.
The Company has not yet quantified the impacts of adopting SFAS No.
133 on its consolidated financial statements and has not determined
the timing of or method of adoption. However the statement could
increase volatility in net income and other comprehensive income.
8. SUPPLEMENTAL GUARANTOR INFORMATION
Substantially all the Company's subsidiaries incorporated in the
United States (the "Subsidiary Guarantors") have fully and
unconditionally guaranteed, on a joint and several basis, the
Company's obligations to pay principal and interest with respect to
the Senior Notes. Each subsidiary guarantor is wholly owned and
management has determined that separate financial statements for the
subsidiary guarantors are not material to investors. The subsidiaries
of the Company that are not Subsidiary Guarantors are referred to in
this note as the "Non-Guarantor Subsidiaries".
The following supplemental consolidating condensed financial
statements present balance sheets as of September 27, 1998 and
December 31, 1997 and statements of earnings and of cash flows for the
three months and nine months ended September 27, 1998 and September
28, 1997. In the consolidating financial statements, Coltec Industries
Inc (the "Parent") accounts for its investments in wholly-owned
subsidiaries using the equity method and the Subsidiary Guarantors
account for their investments in Non-Subsidiary Guarantors using the
equity method. Interest expense related to the indebtedness under the
Company's credit agreement and its three series of senior notes is
allocated to United States subsidiaries based on net sales.
13
<PAGE> 14
Consolidating Condensed Statement of Earnings
<TABLE>
<CAPTION>
Three Months Ended September 27, 1998
-------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 119,608 $ 146,084 $ 108,035 $ (13,329) $ 360,398
Cost of sales 84,234 98,031 80,393 (13,329) 249,329
--------- --------- --------- --------- ---------
Gross Profit 35,374 48,053 27,642 111,069
Selling and administrative 14,937 30,701 9,330 -- 54,968
--------- --------- --------- --------- ---------
Operating income 20,437 17,352 18,312 56,101
Equity earnings of affiliates 21,550 12,692 -- (34,242) --
Interest expense and other, net (12,743) (5,932) 6,287 (232) (12,620)
--------- --------- --------- --------- ---------
Earnings before income taxes
and minority interest 29,244 24,112 24,599 (34,474) 43,481
Income taxes (1,846) (7,263) (5,674) (14,783)
Minority interest in net loss
of subsidiaries -- -- (1,300) -- (1,300)
--------- --------- --------- --------- ---------
Net earnings $ 27,398 $ 16,849 $ 17,625 $ (34,474) $ 27,398
========= ========= ========= ========= =========
Consolidating Condensed Statement of Earnings
<CAPTION>
Nine Months Ended September 27, 1998
------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 363,616 $ 477,945 $ 325,290 $ (37,258) $1,129,593
Cost of sales 293,664 323,845 241,082 (37,258) 821,333
--------- --------- --------- --------- ---------
Gross Profit 69,952 154,100 84,208 308,260
Selling and administrative 44,730 90,267 45,100 -- 180,097
--------- --------- --------- --------- ---------
Operating income 25,222 63,833 39,108 128,163
Equity earnings of affiliates 61,533 30,115 -- (91,648) --
Gain on divestiture 56,194 -- -- 56,194
Interest expense and other, net (39,999) (24,089) 24,444 (1,286) (40,930)
--------- --------- --------- --------- ---------
Earnings before income taxes,
minority interest and
extraordinary item 102,950 69,859 63,552 (92,934) 143,427
Income taxes (10,673) (20,813) (17,279) (48,765)
Minority interest in net loss
of subsidiaries -- -- (2,385) -- (2,385)
--------- --------- --------- --------- ---------
Earnings before extraordinary
item 92,277 49,046 43,888 (92,934) 92,277
Extraordinary item (net of tax) (4,326) -- -- -- (4,326)
--------- --------- --------- --------- ---------
Net earnings $ 87,951 $ 49,046 $ 43,888 $ (92,934) $ 87,951
========= ========= ========= ========= =========
</TABLE>
14
<PAGE> 15
Consolidating Condensed Statement of Earnings
<TABLE>
<CAPTION>
Three Months Ended September 28 1998
-------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 104,673 $ 147,278 $ 83,470 $ (10,968) $ 324,453
Cost of sales 71,373 99,337 61,730 (10,968) 221,472
--------- --------- --------- --------- ---------
Gross Profit 33,300 47,941 21,740 102,981
Selling and administrative 15,898 33,769 4,120 -- 53,787
--------- --------- --------- --------- ---------
Operating income 17,402 14,172 17,620 49,194
Equity earnings of affiliates 16,134 5,729 -- (21,863) --
Interest expense and other, net (13,623) (159) (77) -- (13,859)
--------- --------- --------- --------- ---------
Earnings before income taxes 19,913 19,742 17,543 (21,863) 35,335
Income taxes 3,408 (8,636) (6,786) -- (12,014)
--------- --------- --------- --------- ---------
Net earnings $ 23,321 $ 11,106 $ 10,757 $ (21,863) $ 23,321
========= ========= ========= ========= =========
Consolidating Condensed Statement of Earnings
<CAPTION>
Nine Months Ended September 28, 1998
------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 312,009 $ 428,901 $ 246,566 $ (31,624) $ 955,852
Cost of sales 214,855 285,934 181,119 (31,624) 650,284
--------- --------- --------- --------- ---------
Gross Profit 97,154 142,967 65,447 305,568
Selling and administrative 50,513 95,429 16,750 -- 162,692
--------- --------- --------- --------- ---------
Operating income 46,641 47,538 48,697 142,876
Equity earnings of affiliates 56,439 13,952 -- (70,391) --
Interest expense and other, net (38,556) 32 (381) -- (38,905)
--------- --------- --------- --------- ---------
Earnings before income taxes 64,524 61,522 48,316 (70,391) 103,971
Income taxes 4,097 (20,074) (19,373) -- (35,350)
--------- --------- --------- --------- ---------
Net earnings $ 68,621 $ 41,448 $ 28,943 $ (70,391) $ 68,621
========= ========= ========= ========= =========
</TABLE>
15
<PAGE> 16
Consolidating Condensed Balance Sheet
<TABLE>
<CAPTION>
September 27, 1998
------------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 10,470 $ 5,575 $ 1,987 $ 18,032
Accounts and notes receivable,
net -- 21,210 159,746 180,956
Inventory, net 80,669 60,583 96,386 237,638
Deferred income taxes 9,023 8,065 130 17,218
Other current assets 4,182 5,456 4,837 14,475
--------- --------- --------- ----------- ----------
Total current assets 104,344 100,889 263,086 -- 468,319
Intercompany, net (810,822) 286,108 524,714 --
Investments in affiliates 1,023,051 94,523 865 $(1,118,439) --
Property, plant and equipment 95,984 116,224 86,591 298,799
Cost in excess of net assets
acquired, net 25,033 136,154 55,639 216,826
Other assets 45,596 2,525 53,742 101,863
--------- --------- --------- ----------- ----------
Total assets $ 483,186 $ 736,423 $ 984,637 $(1,118,439) $1,085,807
========= ========= ========= =========== ==========
Total current liabilities $ 130,578 $ 52,756 $ 144,425 $ 327,759
Long-term debt 513,299 2,969 91,315 607,583
Deferred income taxes (30,499) 101,987 17,340 88,828
Other liabilities 35,110 12,143 38,687 $ (3,967) 81,973
Liabilities of discontinued
operations 146,671 -- -- -- 146,671
Company-obligated mandatorily
redeemable convertible
preferred securities of
subsidiary Coltec Capital
Trust holding solely
convertible junior
subordinated debentures of
the Company -- -- 144,966 -- 144,966
Shareholders' equity (311,973) 566,568 547,904 (1,114,472) (311,973)
--------- --------- --------- ----------- ---------
Total liabilities and
shareholders' equity $ 483,186 $ 736,423 $ 984,637 $(1,118,439) $1,085,807
========= ========= ========= =========== ==========
</TABLE>
16
<PAGE> 17
Consolidating Condensed Balance Sheet
<TABLE>
<CAPTION>
December 31, 1997
------------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 9,912 $ 722 $ 4,059 $ 14,693
Accounts and notes receivable,
net -- 60,881 59,430 120,311
Inventory, net 99,100 71,958 85,678 256,736
Deferred income taxes 4,535 10,689 (29) 15,195
Other current assets 4,540 10,406 5,562 20,508
--------- --------- --------- ----------- --------
Total current assets 118,087 154,656 154,700 -- 427,443
Intercompany, net (741,897) 10,933 730,964 --
Investments in affiliates 1,057,890 355,399 2,688 $(1,415,977) --
Property, plant and equipment 89,488 118,405 79,726 287,619
Cost in excess of net assets
acquired, net 21,820 133,441 2,490 157,751
Other assets 40,266 3,490 16,465 60,221
--------- --------- --------- ----------- ---------
Total assets $ 585,654 $ 776,324 $ 987,033 $(1,415,977) $ 933,034
========= ========= ========= =========== =========
Total current liabilities $ 93,669 $ 49,494 $ 96,415 $ 239,578
Long-term debt 689,302 1,611 66,665 757,578
Deferred income taxes (32,780) 101,871 10,138 79,229
Other liabilities 39,706 12,844 10,544 $ (2,202) 60,892
Liabilities of discontinued
operations 154,918 -- -- 154,918
Shareholders' equity (359,161) 610,504 803,271 (1,413,775) (359,161)
--------- --------- --------- ----------- ---------
Total liabilities and
shareholders' equity $ 585,654 $ 776,324 $ 987,033 $(1,415,977) $ 933,034
========= ========= ========= =========== =========
</TABLE>
17
<PAGE> 18
Consolidating Condensed Statement of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended September 27, 1998
------------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities $ 85,723 $ 4,853 $ (2,072) -- $ 88,504
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures (14,972) (13,568) (8,160) (36,700)
Proceeds from divestiture 100,000 -- -- 100,000
Acquisition of business (26,260) (17,000) (50,582) (93,842)
Cash from (to) Parent (89,310) 30,568 58,742 -- --
--------- --------- --------- --------- ---------
Cash used in investing
activities (30,542) -- -- -- (30,542)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Increase (decrease) in
revolving facility, net (472,000) -- 40,000 (432,000)
Repayment of long-term debt (6,462) (234) (15,371) (22,067)
Issuance of long-term debt 292,151 -- -- 292,151
Issuance of convertible
preferred securities -- -- 144,472 144,472
Payments for unclaimed stock (3,871) -- -- (3,871)
Purchase of treasury stock (33,308) -- -- (33,308)
Cash from (to) Parent 168,867 234 (169,101) -- --
--------- --------- --------- --------- ---------
Cash used in financing
activities (54,623) -- -- -- (54,623)
--------- --------- --------- --------- ---------
Cash and cash equivalents:
Increase (decrease) in cash
and cash equivalents 558 4,853 (2,072) 3,339
Cash and cash equivalents -
beginning of period 9,912 722 4,059 -- 14,693
--------- --------- --------- --------- ---------
Cash and cash equivalents -
end of period $ 10,470 $ 5,575 $ 1,987 -- $ 18,032
========= ========= ========= ========= =========
</TABLE>
18
<PAGE> 19
Consolidating Condensed Statement of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended September 28, 1997
------------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities $ 27,343 $ 315 $ 2,676 -- $ 30,334
