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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1997
Commission file number 0-16182
-------------------
AXSYS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-1962029
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
645 Madison Avenue
New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 593-7900
-------------------
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes |X| No |_|
3,048,381 shares of Common Stock, $.01 par value, were outstanding as of
August 11, 1997.
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<PAGE>
AXSYS TECHNOLOGIES, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1997 and 1996.............................. 3
Condensed Consolidated Statements of Operations -
Six Months Ended June 30, 1997 and 1996................................ 4
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996.................................... 5
Condensed Consolidated Statements of Cash Flows-
Six Months Ended June 30, 1997 and 1996................................ 6
Notes to Condensed Consolidated Financial Statements.................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................... 10
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K................................. 12
SIGNATURES................................................................ 12
- ----------
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three Months
Ended June 30,
---------------------------
1997 1996
------------ -----------
Net Sales $ 31,247 $ 23,514
Cost of sales 22,709 17,287
Selling, general and administrative expenses 5,385 4,237
Amortization of intangible assets 73 50
----------- -----------
Operating income 3,080 1,940
Interest expense 688 598
Other expense (income) 15 (6)
----------- -----------
Income before taxes and extraordinary item 2,377 1,348
Provision for income taxes 956 536
----------- -----------
Income before extraordinary item 1,421 812
Extraordinary loss on early extinguishment
of debt, net of tax benefit -- (173)
----------- -----------
Net income 1,421 639
Preferred stock dividends 42 221
----------- -----------
Net income applicable to common shareholders $ 1,379 $ 418
=========== ===========
Earnings per share:
Earnings before extraordinary charge $ 0.41 $ 0.21
Extraordinary charge
-- (0.06)
----------- -----------
$ 0.41 $ 0.15
=========== ===========
Weighted average common shares outstanding 3,323,042 2,701,158
=========== ===========
See notes to condensed consolidated financial statements.
3
<PAGE>
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Six Months Ended
June 30,
------------------------
1997 1996
---------- -----------
Net Sales $ 58,849 $ 40,545
Cost of sales 43,111 29,890
Selling, general and administrative expenses 10,284 7,502
Amortization of intangible assets 125 102
---------- -----------
Operating income 5,329 3,051
Interest expense 1,343 1,042
Other expense (income) 26 (13)
---------- -----------
Income before taxes and extraordinary item 3,960 2,022
Provision for income taxes 1,594 820
---------- -----------
Income before extraordinary item 2,366 1,202
Extraordinary loss on early extinguishment
of debt, net of tax benefit -- (173)
---------- -----------
Net income 2,366 1,029
Preferred stock dividends 102 405
---------- -----------
Net income applicable to common shareholders $ 2,264 $ 624
========== ===========
Earnings per share:
Earnings before extraordinary charge $ 0.69 $ 0.31
Extraordinary charge -- (0.07)
---------- -----------
$ 0.69 $ 0.24
========== ===========
Weighted average common shares outstanding 3,276,586 2,615,102
========== ===========
See notes to condensed consolidated financial statements.
4
<PAGE>
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 415 $ 2,691
Accounts receivable - net 17,994 13,801
Inventories - net 26,270 24,454
Other current assets 1,161 850
------- -------
TOTAL CURRENT ASSETS 45,840 41,796
PROPERTY, PLANT AND EQUIPMENT - net 14,272 13,456
EXCESS OF COST OVER NET ASSETS ACQUIRED - net 14,141 6,415
OTHER ASSETS 442 504
------- -------
TOTAL ASSETS $74,695 $62,171
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 8,862 $ 6,881
Accrued expenses and other liabilities 10,741 7,290
Current portion of long-term debt and capital lease obligations 3,057 2,831
------- -------
TOTAL CURRENT LIABILITIES 22,660 17,002
LONG-TERM DEBT & CAPITAL LEASES, less current portion 26,056 23,324
OTHER LONG-TERM LIABILITIES 2,064 2,293
DEFERRED INCOME 321 387
SHAREHOLDERS' EQUITY:
Preferred Stock, issued and outstanding 738,881
shares in 1996 -- 7
Common Stock, issued and outstanding 3,048,381
shares in 1997 and 2,568,940 shares in 1996 30 26
Capital in Excess of Par 19,465 17,297
Retained Earnings 4,099 1,835
------- -------
TOTAL SHAREHOLDERS' EQUITY 23,594 19,165
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $74,695 $62,171
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
AXSYS TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1997 1996
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,366 $ 1,029
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Extraordinary loss, net -- 173
Realization of net operating loss carryforward 1,355 653
Depreciation and amortization 1,563 1,099
Increase in current assets, other than cash (3,320) (1,932)