--------- --------- --------- --------- ---------
Cash flows from investing
activities:
Capital expenditures (16,650) (13,352) (16,002) (46,004)
Acquisition of business (23,778) (23,778)
Cash from (to) Parent (29,354) 13,352 16,002 -- --
--------- --------- --------- --------- ---------
Cash used in investing
activities (69,782) -- -- -- (69,782)
--------- --------- --------- --------- ---------
Cash flows from financing
activities:
Increase in revolving
facility, net 25,000 -- -- 25,000
Repayment of long-term debt (4,045) -- (4,072) (8,117)
Purchase of treasury stock (42,695) -- -- (42,695)
Sale of accounts receivable -- -- 62,000 62,000
Cash from (to) Parent 57,928 -- (57,928) -- --
--------- --------- --------- --------- ---------
Cash provided by financing
activities 36,188 -- -- -- 36,188
--------- --------- --------- --------- ---------
Cash and cash equivalents:
Increase (decrease) in cash
and cash equivalents (6,251) 315 2,676 (3,260)
Cash and cash equivalents -
beginning of period 10,248 722 4,059 -- 15,029
--------- --------- --------- --------- ---------
Cash and cash equivalents -
end of period $ 3,997 $ 1,037 $ 6,735 -- $ 11,769
========= ========= ========= ========= =========
</TABLE>
19
<PAGE> 20
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 September 27, 1998 and September 28, 1997.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 27 Sept. 28 Sept. 27 Sept. 28
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Sales:
Aerospace $ 180,956 $ 142,775 $ 529,682 $ 390,532
Industrial 179,689 181,923 601,010 565,940
Intersegment elimination (247) (245) (1,099) (620)
--------- --------- ----------- ---------
Total $ 360,398 $ 324,453 $ 1,129,593 $ 955,852
========= ========= =========== =========
Operating income:
Aerospace (1) 29,866 $ 22,077 $ 57,352 $ 60,974
Industrial (2) 35,887 36,619 99,646 112,054
--------- --------- ----------- ---------
Total segments 65,753 58,696 156,998 173,028
Corporate unallocated (9,652) (9,502) (28,835) (30,152)
--------- --------- ----------- ---------
Operating income $ 56,101 $ 49,194 $ 128,163 $ 142,876
========= ========= =========== =========
</TABLE>
(1) Operating income in the Aerospace Segment for the nine months ended
September 27, 1998 included a charge of $25.0 million to recognize
program costs associated with the development of Boeing programs and
$2.0 million of expenses for Year 2000 compliance for new computer
systems. Excluding these charges, Aerospace Segment operating income was
$84.4 million for the nine months ended September 27, 1998.
(2) Operating income in the Industrial Segment for the nine months ended
September 27, 1998 included charges of $12.0 million to record
additional warranty and legal reserves and $3.0 million of expenses for
Year 2000 compliance for new and existing computer systems. Excluding
these charges, Industrial Segment operating income was $114.6 million
for the nine months ended September 27, 1998.
Results of Operations
Company Review
Net sales for the third quarter of 1998 increased 11.1% to $360.4 million from
$324.5 million for the third quarter of 1997 resulting from sales volume
increases in the Aerospace Segment. Gross profit increased to $111.1 million
for the third quarter 1998 from $103.0 million in third quarter 1997. The
increase in gross profit resulted from increased sales in the Aerospace
Segment. Selling and administrative expenses totaled $55.0 million, or 15.3% of
sales, in third quarter 1998 compared to $53.8 million, or 16.6% of sales, in
third quarter 1997.
20
<PAGE> 21
Net sales for the nine months ended September 27, 1998 increased 18.2% to
$1,129.6 million from $955.9 million for the nine months ended September 28,
1997 as a result of continued sales increases in the Aerospace Segment. Gross
profit increased slightly to $308.3 million for the first nine months of 1998
from $305.6 million for the first nine months of 1997. Gross profit in 1998 was
affected by a charge of $25.0 million to recognize program costs associated
with the development of Boeing programs and a charge of $12.0 million to record
additional warranty and legal reserves. Excluding these charges, gross profit
was $344.3 million for the nine months ended September 27, 1998. Although
selling and administrative expenses totaled $180.1 million for year to date
1998 ($175.1 million excluding a $5.0 million expense for Year 2000 compliance
for new and existing computer systems) compared to $162.7 million for year to
date 1997, selling and administrative expenses decreased as a percentage of
sales, 15.9% for year to date 1998 (15.5% excluding Year 2000 expense) as
compared to 17.0% for year to date 1997.
In the second quarter of 1998, the Company performed a study of total revenue
and costs for certain commercial aircraft programs. This study was performed on
the Boeing 777 as the program reached its 200th shipset milestone. Based on
this study which considered recent market conditions including normal market
uncertainties related to shipping schedules beyond five years and expected
future program efficiencies and related costs, the company revised its total
estimated revenue and costs for the Boeing 777 program. In accordance with the
Company's accounting policy for commercial jet aircraft, the Company reduced
inventory by $25.0 million, which resulted in a charge of $25.0 million to
current operations in the nine months ended September 27, 1998.
Also in the second quarter of 1998, the Company recorded a $12.0 million charge
to establish additional warranty and legal reserves for claims and outstanding
cases. Based on first time production of commercial engine applications,
warranty claims escalated during the first six months of 1998. Based on the
liability for individual claims and cases being probable and estimable, the
Company recorded a liability for these cases. None of these claims or cases is
expected to be individually material to the Company's financial position or
results of operations.
In the second quarter 1998, selling and administrative expenses included
expenses of $5.0 million for Year 2000 compliance. After reviewing costs
incurred for new computer systems scheduled to start up in the second quarter
of 1998, the Company determined that approximately $5.0 million of such costs
related to items that should be expensed. These expenses primarily included
certain consulting fees, software maintenance fees and training and travel
costs.
Operating income increased to $56.1 million in third quarter 1998 from $49.2
million in the third quarter of 1997. Operating margin was 15.6% for third
quarter 1998 compared to 15.2% for the third quarter 1997.
Operating income decreased to $128.2 million for the first nine months of 1998
from $142.9 million for the first nine months of 1997 as a result of $42.0
million of charges in the second quarter of 1998. Operating margin for year to
date 1998 was 11.3% (15.1% excluding $42.0 million of charges) compared to
14.9% for year to date 1997.
In May 1998, the Company sold the capital stock of its Holley Performance
Products subsidiary to Kohlberg & Co., L.L.C., a private merchant-banking firm
located in Mount Kisco, New York, for $100 million in cash. The sale resulted
in a pre-tax gain of $56.2 million, net of liabilities retained.
21
<PAGE> 22
Interest expense decreased slightly to $12.6 million in third quarter 1998 from
$13.9 million for third quarter 1997 and increased to $40.9 million for year to
date 1998 as compared to $38.9 million for year to date 1997.
In April 1998, the Company privately placed $300.0 million principal amount of
7 1/2% Senior Notes due 2008 and $150.0 million liquidation value of 5 1/4%
Trust Convertible Preferred Securities. Distributions on the Convertible
Preferred Securities were $1.3 million after-tax and $2.4 million after-tax in
the three months and nine months ended September 27, 1998, respectively, which
is classified as minority interest in net loss of subsidiaries in the Company's
consolidated statements of earnings.
As a result of the foregoing, earnings before extraordinary item for the three
months and nine months ended September 27, 1998 were $27.4 million and $92.3
million, respectively, as compared to $23.3 million and $68.6 million for the
three months and nine months ended September 28, 1997, respectively. The
Company incurred an extraordinary charge of $4.3 million, net of taxes, or $.06
per share in the nine months ended September 27, 1998 in connection with early
debt repayment. Net earnings were $27.4 million in second quarter 1998, or
$0.41 per share (diluted), compared to net earnings of $23.3 million, or $0.35
per share (diluted), in second quarter 1997. 1998 year to date net earnings
were $88.0 million, or $1.30 per share (diluted), as compared to $68.6 million,
or $1.03 per share (diluted) for 1997.
Segment Review - Aerospace
Sales in the third quarter of 1998 for the Aerospace Segment totaled $180.9
million increasing 26.7% from $142.8 million in the third quarter of 1997. For
the nine months ended September 27, 1998 Aerospace sales increased 35.6% to
$529.7 million from $390.5 million for the comparable 1997 period. At Menasco,
sales increased by $21.8 million for the third quarter 1998 and $73.9 million
for the nine months ended September 27, 1998 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 55 and 137 shipsets in
the three months and nine months ended September 28, 1997, respectively, to 59
and 202 shipsets in the three months and nine months ended September 27, 1998,
respectively. Sales increases in 1998 were also driven by higher sales volumes
of the engine components businesses. The acquisition of AMI, on June 30, 1997,
was a significant contributor to the increase in sales for 1998 year to date.
Operating income for the Aerospace Segment increased to $29.9 million in third
quarter 1998 from $22.1 million in third quarter of 1997 as a direct result of
increased Aerospace sales. Operating income for year to date 1998 was $57.4
million ($84.4 million excluding 1998 second quarter charges totaling $27.0
million ($25.0 million to recognize program costs associated with development
of Boeing programs and $2.0 million for Year 2000 compliance for new computer
systems) as compared to $61.0 million for year to date 1997. The increase,
excluding charges, was also driven by generally higher sales volumes thoughout
the Segment. Operating margins increased slightly in the third quarter 1998,
primarily due to productivity improvements.
Segment Review - Industrial
Industrial sales decreased slightly to $179.7 million in the three months ended
September 27, 1998, from $181.9 in the three months ended September 28, 1997.
Sales were unfavorably impacted by the effect of the second quarter divestiture
of Holley Performance Products which was partially offset by the Company's
first quarter acquisitions.
Operating income for the Industrial Segment was $35.9 million and $99.6 million
in the three months and nine months ended September 27, 1998, respectively,
compared to $36.6
22
<PAGE> 23
million and $112.1 million in the three and nine months ended September 28,
1997, respectively. Operating income for the nine months ended September 27,
1998 included charges of $12.0 million to record additional warranty and legal
reserves and $3.0 million expense for Year 2000 compliance for new and existing
computer systems. Excluding these charges, Industrial Segment operating income
increased slightly to $114.6 million for the nine months ended September 27,
1998, as a result of increased sales. Operating margin excluding the second
quarter charges decreased slightly from prior periods due to lower operating
margins on the first quarter 1998 acquisitions, although such acquisitions were
accretive.
Liquidity and Capital Resources
The Company generated $88.5 million of operating cash flows for the nine months
ended September 27, 1998 compared with $30.3 million for the nine months ended
September 28, 1997. The higher operating cash flows in 1998 were primarily due
to the increase in earnings before depreciation and amortization and the
Company's initiatives to reduce working capital requirements.
The ratio of current assets to current liabilities at June 28, 1998 was 1.43,
decreasing from 1.78 at December 31, 1997. Cash and cash equivalents increased
to $18.0 million at September 27, 1998 from $14.7 million at December 31, 1997.
In the first nine months of 1998, the Company invested $36.7 million in capital
expenditures compared to $46.0 million during the same prior year period. Debt
decreased by $148.6 million at September 27, 1998 compared to December 31,
1997. In April 1998, the Company sold $150.0 million of 5 1/4% Convertible
Preferred Securities. The proceeds from the Convertible Preferred Securities,
which are effectively guaranteed by the Company, were used to reduce the
Company's indebtedness under its credit agreement.
Year 2000
As is the case with most other companies, the Company recognizes the need to
ensure that its operations will not be adversely impacted by the Year 2000 date
transition and is faced with the task of addressing related issues. With senior
management accountability and corporate staff guidance, all operating units
have completed the assessment phase with respect to both information technology
("IT") and non-IT systems and are in varying stages of plan implementation to
address the Company's Year 2000 issues. Overall, the Company has targeted Year
2000 compliance primarily by the end of 1998, with certain operating units
targeting compliance by mid-1999. The testing phase has begun at various
operating units and will be completed company-wide by late 1999. The Company is
also evaluating whether the Year 2000 transition issues resulting from
relationships with customers, suppliers and other constituents will have an
impact on the Company's results of operations, financial condition or cash
flows. The Company has recently initiated formal communication with its active
suppliers to determine the extent to which the Company is vulnerable to
suppliers and customers who fail to address their own Year 2000 issues.
The Company estimates that total IT system expenditures (including all computer
systems replaced since January 1, 1997) will approximate $30,000 which will be
funded from operating cash flows. At September 27, 1998, approximately $24,000
of the $30,000 had been incurred, $19,000 of which has been capitalized since
January 1, 1997 and $5,000 of Year 2000 costs was expensed in the nine months
ended September 27, 1998. The remaining costs of modifying its existing software
for the Year 2000 date transition should have an immaterial impact on
consolidated operating
23
<PAGE> 24
results. The costs of the project and the date on which the Company plans to
complete Year 2000 compliance efforts are based on management's best estimates,
which were derived from assumptions of future events including the continued
availability of certain resources, third parties' Year 2000 readiness and other
factors. There can be no assurance that these assumptions will prove to be
accurate, and actual results could differ materially from those currently
anticipated.
Although the Company believes that its critical systems will be fully compliant
prior to year end 1999, the Company also believes that prudent business
practices call for the development of contingency plans. Currently, the Company
does not have Year 2000 contingency plans in place; however, the Company is
assessing areas which require contingency planning and expects to have
necessary contingency plans in place by mid-1999. Such contingency plans will
primarily address mitigating the impact of internal system and third party
failures.
Because the implementation of multiple computer systems and communication with
critical third parties is on-going, the Company's reasonably likely worst case
scenario is unknown at this time. The Company does not currently expect the
Year 2000 transition to have a material adverse effect on its results of
operation, financial position or cash flows. However, if all Year 2000 issues
are not properly identified, or assessment, remediation and testing are not
effected timely with respect to Year 2000 problems that are identified, there
can be no assurance that the Year 2000 issue will not have a material adverse
effect on the Company's results of operations, financial position or cash flows
or adversely affect the Company's relationships with suppliers, customers or
others. Additionally, there can be no assurance that the Year 2000 issues of
other entities will not have a material adverse effect on the Company's results
of operations, financial position or cash flows.
Cautionary Statement Regarding Forward-Looking Statements
This Management's Discussion and Analysis contains forward-looking statements
within the meaning of the federal securities laws. As a general matter,
forward-looking statements are those focused upon anticipated events or trends
and expectations and beliefs relating to matters that are not historical in
nature. Such forward-looking statements are subject to uncertainties and
factors relating to the Company's operations and business environment, all of
which are difficult to predict and many of which are beyond the control of the
Company, that could cause actual results of the Company to differ materially
from those matters expressed in or implied by such forward-looking statements.
For a discussion of various factors that may cause the Company's actual results
to differ materially from those matters expressed in or implied by such
forward-looking statements, see the Company's 1997 Annual Report on Form 10-K
as well as the Company's 1998 filings with the Securities and Exchange
Commission.
24
<PAGE> 25
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 6 to consolidated financial statements.
Item 5. Other Information
Any shareholder proposals intended to be presented at the 1999 Annual Meeting
of Shareholders pursuant to Rule 14a-8 must be received by the Secretary of
Coltec by November 20, 1998 to be considered for inclusion in the proxy
statement and proxy relating to such meeting.
Coltec's Bylaws require that any shareholder who intends to present a
proposal at the 1999 Annual Meeting of Shareholders and has not sought
inclusion of the proposal in the Company's proxy materials pursuant to Rule
14a-8 must (i) deliver written notice, including specified information, to
the Secretary of Coltec by not earlier than February 5, 1999 and not later
than March 7, 1999 and (ii) be a shareholder of record of Coltec on both the
date on which such notice is given and on the record date for such meeting.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.2 Amended and Restated Bylaws.
4.27 Sixth Amendment to Credit Agreement dated as of
September 9, 1998.
4.28 Family Protection Plan of Coltec Industries Inc.
27. Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed by the Company during
the quarter ended September 27, 1998.
25
<PAGE> 26
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 /s/ David D. Harrison
-----------------------------
David D. Harrison
Executive Vice President
and Chief Financial Officer
Date: November 12, 1998
26
<PAGE> 1
3.2 AMENDED AND RESTATED BYLAWS
COLTEC INDUSTRIES INC
BY-LAWS
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of Coltec
Industries Inc (hereinafter called the "Corporation") in the Commonwealth of
Pennsylvania shall be in care of CT Corporation System, Oliver Building, Mellon
Square, Pittsburgh, Pennsylvania 15222.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the Commonwealth of Pennsylvania as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of the shareholders for the
election of directors shall be held in the City of Charlotte, State of North
Carolina, at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the Commonwealth of
Pennsylvania as shall be designated from time to time by the Board of Directors
and specified in the notice of the meeting. Meetings of shareholders for any
other purpose may be held at such time and place, within or without the
Commonwealth of Pennsylvania, as shall be specified in the notice of the
meeting.
Section 2. Annual Meetings. Annual meetings of shareholders shall be
held on the first Thursday of May of each year, if not a legal holiday, and, if
a legal holiday, then on the next business day following, at 10:00 a.m., or at
such other date and time as shall be designated from time to time by the Board
of Directors and specified in the notice of the meeting. At the annual meeting,
the shareholders shall elect in the manner herein provided a Board of Directors
and transact such
<PAGE> 2
other business as may properly be brought before the meeting. At the annual
meeting, the shareholders shall elect by a plurality vote a Board of Directors
and transact other business that may be properly brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given not less
than ten days before the date of the meeting to each shareholder entitled to
vote at such meeting.
Section 4. Shareholders List. The officer who has charge of the
transfer books for shares of the Corporation shall prepare and make a complete
list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. The list shall be
produced and kept open at the time and place of the meeting during the whole
time thereof, and may be inspected by any shareholder who is present. In lieu
of making such list, the Corporation may make the information therein available
by any other means permitted by statute.
Section 5. Action at Meetings. As provided in Article Six of the
Amended Restated Articles of Incorporation of the Corporation (the "Articles")
(i) any action required or permitted to be taken at any annual or special
meeting of shareholders may be taken only upon the vote of the shareholders at
an annual or special meeting duly noticed and called, as provided in these
By-laws, and may not be taken by a written consent of the shareholders and (ii)
special meetings of the shareholders of the Corporation for any purpose or
purposes may be called at any time by the Chairman of the Board of Directors or
by a majority of the members of the Board of Directors. Special meetings of
shareholders of the Corporation may not be called by any other person or
persons.
Section 6. Notice of Special Meeting. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten days
before the date of the meeting to each shareholder entitled to vote at such
meeting.
Section 7. Organization of Shareholders Meetings. At each meeting of
the shareholders the Chairman of the Board of Directors, or, in the absence of
the Chairman of the Board of
<PAGE> 3
Directors, the President, or, in the absence of the President, a Vice Chairman
of the Board of Directors, or, in their absence, a chairman chosen by a majority
vote of the shareholders present in person or by proxy and entitled to vote
thereat, shall act as chairman; and the Secretary, or, in his absence, an
Assistant Secretary, or, in the absence of the Secretary and all Assistant
Secretaries, a person whom the chairman of such meeting shall appoint, shall act
as Secretary of such meeting and keep the minutes thereof.
Section 8. Quorum. The presence, in person or represented by proxy, of
shareholders entitled to cast at least a majority of the votes which all
shareholders are entitled to cast on the particular matter shall constitute a
quorum for the purpose of considering such matter at a meeting of the
shareholders, except as otherwise provided by statute or by the Articles and in
this Section 8. If, however, a meeting of shareholders cannot be organized
because a quorum has not attended, the shareholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting at which the adjournment is taken of the time and place of the
adjourned meeting, until a quorum shall be present or represented. In case of a
meeting for the election of directors, such meeting may be adjourned only from
day to day or for such longer periods, not exceeding fifteen days each, until
such directors have been elected. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally specified in the notice
thereof. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, notice of the
adjourned meeting shall be given to each shareholder of record entitled to vote
at the meeting.