Increase (decrease) in current liabilities 3,875 (1,355)
Other - net (121) (333)
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,718 (666)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (851) (580)
Acquisition of business, net of cash acquired (7,335) (4,728)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (8,186) (5,308)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 23,500 54,061
Repayment of borrowings (21,726) (47,529)
Other (1,582) (420)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 192 6,112
-------- --------
NET (DECREASE) INCREASE IN CASH (2,276) 138
CASH AT BEGINNING OF PERIOD 2,691 91
-------- --------
CASH AT END OF PERIOD $ 415 $ 229
======== ========
Supplemental Cash Flow Information:
Cash paid for:
Interest $ 1,162 $ 669
Income taxes 37 373
Non-cash investing and financing activities:
Equipment acquired under capital leases $ 1,158 $ 464
Capital stock issued for acquisition 2,166 --
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
AXSYS TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands)
Note 1 - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation (consisting of normal recurring accruals) have
been included. Operating results for the three month and six month periods ended
June 30, 1997 are not indicative of the results that may be expected for the
year ending December 31, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
Certain reclassifications have been made to previously reported financial
statements to conform to current classifications.
Note 2 - Earnings per Share
- ---------------------------
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share" was issued in February 1997 and replaces Accounting Principles Board
("APB") Opinion No. 15. The new statement simplifies the computations of
earnings per share ("EPS") by replacing the presentation of primary EPS with
basic EPS, which is computed by dividing income available to common stockholders
by the weighted-average number of common shares outstanding for the period.
Diluted EPS under the new statement is computed similarly to fully diluted EPS
pursuant to APB Opinion 15. SFAS No. 128 is effective for financial statements
for both interim and annual periods ending after December 15, 1997. Early
application is prohibited. For the three month and the six month periods ended
June 30, 1997, the effect of adopting SFAS No. 128 on the Company's reported EPS
would be immaterial.
Note 3 - Acquisitions and Divestiture
- -------------------------------------
On May 30, 1997, the Company acquired Teletrac, Inc. for $9,926, including the
issuance of 153,000 shares of Axsys common stock. Teletrac designs and
manufactures laser-based precision measurement systems and state-of-the-art
precision linear and rotary positioning servo systems for use in the electronics
capital equipment market.
On April 25, 1996, the Company acquired all of the outstanding shares of
Precision Aerotech, Inc., ("PAI") for $4,728, net of cash acquired. In addition,
the Company repaid $12 million of borrowings under PAI term loans. Precision
Aerotech designs, manufactures and markets laser scanners, precision metal
optics, high performance air bearings and precision machined parts sold
predominantly in commercial markets.
The acquisitions of Teletrac and PAI were accounted for under the purchase
method of accounting and, accordingly, the results of operations of Teletrac and
PAI have been included in the accompanying consolidated financial statements
since the date of their respective acquisition. The cost of the acquisitions was
allocated on the basis of the estimated fair market value of the assets acquired
and liabilities assumed. The purchase price allocations for Teletrac have been
completed on a preliminary basis, however, management does not believe that
changes in the allocations will be material. During the PAI acquisition process,
the Company determined that L&S Machine Company, Inc. (L&S), a wholly-owned
subsidiary of PAI which manufactures structural components for the aerospace
industry, did not fit its long-term strategy and would be subsequently sold. The
portion of the PAI acquisition cost allocated to this asset represented the net
proceeds realized upon sale. In December 1996, the Company completed the sale of
L&S for an aggregate purchase price of approximately $13,000. The price included
the assumption of approximately $1,800 in long-term capitalized.
7
<PAGE>
AXSYS TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands)
Summarized below are the unaudited pro forma results of operations of the
Company as if Teletrac and PAI had been acquired on January 1, 1996:
Pro Forma
Six Months Ended June 30,
-------------------------
1997 1996
--------- ---------
Net sales $63,160 $53,703
Income before extraordinary item 2,455 1,252
Net income 2,455 1,079
Earnings per share:
Income before extraordinary item 0.69 0.31
Net income 0.69 0.24
The pro forma financial information presented above is not necessarily
indicative of either the results of operations that would have occurred had the
acquisitions of Teletrac and PAI taken place at the beginning of 1996 or the
future operating results of the combined companies. Pro forma net income for the
six months ended June 30, 1996 included certain special charges totaling
approximately $400.