Section 9. Vote Required. When a quorum is present at any meeting, the
vote of a majority of the votes cast by all shareholders entitled to vote on
the particular matter shall decide any question brought before such meetings,
unless the question is one upon which, by express provision of the laws of the
Commonwealth of Pennsylvania or of the Articles, a different vote is required,
in which case such express provision shall govern and control the decision of
such question, as in the case of the election of directors as provided in
Section 2 hereof and in the Articles.
<PAGE> 4
Section 10. Proxies; Appointment and Revocation. As provided in
Article Fourth of the Articles, and in accordance with the provisions of
Section 1763 of the Pennsylvania Business Corporation Law of 1988 (the "BCL"),
each shareholder of record shall at every meeting of the shareholders be
entitled to one vote for each share of the capital stock having voting power
held by such shareholder in person or by proxy appointed by an instrument in
writing, executed by such shareholder or by his attorney thereunto authorized,
or by a telegram, cable or radiogram, filed with the Secretary of the
Corporation; in no event shall a proxy, unless coupled with an interest, be
voted on after three years from the date of its execution. A proxy, unless
coupled with an interest, shall be revocable at will, notwithstanding any other
agreement or any provision in the proxy to the contrary, but the revocation of
a proxy shall not be effective until notice thereof has been given to the
Secretary of the Corporation. A proxy shall not be revoked by the death or
incapacity of the maker unless, before the vote is counted or the authority is
exercised, written notice of such death or incapacity is given to the Secretary
of the Corporation.
Section 11. Judges of Election. In advance of any meeting of
shareholders, the Board of Directors may appoint judges of election who need
not be shareholders, to act at such meeting or any adjournment thereof. If
judges of election be not so appointed, the chairman of any such meeting may,
and on the request of any shareholder or his proxy shall, make such appointment
at the meeting. The number of judges shall be one or three as shall be
determined by the Board of Directors, except that if appointed at the meeting
on the request of one or more shareholders or proxies, the holders of a
majority of the shares of the Corporation present and entitled to vote shall
determine whether one or three judges are to be appointed. No person who is a
candidate for office shall act as a judge.
In case any person appointed as a judge fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Board of
Directors in advance of the convening of the meeting, or at the meeting by the
officer or person acting as chairman.
The judges of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
questions in any
<PAGE> 5
way arising in connection with the right to vote, count and tabulate all votes,
determine the result, and do such other acts as may be proper to conduct the
election or vote with fairness to all shareholders. The judges of election shall
perform their duties impartially, in good faith, to the best of their ability,
and as expeditiously as is practical. If there be three judges of election, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act or certificate of all.
On request of the chairman of the meeting, or of any shareholder or
his proxy, the judges shall make a report in writing of any challenge or
question or matter determined by them, and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated therein.
Section 12. Advance Notification of Business to be Transacted at
Shareholder Meetings. To be properly brought before the annual meeting of
shareholders, or any special meeting of shareholder, business must be either
(a) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors (or any duly authorized committee
thereof), (b) otherwise properly brought before the annual or special meeting
by or at the direction of the Board of Directors (or any duly authorized
committee thereof) or (c) otherwise properly brought before the annual or
special meeting by any shareholder of the Corporation (i) who is a shareholder
of record on the date of the giving of the notice provided for in this Section
12 and on the record date for the determination of shareholders entitled to
vote at such annual or special meeting and (ii) who complies with the notice
procedures set forth in this Section 12.
In addition to any other applicable requirements, for business to be
properly brought before an annual or special meeting by a shareholder, such
shareholder must have given timely notice thereto in proper written form to the
Secretary of the Corporation.
To be timely, a shareholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an annual meeting, not less than sixty (60) days
nor more than ninety (90) days prior to the date of the Corporation's proxy
statement released to shareholders in connection with the annual meeting of
shareholders provided, however, that if the
<PAGE> 6
annual meeting is called for a date that is not within thirty (30) days before
or after the anniversary date of the immediately preceding annual meeting,
notice by the shareholder in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the day on which
notice of the date of the annual meeting was mailed or public disclosure of the
date of the annual meeting was made, whichever first occurs; and (b) in the case
of a special meeting of shareholders, not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
special meeting was mailed or public disclosure of the date of the special
meeting was made, whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary
must set forth as to each matter such shareholder proposes to bring before the
annual or special meeting (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and record address of such shareholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such shareholder, (iv) a description of all
arrangements or understandings between such shareholder and any other person or
persons (including their names) in connection with the proposal of such
business by such shareholder and any material interest of such shareholder in
such business and (v) a representation that such shareholder intends to appear
in person or by proxy at the meeting to bring such business before the meeting.
Notwithstanding anything in these By-laws to the contrary, no business
shall be conducted at the annual meeting of shareholders or any special meeting
of shareholders except business brought before such meeting in accordance with
the procedures set forth in this Section 12; provided, however, that, nothing
in this Section 12 shall be deemed to preclude discussion by any shareholder of
any business properly brought before the meeting. The Chairman or other officer
of the Corporation presiding at the meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the foregoing procedures, and if he
should so determine, the Chairman or other officer of the Corporation presiding
at the meeting shall so declare to the meeting that the business was not
properly brought before the meeting and such business shall not be transacted.
<PAGE> 7
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of directors which shall
constitute the whole Board shall be not less than three nor more than fifteen.
Within the limit above specified, the number of directors shall be determined
by resolution of the Board of Directors. Except as provided in Section 2 of
this Article, the directors shall be elected at the annual meeting of the
shareholders in the manner provided in Article II, Section 2, of these By-Laws
and in the Articles, and each director elected shall hold office until his
successor is elected and qualified or until his death, resignation or removal.
Directors need not be shareholders.
Section 2. Vacancies; New Directorship. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled (subject to the provisions of Article III, Section 14, of these
By-laws in the case of removal) by a majority of the directors then in office,
though less than a quorum, or by a sole remaining director, and each director so
chosen shall hold office until the next annual election and until his successor
is duly elected and shall qualify or until his death, resignation, removal or
disqualification. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. When one or more
directors shall resign from the board effective at a future date, a majority of
the directors then in office including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective; and each such director
so chosen shall hold office as provided in this Section in the filling of other
vacancies.
Section 3. Management of Corporation. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Articles or by these By-Laws
directed or required to be exercised or done by the shareholders.
<PAGE> 8
Section 4. Place of Meetings of the Board of Directors. The Board of
Directors of the Corporation may hold meetings, both regular and special,
either within or without the Commonwealth of Pennsylvania.
Section 5. Annual Meetings of Board of Directors. After each annual
election of directors and on the same day, Board of Directors shall meet for
the purpose of organization, the election of officers and the transaction of
other business, at the place where such annual election is held. Notice of such
meeting need not be given. Such meetings may be called and held at any other
time and place which shall be specified in a notice or waiver of notice thereof
as in the case of a special meeting of the Board of Directors.
Section 6. Regular Meetings of the Board of Directors. The regular
meetings of the Board of Directors shall be held quarterly at such time and
place as shall be designated by the Board of Directors from time to time or at
such other time and place as shall be set forth in a written notice given at
least five days prior to the meeting date. Notice of regular meetings of the
Board shall not be required to be given, except as otherwise expressly required
herein or by law, except that whenever the time or place of regular meetings
shall be initially fixed or changed, notice of such action shall be given
promptly by telephone or otherwise to each director not participating in such
action.
Section 7. Special Meetings of the Board of Directors. Special
meetings of the Board of Directors may be called by Chairman of the Board of
Directors, the President, a Vice Chairman of the Board of Directors or by a
majority of the Board of Directors on two days' notice to each director, either
personally or by mail, telegram, cable or radiogram. Special meetings shall be
called by the Chairman of the Board of Directors by the President, a Vice
Chairman of the Board of Directors or by the Secretary in like manner and on
like notice on the written request of a majority of directors and the place and
time of such special meeting shall be designated in the notice of such
meetings.
Section 8. Quorum. At all meetings of the Board of Directors one-third
of the directors in office shall constitute a quorum for the transaction of
business and the act of a majority of the directors present and voting at any
meeting at which there is a quorum shall be the act of the Board of
<PAGE> 9
Directors, except as may be otherwise specifically provided by statute or by the
Articles of by these By-laws. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present. The directors at a duly organized meeting can
continue to do business until adjournment notwithstanding the withdrawal of
enough directors to leave is less than a quorum.
Section 9. Organization of Meetings of Board of Directors. At each
meeting of the Board of Directors the Chairman of the Board of Directors or, in
his absence, the President, or, in the absence of the President, a Vice
Chairman of the Board of Directors or, in their absence, a director chosen by a
majority of the directors present shall act as chairman. The Secretary or, in
his absence, an Assistant Secretary of the Corporation or, in the absence of
the Secretary and all Assistant Secretaries, a person whom the chairman of such
meeting shall appoint, shall act as secretary of such meeting and keep the
minutes thereof.
Section 10. Meetings by Telephone Conference. One or more directors of
the Corporation may participate in any meeting of the Board of Directors or of
any committee thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
Section 11. Action by Written Consent. Unless otherwise restricted by
the Articles or these By-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if, prior or subsequent to the action so taken, all members
of the Board or committee, as the case may be, sign a consent or consents in
writing setting forth the action so taken, and the writing or writings are
filed with the Secretary of the Corporation and the minutes of proceedings of
the Board or committee .
Section 12. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more directors of the
Corporation, and to have all of the power and authority of the Board of
Directors except as limited by statute, and to perform such duties, as the
resolution designating the committee shall prescribe. The Board
<PAGE> 10
of Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of any member and alternate of
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Such
committee shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
Section 13. Minutes of Committee Meetings. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 14. Removal of Directors. Any director or directors may be
removed, either with or without cause, at any time, by the affirmative vote of
the shareholders entitled to cast at least a majority of the votes which all
shareholders would be entitled to cast at any annual election of directors of
the Corporation, at a special meeting of the shareholders called and held for
that purpose; and the vacancy in the Board of Directors caused by any such
removal may be filled, by such shareholders at such meeting, or, if the
shareholders shall fail to fill such vacancy, as provided in these By-laws.
Section 15. Compensation of Directors. The directors shall receive
such compensation for their services as the Board of Directors may from time to
time determine; provided, however, that directors who are also officers or
employees of the Corporation or a subsidiary of the Corporation shall not be
entitled to any such compensation as a director; and all directors shall be
reimbursed for their expenses of attendance at each regular or special meeting
of the Board of Directors. Members of any committee of directors may be allowed
like compensation and reimbursement for expenses for serving as members of any
such committee and for attending committee meetings.
Section 16. Resignation. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Chairman of the
Board of Directors, to the President, to a Vice Chairman of the Board of
<PAGE> 11
Directors or to the Secretary. Such resignation shall take effect at the date
of receipt of such notice by the Chairman of the Board of Directors, the
President, a Vice Chairman of the Board of Directors or the Secretary, or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 17. Chairman of the Board Emeritus and Directors Emeritus. The
Board of Directors from time to time may name, for such period as the Board may
determine, a former Chairman of the Board of Directors to fill the honorary
position of Chairman of the Board emeritus and one or more former directors to
fill the honorary position of director emeritus. The positions of Chairman of
the Board emeritus and director emeritus are honorary and persons named to such
positions shall not be deemed officers or directors of the Corporation. The
persons holding such honorary positions shall not attend meetings of the Board
of Directors except as specifically invited by the Chairman of the Board. When
attending meetings at the request of the Chairman of the Board, they may advise
the Board of Directors of their views on such matters coming before the Board
of Directors for consideration as requested by the Chairman of such meeting,
but shall not be entitled to vote on any business coming before the Board of
Directors or to exercise any of the other responsibilities of directors. Notice
of meetings of the Board of Directors shall not be required to be given to the
Chairman of the Board emeritus or directors emeritus under the provisions of
the Articles of Incorporation or of these By-laws, nor shall the Chairman of
the Board emeritus or directors emeritus be counted as directors of the
Corporation for the purpose of determining a quorum of the Board of Directors.
Chairman of the Board emeritus or directors emeritus shall be reimbursed for
their reasonable expenses for attendance at meetings of the Board of Directors
to which they have specifically been invited.
Section 18. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of
Directors or committee in
<PAGE> 12
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to his or their
relationship or interest and as to the contract or transaction is specifically
approved in good faith by vote of the shareholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof or the
shareholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
ARTICLE IV
NOTICES
Section 1. Method of Giving Notice. Whenever, under the provisions of
the statutes or of the Articles or of these By-laws, notice is required to be
given to any director or shareholder, it shall not be construed to mean
personal notice, but such notice may be given either personally or by mail, or
by telegram (with messenger service specified), telex or TWX (with answer-back
received), cable or radiogram or courier service, charges prepaid or by
facsimile transmission, addressed to such director or shareholder, to his
address as it appears on the books of the Corporation or supplied by him to the
Corporation for the purpose of notice, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail or
with a telegraph office or courier service for transmission to such person.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under the provisions of any statute, the Articles or these By-laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether given before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting of shareholders, in
person or by proxy, or at a meeting of the Board of Directors shall constitute
a waiver of notice of such meeting, except when a person attends such meeting
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. Except in the case of a special
meeting of shareholders, neither the business to be transacted at, nor the
purpose of, any meeting
<PAGE> 13
need be specified in any written waiver of notice unless so required by the
Articles of these By-laws.
ARTICLE V
OFFICERS
Section 1. Election. The officers of the Corporation shall be chosen
by the Board of Directors at its first meeting after each annual meeting of
shareholders and shall consist of a Chairman of the Board of Directors, a
President, one or more Vice Chairmen of the Board of Directors, one or more
Vice Presidents, a Secretary and a Treasurer. Any number of offices may be held
by the same person, unless the Articles of these By-laws otherwise provide. Any
Vice President may carry such further title as may be designated by the Board
of Directors or by the President.
Section 2. Term of Officer; Removal, Vacancies. The officers of the
Corporation shall hold office until their successors are chosen and qualify or
until their death, resignation or removal. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
Section 3. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall be chief executive officer of the Corporation and,
subject to the authority of the Board of Directors, shall have the general
control and management of the business and affairs of the Corporation. He shall
preside at all meetings of the Board of Directors.
Section 4. President. The President shall be the chief operating
officer of the Corporation and he shall perform such duties and have such
powers relating to the general control and management of the business and
affairs of the Corporation as the Chairman of the Board of Directors shall
determine, subject to the authority of the Board of Directors.
Section 5. Vice Chairman of the Board of Directors. The Executive Vice
Presidents and Senior Vice Presidents shall perform such duties and have such
powers relating to general control and management of the business and affairs
of the Corporation as the Chairman of the Board of Directors shall determine,
subject to the authority of the Board of Directors.
<PAGE> 14
Section 6. Vice Presidents. The Vice Presidents shall perform such
duties and have such powers relating to the general control and management of
the business and affairs of the Corporation as the President, subject to the
authority of the Board of Directors, shall determine.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees of the Board of Directors, when required. He shall give, or
cause to be given, notice of all meetings of the shareholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or by the Chairman of the Board as to
matters relating to the Board of Directors. He shall have custody of the
corporate seal of the Corporation and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and, when so
affixed, it may be attested by his signature or by the signature of such
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing
by his signature. The Secretary shall also have such other powers and perform
such other duties as from time to time may be assigned to him by the President.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Board of Directors, at its regular meetings or when the
Board of Directors so requires, and to the President and Chairman of the Board,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties in his office and for the
restoration to the Corporation, in case of his death, resignation, retirement
or removal from office, of
<PAGE> 15
all books, papers, vouchers, money and other property or whatever kind in his
possession or under his control belonging to the Corporation.
Section 9. Subordinate Officer. In addition to the officers enumerated
in this Article V, the Corporation may have such other officers, agents and
employees as the Board of Directors may determine, including one or more
Assistant Secretaries and one or more Assistant Treasurers, each of whom shall
hold office for such period, have such authority and perform such duties as the
Board of Directors may from time to time determine. The Board of Directors may
delegate to any principa1 officer (that is, an officer whose office is
enumerated in Sections 3, 4, 5, 6, 7 or 8 of this Article V) the power to
appoint or remove any such subordinate officers, agents or employees.
Section 10. Removal. Any officer may be removed, either with or
without cause, by the vote of a majority of the directors then in office at a
meeting called for the purpose or, except in case of any officer elected by the
Board of Directors, by any officer upon whom the powers of removal may be
conferred by the Board of Directors.
Section 11. Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Chairman of the Board of
Directors, the President, a Vice Chairman of the Board of Directors or the
Secretary of the Corporation. Such resignation shall take effect on the date of
receipt of such notice or at any later time specified therein; and unless
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 12. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in these By-laws for
regular election or appointment to such office.
Section 13. Officers' Salaries. The salaries of the officers shall be
fixed from time to time by the Board of Directors, and none of such officers
shall be prevented from receiving a salary by reason of the fact that he is
also a director of the Corporation. The provisions of this Section 13 are
subject to the provisions of Section 15 of Article III of these By-laws in the
case of officers who are also directors.
<PAGE> 16
Section 14. Staff and Group Officers. In addition to the corporate
officers enumerated in this Article V (that is, officers whose offices are
enumerated in Sections 3, 4, 5, 6, 7, 8 or 9 of this Article V), the
Corporation may have such staff and group officers as the President may appoint
including, but not by way of limitation, one or more group vice presidents and
staff vice presidents. Each such staff and group officer appointed may carry
such exact title as may be designated by the President and shall hold office
for such period, have such executive authority as to a specific area designated
by the President and perform such duties as the President may from time to time
determine.
ARTICLE VI
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 1. Authority of Officers. The Board of Directors, except as
otherwise provided in these By-laws, may authorize any officer or officers,
agent or agents, or employee or employees of the Corporation to enter into any
contract or execute and deliver any instrument in the name and on behalf of the
Corporation, and such authority may be general or confined to specific
instances; and, unless so authorized by the Board of Directors, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable
pecuniarily for any purpose or to any amount.
Section 2. Authorized Loan; Security. No loan shall be contracted on
behalf of the Corporation, and no negotiable paper shall be issued, endorsed or
accepted in its name, unless authorized by the Board of Directors. Such
authority may be general or confined to specific instances. When so authorized
the officer or officers thereunto authorized may effect loans and advances at
any time for the Corporation from any bank, trust company or other institution,
or from any firm, corporation or individual, and for such loans and advances
may make, execute and deliver promissory notes or other evidences of
indebtedness of the Corporation; and, when authorized as aforesaid, as security
for the payment of any and all loans, advances, indebtedness and liabilities of
the Corporation, such officers may mortgage, pledge, hypothecate or transfer
any real or personal property at any time owned or held by the Corporation, and
to that end execute instruments of mortgage or pledge or otherwise transfer
such property.
<PAGE> 17
Section 3. Endorsement of Checks, etc. All checks, drafts, bills of
exchange or other orders for the payment of money, obligations, notes or other
evidences of indebtedness, bills of lading, warehouse receipts and insurance
certificates of the Corporation shall be signed or endorsed by such officer or
officers, agent or agents, attorney or attorneys or employee or employees of
the Corporation as shall from time to time be determined by resolution of the
Board of Directors. Each of such officers and employees shall give such bond,
if any, as the Board of Directors may require.
Section 4. Deposit of Funds. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board
of Directors may from time to time designate, or as may be designated by any
officer or officers, agent or agents, attorney or attorneys or employee or
employees of the Corporation to whom such power may be delegated by the Board
of Directors.
Section 5. Bank Accounts. The Board of Directors may from time to time
authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as it may designate or as may
be designated by any officer or officers, agent or agents, attorney or
attorneys or employee or employees of the Corporation to whom power in that
respect shall have been delegated by the Board of Directors. The Board may make
such special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these By-laws, as it may deem expedient.
Section 6. Rights of Corporation as Stockholder. Unless otherwise
provided by resolution adopted by the Board of Directors, the Chairman of the
Board of Directors, the President, a Vice Chairman of the Board of Directors or
any Vice President may from time to time appoint an attorney or attorneys, or
agent or agents, to exercise in the name and on behalf of the Corporation the
powers and rights which the Corporation may have as the holder of stock or
other securities in any other corporation, to vote or to consent in respect of
such stock or other securities; the Chairman of the Board of Directors, the
President, a Vice Chairman of the Board of Directors or any Vice President may
instruct the person or persons so appointed as to the manner of exercising such
powers rights and may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal, or otherwise, all such written
proxies, powers of attorney or other
<PAGE> 18
written instruments as he may deem necessary in order that the Corporation may
exercise such powers and rights.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Shareholder Entitled to Certificates. Every holder of stock
shall have a certificate, signed by, or in the name of the Corporation by, the
Chairman of the Board of Directors, the President or a Vice Chairman of the
Board of Directors and the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by him in the Corporation. Each such certificate shall be
sealed with the corporate seal, which may be facsimile, engraved or printed. If
the Corporation shall be authorized to issue more than one class or series of
stock, every certificate representing shares shall set forth upon the face or
back of the certificate, or shall state that the Corporation will furnish to
any shareholder upon request and without charge, a full or summary statement of
the designations, voting rights, preferences, limitations and relative rights
of the shares of each class authorized to be issued and, if the Corporation is
authorized to issue any preferred or special class in series, the variations in
the relative rights and preferences between the shares of each such series so
far as the same have been fixed and determined and the authority of the Board
of Directors to fix and determine designations, voting rights, preferences,
limitations, and special rights of the classes and series of shares of the
Corporation.