On October 2, 1996, the Company acquired substantially all of the assets of
Lockheed Martin Beryllium Corporation ("LMBC") for $2,883, subject to
post-closing adjustments. LMBC's operations consist primarily of precision
machining of beryllium and other exotic material components. This acquisition
has also been accounted for under the purchase method of accounting and,
accordingly, the results of operations of LMBC have been included in the
accompanying consolidated financial statements since the date of acquisition.
The cost of the acquisition has been allocated on the basis of the estimated
fair market value of the assets acquired and liabilities assumed. The purchase
price allocation has been completed on a preliminary basis. Management does not
believe that changes in the purchase price allocation will be material.
Note 4 - Inventories
- --------------------
Inventories have been determined generally by lower of cost (first-in, first-out
or average) or market. Inventories consist of:
June 30, December 31,
1997 1996
-------- ------------
Raw materials $ 9,030 $ 8,033
Work-in-process 12,717 12,942
Finished goods 10,576 10,118
------- -------
32,323 31,093
Less reserves 6,053 6,639
------- -------
$26,270 $24,454
======= =======
8
<PAGE>
Note 5 - Shareholders' Equity
- -----------------------------
On February 14, 1997, the Company commenced an offer to exchange 0.75 shares of
its common stock for each outstanding share of its preferred stock. On March 17,
1997, the Exchange Offer terminated and the Company accepted for exchange all
shares of preferred stock validly tendered as of that time. Approximately
538,000 shares of preferred stock were exchanged for 403,500 shares of common
stock. Holders of shares of preferred stock accepted for exchange did not
receive any separate payment in respect of dividends not paid subsequent to
February 22, 1996, the last date on which dividends were paid on the preferred
stock.
On June 4, 1997, the Company redeemed all remaining outstanding shares of its
preferred stock. The redemption price was $7.70 per share, including accrued and
unpaid dividends of $1.54 per share through the redemption date. Approximately
200,900 shares of preferred stock have been called for redemption.
Note 6 - Other Information
- --------------------------
June 30, December 31,
1997 1996
------- ------------
Allowance for doubtful accounts $ 432 $ 385
====== ======
Accumulated depreciation and amortization
of property, plant and equipment $8,952 $7,458
====== ======
Accumulated amortization of excess of cost
over net assets acquired $1,171 $1,046
====== ======
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
Net sales by product for the three month and six month periods ended June 30,
1997 are presented in the table below.
The Company acquired the stock of Teletrac and PAI on May 30, 1997 and April 25,
1996, respectively. On October 2, 1996, the Company acquired substantially all
of the assets of LMBC. These acquisitions have been accounted for under the
purchase method of accounting and, accordingly, the results of the continuing
operations of Teletrac, PAI and LMBC (see Note 3 to the Condensed Consolidated
Financial Statements) have been included in the Company's Condensed Consolidated
Statement of Operations since their respective dates of acquisition.
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1997 1996 1997 1996
------- ------- ------- -------
Precision Systems $19,800 $12,325 $36,418 $18,100
Industrial Components 11,447 11,189 22,431 22,445
------- ------- ------- -------
Net Sales $31,247 $23,514 $58,849 $40,545
======= ======= ======= =======
Three Months Ended June 30, 1997 Compared to the Three Months Ended June 30,
- --------------------------------------------------------------------------------
1996
- ----
Net sales in 1997 increased by $7.7 million or 33%, compared to the same period
in 1996.
The Precision Systems group's sales (precision optical and positioning
components and subsystems) increased in 1997 by $7.5 million, or 61%, as
compared to 1996. Bookings for the group were $19.8 million in 1997, an increase
of $8.3 million, or 72%, compared to 1996. Both the increase in sales and
bookings were primarily due to the acquisitions of Teletrac, PAI and LMBC, and
increased business in the space market. Backlog at June 30, 1997 was $50.6
million, compared to $43.9 million at December 31, 1996. The increase in backlog
of $6.7 million is primarily attributable to the acquisition of Teletrac and
increased bookings from the digital imaging market.
The Industrial Components group's sales (precision ball bearings and
interconnect devices) increased in 1997 by $.3 million, or 2%, compared to 1996.
Bookings for the group were $10.6 million, a decrease of $.2 million, or 2%,
compared to 1996. Backlog at June 30, 1997 was $11.7 million, compared to $12.5
million at December 31, 1996.