Section 2. Facsimile Signatures. Where a certificate is countersigned
(1) by a transfer agent other than the Corporation or its employee or (2) by a
registrar other than the Corporation or its employee, any other signature on
the certificate may be facsimile, engraved or printed. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate, shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed
<PAGE> 19
upon the making of an affidavit to that fact by the person claiming the
certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnify
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfers of Stock. Upon surrender to the Corporation or
the transfer agent or agents of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall by the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 5. Fixing Record Date. In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than ninety days before the
date of such meeting or any other action. If no record date is fixed, then (a)
the record date for determining shareholders shall be at the close of business
on the day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held and (b) the record date for determining shareholders for any
other purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating hereto. A determination of
shareholders of record entitled to notice of, or to vote at, a meeting of
shareholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting
in which case notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
Section 6. Registered Shareholders. The Corporation shall be entitled
to recognize the exclusive right of a person
<PAGE> 20
registered on its books as the owner of shares to receive dividends, and to vote
as such owner, and to hold liable for calls and assessments a person registered
on its books as the owner of shares, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Pennsylvania.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Articles, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Articles.
Section 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purposes as the directors shall think conductive to the interest
of the Corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
Section 3. Fiscal Year. The fiscal year of the Corporation shall end
on the thirty-first day of December in each year.
Section 4. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Pennsylvania". The seal may be issued by causing it or a facsimile
thereof to be impressed or affixed or in any manner reproduced.
ARTICLE IX
AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may
be adopted by the vote of shareholders entitled
<PAGE> 21
to cast at least a majority of the votes which all shareholders are entitled to
cast thereon or by the majority vote of the members of the Board of Directors at
any regular or special meeting of the shareholders or the Board of Directors
duly convened after notice to the shareholders or directors of the purpose.
ARTICLE X
APPLICABILITY OF CERTAIN PENNSYLVANIA STATUTES
Subchapter 25E and Subchapters 25G through 25J of the BCL shall not be
applicable to the Corporation, Subchapter 25F and all other provisions of the
BCL which have not been rendered inapplicable to the Corporation by the first
paragraph of this Article X shall be applicable to the Corporation.
<PAGE> 1
4.27 SIXTH AMENDMENT TO CREDIT AGREEMENT DATED AS OF
SEPTEMBER 9, 1998
SIXTH AMENDMENT TO CREDIT AGREEMENT
SIXTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of September 9,
1998, among COLTEC INDUSTRIES INC, a corporation organized and existing under
the laws of the State of Pennsylvania (the "Company"), Coltec Aerospace Canada
Ltd., an Ontario corporation (the "Canadian Borrower"), the various Subsidiaries
of the Company that are Credit Parties on the date of this Amendment, the
various Banks party to the Credit Agreement referred to below, BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of
America Illinois), as Documentation Agent, THE CHASE MANHATTAN BANK, as
Syndication Agent, BANKERS TRUST COMPANY, as Administrative Agent, and BANK OF
MONTREAL, as Canadian Paying Agent. All capitalized terms used herein and not
otherwise defined 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 Canadian Borrower, 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"); and
WHEREAS, the parties hereto have agreed to amend the Credit
Agreement as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments to Credit Agreement.
1. Section 3.03(e) of the Credit Agreement is hereby amended
by inserting immediately after sub-clause (E) appearing in the second
parenthetical thereof the following: "and (F) the sale of the Burbank Property,
if consummated prior to June 30, 1999 pursuant to the requirements of Section
9.02(xxvi)".
2. Section 7.08 of the Credit Agreement is hereby amended by
deleting clause (b) thereof in its entirety and inserting in lieu thereof the
following new clause (b):
<PAGE> 2
"(b) No Credit Party nor any of its Subsidiaries is engaged,
directly or indirectly, principally, or as one of its important
activities, in the business of extending, or arranging for the
extension of, credit for the purpose of purchasing or carrying Margin
Stock. No part of any Credit Event (or the proceeds thereof) will be
used to purchase or carry any Margin Stock or to extend credit for the
purpose of purchasing or carrying any Margin Stock except for (i)
purchases of Company Common Stock in compliance with Section 9.03 and
(ii) purchases of up to $2,500,000 in the aggregate at any time
outstanding with respect to Permitted Investments made under Section
9.05(vi). Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, nor the occurrence of any other Credit Event, will
violate or be inconsistent with the provisions of the Margin
Regulations. At the time of each Credit Event and after giving effect
thereto, less than 25% of the value (as determined by any reasonable
method) of the assets of the Company and its Subsidiaries taken as a
whole will constitute Margin Stock."
3. Section 7 of the Credit Agreement is hereby amended by
inserting the following new Section 7.29 at the end thereof:
"7.29 Year 2000. All Information Systems and Equipment are
either Year 2000 Compliant, or any reprogramming, remediation or any
other corrective action, including the internal testing of all such
Information Systems and Equipment, are expected to be completed by June
30, 1999. Furthermore, to the extent that such reprogramming,
remediation or other corrective action is required, the cost thereof,
as well as the cost of the reasonably foreseeable consequences of
failure to become Year 2000 Compliant, to the Company and its
Subsidiaries (including, without limitation, reprogramming errors and
the failure of other systems or equipment) is not reasonably expected
to result in a Default, an Event of Default or a materially adverse
effect on the business, property, assets, condition (financial or
otherwise) or prospects of the Company (or of the Company and its
Subsidiaries taken as a whole) or on the rights or remedies of the
Banks or any Agent under any Credit Document or on the ability of the
Company and its Subsidiaries to perform their obligations to the Banks
under any Credit Document."
<PAGE> 3
4. Section 8 of the Credit Agreement is hereby amended by
inserting the following new Section 8.17 at the end thereof:
"8.17 Margin Regulations. Except as provided in the second
succeeding sentence, neither the Company nor any of its Subsidiaries
shall acquire any Margin Stock (other than shares of Company Common
Stock acquired in compliance with Section 9.03) if, after giving
effect to such acquisition, the aggregate purchase price of all Margin
Stock (other than shares of Company Common Stock held by the Company
and its Subsidiaries) owned by the Company and its Subsidiaries
exceeds $2,500,000. So long as the covenant contained in the
immediately preceding sentence is complied with, all Margin Stock at
any time owned by the Company and its Subsidiaries shall not
constitute Collateral and no security interest shall be granted (or
required to be granted) therein pursuant to any Credit Document. If at
any time the aggregate purchase price of all Margin Stock owned by the
Company and its Subsidiaries exceeds $2,500,000 (exclusive of shares
of Company Common Stock held by the Company or any of its
Subsidiaries), then (x) all Margin Stock owned by the Credit Parties
(other than shares of Company Common Stock) shall be pledged, and
delivered for pledge, pursuant to the respective Pledge Agreement (but
only to the extent that the aggregate purchase price of such Margin
Stock exceeds $2,500,000) and (y) the Company shall execute and
deliver to the Banks appropriately completed forms (including, without
limitation, Form U-1) establishing compliance with the Margin
Regulations. If at any time any Margin Stock is required to be pledged
as a result of the provisions of the immediately preceding sentence,
repayments of outstanding Obligations may be required (and subsequent
Credit Events may be restricted but only to the extent necessary) in
order to be in compliance with the applicable provisions of the Margin
Regulations."
5. Section 9.02 of the Credit Agreement is hereby amended by
(i) deleting the word "and" appearing at the end of clause (xxiv) thereof, (ii)
deleting the period appearing at the end of clause (xxv) thereof and inserting
"; and" in lieu thereof and (iii) inserting in appropriate order the following
new clause (xxvi):
"(xxvi) the Company (or its Subsidiary that is the fee owner
of the Burbank Property) shall be permitted to agree to sell, and to
consummate the sale of, the Burbank
<PAGE> 4
Property so long as such sale is for fair market value (as determined
in good faith by the Board of Directors of the Company) and results in
consideration consisting of cash (it being understood and agreed that
such consideration may consist of one or more promissory notes so long
as such notes shall be due and payable in cash within 180 days after
the issuance thereof), and notwithstanding anything to the contrary
herein, the Net Sale Proceeds from the sale of the Burbank Property
need not be applied in accordance with Section 3.03(e)."
6. Section 9.03 of the Credit Agreement is hereby amended by
adding the following new sentence immediately at the end thereof:
"In addition to the purchases of Company Common Stock permitted
pursuant to the preceding provisions of this Section 9.03, during the
eighteen-month period commencing on September 1, 1998 and ending on
March 1, 2000, the Company shall be permitted to purchase additional
shares of Company Common Stock so long as (i) there shall exist no
Default or Event of Default (both before and after giving effect
thereto) and (ii) the aggregate purchase price of Company Common Stock
acquired by the Company pursuant to this sentence in such
eighteen-month period does not exceed $75,000,000."
7. Section 9.05 of the Credit Agreement is hereby amended by
(i) deleting the word "and" appearing at the end of clause (xxi) thereof, (ii)
deleting the period appearing at the end of clause (xxii) thereof and inserting
"; and" in lieu thereof and (iii) inserting in appropriate order the following
new clause (xxiii):
"(xxiii) the Company may purchase Company Common Stock to the
extent permitted by Section 9.03."
8. Section 11 of the Credit Agreement is hereby amended by
inserting in appropriate order the following new definitions:
"'Burbank Property' shall mean those certain parcels of land (and the
improvements thereon) located at 100 East Cedar Avenue, Burbank,
California.
`Information Systems and Equipment' shall mean all computer hardware,
firmware and software, as well as other information processing
systems, or any equipment containing
<PAGE> 5
embedded microchips, whether directly owned, licensed, leased, operated
or otherwise controlled by the Company or any of its Subsidiaries,
including through third-party service providers, and which, in whole or
in part, are used, operated, relied upon, or integral to, the Company's
or any of its Subsidiaries' conduct of their business.
'Margin Regulations' shall mean and include each of Regulation T,
Regulation U and Regulation X.
`Regulation T' shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
`Regulation X' shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof.
`Year 2000 Compliant' means, with respect to any Information Systems
and Equipment, that such Information Systems and Equipment accurately
process date data (including, but not limited to, calculating,
comparing and sequencing), before, during and after the year 2000, as
well as same and multi-century dates, or between the years 1999 and
2000, taking into account all leap years, including the fact that the
year 2000 is a leap year, and further, that when used in combination
with, or interfacing with, other Information Systems and Equipment,
shall accurately accept, release and exchange date data, and shall in
all material respects continue to function in the same manner as it
performs as of September 9, 1998 and shall not otherwise impair the
accuracy or functionality of Information Systems and Equipment."
II. Miscellaneous.
1. In order to induce the Banks to enter into this Amendment,
the Company and the Canadian Borrower hereby represent and warrant that (i) all
representations and warranties contained in Section 7 of the Credit Agreement
(as amended by this Amendment) are true and correct in all material respects on
and as of the Sixth 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
<PAGE> 6
no Default or Event of Default on the Sixth Amendment Effective Date after
giving effect to this Amendment.
2. 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.
3. 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.
4. 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.
5. This Amendment shall become effective on the date (the
"Sixth Amendment Effective Date") when each Credit Party (including without
limitation, the Company, the Canadian Borrower and each Subsidiary Guarantor)
and the Required Banks shall have signed a counterpart hereof (whether the same
or different counterparts) and shall have delivered (including, without
limitation, by usage of facsimile transmission) the same to the Administrative
Agent at its Notice Office. This Amendment and the agreements contained herein
shall be binding on the successors and assigns of the parties hereto.
6. From and after the Sixth 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> 7
IN WITNESS WHEREOF, the parties hereto have caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
COLTEC INDUSTRIES INC
By /s/ Thomas B. Jones
--------------------------------------
Title: Treasurer
COLTEC AEROSPACE CANADA LTD.
By /s/ Robert J. Tubbs
--------------------------------------
Title: Vice President
<PAGE> 8
BANKERS TRUST COMPANY,
Individually and as
Administrative Agent
By /s/ G. Andrew Keith
--------------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
Individually and as
Documentation Agent
By /s/ Michale J. Mullaney
--------------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK,
Individually and as
Syndication Agent
By /s/
--------------------------------------
Title: Vice President
BANK OF MONTREAL,
Individually and as Canadian
Paying Agent and Canadian
Documentation Agent
By /s/ Bruce A. Pietka
--------------------------------------
Title: Director
ALLIED IRISH BANK, PLC,
CAYMAN ISLANDS BRANCH
By /s/ William J. Strickland
--------------------------------------
/s/ Tracey Duffy
--------------------------------------
Title: Sr. Vice President
Asst. Vice President
<PAGE> 9
BANK COMMERCIALE ITALIANA
NEW YORK BRANCH
By /s/ C. Dougherty
--------------------------------------
Title: V.P.
By /s/ Karen Purelis
--------------------------------------
Title: V.P.
BANK OF IRELAND
By /s/
--------------------------------------
Title: Corporate Officer
THE BANK OF NEW YORK
By /s/ Ann Marie Hughes
--------------------------------------
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By /s/ Freidrich N. Wilmar
--------------------------------------
Title: Vice President
NATEXIS BANQUE BFCE, formerly
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By /s/
--------------------------------------
Title: /s/
By /s/ G. Kevin Dooley
--------------------------------------
Title: Vice President
CIBC INC.
By /s/ Thor Zaluckyj
--------------------------------------
Title: Executive Director
CIBC Oppenheimer Corp., as AGENT
<PAGE> 10
ROYAL BANK OF CANADA
By
--------------------------------------
Title:
COMMERCIAL LOAN FUNDING TRUST I
By Lehman Commercial Paper Inc.,
not in its individual capacity but
solely as
administrative agent.
By /s/ Michale Swanson
--------------------------------------
Title: Authorized Signatory
MELLON BANK CANADA
By /s/
--------------------------------------
Title: Vice President
CREDIT LYONNAIS ATLANTA AGENCY
By /s/ David M. Caunn
--------------------------------------
Title: First Vice President
CREDIT LYONNAIS NEW YORK
BRANCH
By /s/ Robert Ivosevich
--------------------------------------
Title: Senior Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By /s/
--------------------------------------
Title: Account Officer
FIRST UNION NATIONAL BANK
(f/k/a First Union National
Bank of North Carolina)
By /s/ Patrick D. Finn
--------------------------------------
Title: Senior Vice President
<PAGE> 11
THE FUJI BANK, LIMITED,
ATLANTA AGENCY
By /s/ Toshihiro Mitsui
--------------------------------------
Title: Senior Vice President &
Joint General Manager
ERSTE BANK DER
OESTERREICHISCHEN SPARKASSEN
AG (f/k/a Girocredit Bank AG
Der Sparkassen,
Grand Cayman Island Branch)
By /s/ Arcinee Hovanessian
--------------------------------------
Title: Vice President - Erste Bank
New York
By /s/ Paul Judicke
--------------------------------------
Title: Vice President - Erste Bank
New York
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By /s/ Kenji Tsugami
--------------------------------------
Title: General Manager
LLOYDS BANK PLC
By /s/ David C. Rodwky
--------------------------------------
Title: Assistant Vice President
R156
By /s/ Mela Dorgan
--------------------------------------
Title: Assistant Vice President
Structured Finance D094
MELLON BANK, N.A.
By /s/ M. Johnst
--------------------------------------
Title: AVP
<PAGE> 12
NATIONSBANK, N.A.
By /s/
--------------------------------------
Title: Senior Vice President
BANK LEUMI TRUST COMPANY
OF NEW YORK
By /s/ Sami Ambar
--------------------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By /s/ John C. Kissinger
--------------------------------------
Title: General Manager
THE TOKAI BANK, LIMITED
NEW YORK BRANCH
By /s/
--------------------------------------
Title: Assistant General Manager
WACHOVIA BANK, N.A.
By /s/ Timothy R. Hileman
--------------------------------------
Title: Senior Vice President
BT BANK OF CANADA
By /s/ James E. Kellar
--------------------------------------
Title: Principal
By /s/ Brian S. Strauss
--------------------------------------
Title: Principal
BANK OF AMERICA CANADA
By /s/
--------------------------------------
Title: /s/
<PAGE> 13
THE CHASE MANHATTAN BANK OF
CANADA
By /s/ Christine Chan
--------------------------------------
Title: Vice President
By /s/ Arun K. Bery
--------------------------------------
Title: Vice President
CREDIT LYONNAIS CANADA
By /s/ Robert Dyck
--------------------------------------
Title: Manager, Corporate Banking
By /s/ David J. Farmer
--------------------------------------
Title: First Vice President and
Manager, Central Region
<PAGE> 14
Acknowledged and agreed:
AMI INDUSTRIES INC.
CII HOLDINGS INC
COLTEC CANADA INC
COLTEC INDUSTRIAL PRODUCTS INC
COLTEC INTERNATIONAL SERVICES CO
COLTEC NORTH CAROLINA INC.
COLTEC TECHNICAL SERVICES INC
DELAVAN INC (F/K/A DELAVAN NEWCO INC.)
GARLOCK INC
GARLOCK INTERNATIONAL INC
GARLOCK OVERSEAS CORPORATION
HABER TOOL COMPANY INC
JAMCO PRODUCTS, LLC
MENASCO AEROSYSTEMS INC
STEMCO INC
WALBAR INC
By /s/ Robert J. Tubbs
----------------------------------
Title: Vice President
On behalf of each of the above
Subsidiary Guarantors
<PAGE> 1
4.28 FAMILY PRODUCTION PLAN OF COLTEC INDUSTRIES INC.
COLTEC INDUSTRIES INC.
FAMILY PROTECTION PLAN
In recognition of the services provided to Coltec Industries Inc. (the
"Company") by certain of its key executives and other key employees, the Company
has maintained a family protection program since 1974 to provide those
individuals with death benefit coverage from the Company's assets for their
designated beneficiaries (the "Program"). Effective January 1, 1998, the
Company's, Retirement Committee, as authorized by the Board of Directors, has
determined to document a formal plan to provide for insurance protection for
those individuals under the terms and conditions set forth below. Accordingly,
the Family Protection Plan is hereby adopted to read, in its entirety, as
follows:
SECTION 1
Definitions
As used herein, the following words and phrases shall have the meaning described
below:
1.1 "Beneficiary" means the person(s) designated by a Participant to
receive any benefits payable under this Plan subsequent to the Participant's
death. In the event a Participant has not filed a beneficiary designation with
the Company, the Beneficiary shall be the Participant's surviving spouse, or if
there is no surviving spouse, his estate.
1.2 "Board" means the Board of Directors of Coltec Industries Inc.
1.3 "Effective Date" means January 1, 1998.
1.4 "Eligible Executive" means an Employee employed by the Company in
an executive capacity, as designated by the Board. "Eligible Officer" means an
Eligible Executive who is elected by the Board and is serving as an officer of
the Company at the time of death, retirement or Separation from Employment.
1.5 "Employee" means any individual employed on a regular basis by
the Company but excluding any non-resident alien and any leased employee within
the meaning of Code Section 414(n)(2), or
<PAGE> 2
any individual not characterized by the Company as an "employee," no matter how
characterized by the Internal Revenue Service, other governmental agency or a
court. Any change of characterization of an individual shall take effect on the
actual date of such change without regard to any retroactive recharacterization.
1.6 "Employment Agreement" means an employment contract or change in
control agreement entered into between the Company and a Participant and as the
same may be amended or superseded from time to time.
1.7 "Interest" means all premiums the Company paid on the Policy for
a Participant or the cash surrender value of the Policy at the time the
Participant Separates from Employment if less.
1.8 "Participant" means any Employee who satisfies the requirements
for eligibility set forth in Section 2 below and is designated as a Participant
thereunder.
1.9 "Plan" means the Coltec Industries, Inc. Family Protection Plan
as set forth herein.
1.10 "Plan Administrator" means the Company's Retirement Committee.
1.11 "Policy" means a whole life insurance policy or policies
purchased in accordance with the provisions of Section 2.3.
1.12 "Retirement Date" means the first day of any month following a
Participant's attainment of age 55 and completion of 10 Years of Service as an
Employee.
1.13 "Separates from Employment" means a Participant's (i) termination
of employment from the Company for any reason other than death, Retirement or
"disability," as defined in the Company's long-term disability plan, or (ii)
reduction in employment grade or status such that the Participant no longer
qualifies as an Eligible Executive. Except as otherwise provided herein or in an
Employment Agreement, a "Separation from Employment" shall be deemed to have
occurred on the last day of the Participant's service to the Company.
1.14 "Years of Service" means a Participant's total service as an
Employee of the Company, as credited to a Participant under the Company's
Retirement Plan.
<PAGE> 3
SECTION 2
Participation
2.1 Any Employee who was a Participant in the Program prior to the
Effective Date shall participate in the Plan in accordance with its terms.
2.2 Each other Employee who becomes an Eligible Executive shall be
eligible to become a Participant at the designation of the Company's Chief
Executive Officer. All Participants shall be listed on Exhibit "A" hereto as
they are so designated.
2.3 Upon becoming a Participant, each Eligible Executive shall
purchase a Policy, from the insurance company or companies specified by the Plan
Administrator, for an annual premium in an amount designated by the Company's
Chief Executive Officer and which generally will be at least $20,000 (with the
actual amount being listed opposite the Participant's name on Exhibit A hereto,
as modified from time to time) for each of the succeeding 10 Plan Years;
provided, however, that with respect to Participants on the Effective Date who
have already purchased or otherwise own a Policy that the Company has authorized
for use under the Plan, such Policy, and the premiums due thereunder, shall
qualify for the purposes of this Section and shall be listed on Exhibit A
hereto. The Participant shall be obligated to pay the so-called "P.S. 58" costs
under the Policy, which shall be deducted from the Participant's wages if not
otherwise paid on a timely basis, and the Company shall pay the balance of all
premiums due under the Policy. The Policy shall have an initial face amount
sufficient to provide a death benefit to the Participant's Beneficiary under
Section 3.1 and to return to the Company, from the cash surrender value of the
Policy, the Company's Interest under the Policy by the date on which the
Eligible Executive attains age 65. Such Policy shall also contain a waiver of
premium in the case of disability. In addition, the Participant (or the
Participant's assignee(s) if all incidents of ownership have been transferred by
the Participant) shall execute a collateral assignment split dollar agreement in
the form specified by the Committee to secure the Company's Interest under the
Policy. Notwithstanding anything herein to the contrary, the Company will
continue to pay the annual premium for more than 10 Plan Years if required in
order to make the Policy sufficient to provide both the death benefit and the
Company's Interest.
<PAGE> 4
2.4 Notwithstanding the above, no Employee shall be eligible to
participate in this Plan nor will any benefits be paid hereunder on and after
the date, if any, on which the Employee violates the terms and conditions of any
Employment Agreement, service contract or any agreement relating to matters of
confidentiality of the Company or competition with the Company, or if the
Employee is terminated for "cause" as defined in the Company's personnel
policies or, alternatively, in any Employment Agreement. In any such case, the
Employee shall be deemed to have immediately Separated from Employment and not
to have been an Eligible Officer.
SECTION 3
Death Benefits, Termination Rules, Annual Bonus and Change of
Control
3.1 Subject to the provisions of Section 4.5, upon the death of a
Participant while an Eligible Executive, or thereafter if the Participant
terminated employment on or after the Participant's Retirement Date, as provided
in Section 3.3, the Beneficiary shall receive an insured death benefit under the
Policy purchased upon entry of the Participant into the Plan as provided in
Section 2.3. The benefit shall be paid as soon as practicable following the date
of death and shall be the death benefit under the Policy.
3.2 If the Participant Separates from Employment prior to death, all
payments of premium by the Company to the Policy shall
immediately cease and the Participant must surrender the Policy
to the Company.
3.3 Notwithstanding the provisions of Section 3.2:
(a) A Participant who Separates from Employment prior to death may
elect to continue a Policy by paying all premiums due thereafter under the
Policy provided the Participant repays the Company its Interest within 60 days
following the date of Separation from Employment.
(b) A Participant who Separates from Employment on a Retirement Date
but who is an Eligible Officer on that date may elect to (i) continue the
Policy as described in subsection (a) or (ii) continue the Policy by causing
the Policy to be converted, with no further premiums being paid by the Company,
such that the cash surrender value of the Policy, and the death benefit, are
<PAGE> 5
sufficient to return to the Company its Interest upon the Participant's death.
3.4 On an annual basis, no later than 30 days after the premium is
paid on the Policy, the Company shall pay each Participant a bonus equal to the
sum of the amount paid by the Participant pursuant to the second sentence of
Section 2.3 and the taxes needed to be paid by the Participant, including all
Federal, state and local taxes, by reason of the payments to the Participant
under this Section 3.4 such that the amount received by the Participant net of
any tax liability shall equal the amount paid by the Participant pursuant to
the second sentence of Section 2.3 (and assuming that the Participant is in the
maximum Federal, state and local income tax bracket).
3.5 Notwithstanding anything in this Plan to the contrary, in the
event that the Participant has entered into an Employment Agreement and,
thereafter, a "Change-in-Control" occurs, as such term is defined in the
Employment Agreement, the provisions of the Employment Agreement shall control
and shall not be superseded by this Plan and the Company hereby agrees that it
shall take the action required by the Employment Agreement with respect to the
Participant's Policy. In addition, actions under this Section 3.5 shall not
abrogate the Participant's (or trustee's, if the Participant has transferred
all of the rights under the Policy to a trust) obligations under the Plan;
provided, however, that neither a Change-in-Control nor a Separation from
Employment in connection therewith shall accelerate those obligations under the
Plan.
SECTION 4
Miscellaneous
4.1 Nothing contained herein (a) shall be deemed to exclude a
Participant from any compensation, bonus, pension, insurance, severance pay or
other benefit to which he otherwise is or might become entitled to as an
Employee of the Company, or (b) shall be construed as conferring upon an
Employee the right to continue in the employ of the company as an executive or
in any other capacity.
4.2 Any amounts payable by the Company hereunder shall not be deemed
salary or other compensation to a Participant for the purposes of computing
benefits to which he may be entitled under
<PAGE> 6
any retirement-type plan of the Company or any other arrangement of the Company
for the benefit of its employees.
4.3 The Company's obligation to contribute to the Policies under this
Plan shall constitute a general, unsecured obligation, payable solely out of
its general assets, and no Participant shall have any right to any specific
assets of the Company
4.4 The rights and obligations created hereunder shall be binding on
a Participant's heirs, executors and administrators and on the successors and
assigns of the Company.
4.5 Except as to the Chairman of the Company on the Amendment
Effective Date, the Board, in its sole discretion, may amend, modify or
terminate the Plan at any time; provided, however, that during the term of any
Employment Agreement any such action as to a Participant covered by the
Employment Agreement must be consistent with the provisions of the Employment
Agreement applicable to such Participant.
4.6 The masculine pronoun whenever used shall include the feminine
and the singular shall be construed as the plural, where applicable.
4.7 The rights of any Participant under this Plan are personal and
may not be assigned, transferred, pledged or encumbered; provided, however,
that nothing herein shall prevent or shall be construed to prevent a further
transfer of the policy transferred to the Participant, if any, under Section
3.3 above. Any other attempt to do so shall be void.
4.8 The Plan Administrator, or its designee, shall have full power
and authority to interpret and administer this Plan and his actions in so doing
shall be final and binding on all persons interested in this Plan. The Plan
Administrator may, from time to time, adopt rules and regulations governing the
Plan.
4.9 Neither the Company nor any member of the Board shall be
responsible or liable in any manner to any Participant, Beneficiary or any
person claiming through them for any benefit or action taken or omitted in
connection with the granting of benefits, the continuation of benefits, or the
interpretation and administration of the Plan.
4.10 The Plan created hereby shall be construed in accordance with and
governed by the laws of the State of North Carolina.
<PAGE> 7
SECTION 5
Claims Procedure
5.1 The Plan Administrator will advise the Beneficiary of any benefit
to which the Beneficiary is entitled under the Plan and shall have the power to
interpret this Plan and make all required determinations including factual
determinations. The Plan Administrator's decisions shall be final and binding
on the Company, the Employee, the Beneficiary and all persons claiming an
interest in this Plan through the Employee. If the Beneficiary believes that
the Plan Administrator has failed to provide any benefit to which the
Beneficiary is entitled, the Beneficiary may file a written claim with the Plan
Administrator. The claim shall be reviewed, and a response provided, within a
reasonable time after receiving the claim. The Beneficiary shall be provided
with written notice setting forth in a manner calculated to be understood by
the Beneficiary:
(1) the specific reasons or reasons for the denial;
(2) specific reference to pertinent Agreement provisions on
which denial is based;
(3) a description of any additional material or information
necessary for the claimant to perfect the claim; and
(4) an explanation of the claims review procedure set forth
in paragraph (b), below.
5.2 Within 60 days of receipt by the Beneficiary of a notice denying
a claim under the Agreement, the Beneficiary or duly authorized representative
may request in writing a full and fair review of the claim by the Plan
Administrator. The Plan Administrator may extend the 60-day period where the
nature of the benefit involved or other attendant circumstances make such
extension appropriate. In connection with such review, the Beneficiary or duly
authorized representative may review pertinent documents and may submit issues
and comments in writing. The Plan Administrator shall make a decision promptly,
and not later than 60 days after the Plan Administrator's receipt of a request
for review, unless special circumstances require an extension of time for
processing, in which case a decision shall be rendered as soon as possible, but
not later than 120 days after receipt of a request for review. The decision on
review shall be in writing and shall include specific reasons for the decision,
written in a
<PAGE> 8
manner calculated to be understood by the Beneficiary, and specific references
to the pertinent Agreement provisions on which the decision is based.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 27, 1998 CONSOLIDATED BALANCE SHEET AND STATEMENT OF EARNINGS FOR THE
NINE MONTHS ENDED SEPTEMBER 27, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-27-1998
<CASH> 18,032
<SECURITIES> 0
<RECEIVABLES> 184,034
<ALLOWANCES> 3,078
<INVENTORY> 237,638
<CURRENT-ASSETS> 468,319
<PP&E> 708,062
<DEPRECIATION> 409,263
<TOTAL-ASSETS> 1,085,807
<CURRENT-LIABILITIES> 327,759
<BONDS> 610,803
144,966
0
<COMMON> 705
<OTHER-SE> (312,678)
<TOTAL-LIABILITY-AND-EQUITY> 1,085,807
<SALES> 1,129,593
<TOTAL-REVENUES> 1,129,593
<CGS> 821,333
<TOTAL-COSTS> 1,001,430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,930
<INCOME-PRETAX> 143,427
<INCOME-TAX> 48,765
<INCOME-CONTINUING> 92,277
<DISCONTINUED> 0
<EXTRAORDINARY> (4,326)
<CHANGES> 0
<NET-INCOME> 87,951
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.30
</TABLE>