Operating income was $3.1 million in 1997, as compared to $1.9 million in 1996,
representing a $1.2 million increase. This increase was primarily due to the
higher sales volume partially offset by increased engineering and other fixed
overhead spending and higher selling, general and administrative expenses. Gross
margin on sales was 27.3% in 1997 as compared to 26.5% in 1996.
Selling, general and administrative expenses, as a percentage of sales, declined
to 17.2% in 1997 from 18.0% in 1996. Selling, general and administrative
expenses increased by $1.1 million in 1997 primarily due to the acquisitions of
Teletrac, PAI and LMBC, as well as increased employment and other selling
expenses.
Preferred stock dividends decreased by $.2 million, as compared to 1996, due to
the Company's exchange of preferred stock for common stock and subsequent
redemption of remaining preferred stock (see Note 5 to the Condensed
Consolidated Financial Statements).
10
<PAGE>
Six Months Ended June 30, 1997 Compared to the Six Months Ended June 30, 1996
- -----------------------------------------------------------------------------
Net sales in 1997 increased by $18.3 million or 45%, compared to the same period
in 1996.
The Precision Systems group's sales (precision optical and positioning
components and subsystems) increased in 1997 by $18.3 million, or 101%, as
compared to 1996. Bookings for the group were $37.9 million in 1997, an increase
of $20.4 million, or 117%, compared to 1996. Both the increase in sales and
bookings were primarily due to the acquisitions of Teletrac, PAI and LMBC and
increased business in the space market.
The Industrial Components group's sales and bookings (precision ball bearings
and interconnect devices) for both 1997 and 1996 were $22.4 and $21.6 million,
respectively.
Operating income was $5.3 million in 1997, as compared to $3.1 million in 1996,
representing a $2.2 million increase. This increase was primarily due to the
higher sales volume partially offset by an unfavorable sales mix in the
Precision Systems group, increased engineering and other fixed overhead spending
and higher selling, general and administrative expenses. Gross margin on sales
was 26.7% in 1997 as compared to 26.3% in 1996.
Selling, general and administrative expenses, as a percentage of sales declined
to 17.5% in 1997 from 18.5% in 1996. Selling, general and administrative
expenses increased by $2.8 million in 1997 primarily due to the acquisitions of
Teletrac, PAI and LMBC, as well as increased employment and other selling
expenses.
Interest expense increased by $.3 million in the first six months of 1997 as a
result of higher average borrowings due to the acquisition of PAI in April 25,
1996 and Teletrac on May 30, 1997.
Preferred stock dividends decreased by $.3 million, as compared to 1996, due to
the Company's exchange of preferred stock for common stock and subsequent
redemption of remaining preferred stock (see Note 5 to the Condensed
Consolidated Financial Statements).
Liquidity and Capital Resources
- -------------------------------
Net cash provided by (used in) operations for 1997 and 1996 was $5.7 million and
$(.7) million, respectively. This improvement was primarily due to higher cash
earnings and lower working capital requirements.
Cash used in investing activities was $8.2 million in 1997, as compared to $5.3
million in 1996, due to an increase in the use of cash for business
acquisitions. During the second quarter of 1997, the Company acquired the stock
of Teletrac. The cash portion of the total purchase price for Teletrac was $7.3
million. During the second quarter of 1996, the Company acquired the stock of
PAI for $4.7 million (see Note 3 of the Condensed Consolidated Financial
Statements).
The Company had no material commitments for capital expenditures as of June 30,
1997.
In connection with the acquisition of Teletrac, the Company amended its Credit
Agreement to increase the revolving credit portion of its Credit Facility from
$11.0 million to $18.0 million. The Company believes that funds available under
this revolving credit facility and cash generated from operations will be
sufficient to meet its future capital expenditure and working capital
requirements and required debt amortization.
11
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit 10: Amendments No. 2 and 3 to Bank Credit Agreement
Exhibit 27: Financial Data Schedule (For SEC use only).
b) Reports on Form 8-K
On June 13, 1997 the Company filed a report on Form 8-K relating to its
acquisition of Teletrac.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1997 AXSYS TECHNOLOGIES, INC.
By: /s/ Stephen W. Bershad
--------------------------
Stephen W. Bershad
Chief Executive Officer
By: /s/ Raymond F. Kunzmann
--------------------------
Raymond F. Kunzmann
Chief Financial Officer
12
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment"), dated as
of April , 1997, among AXSYS TECHNOLOGIES INC. (f/k/a VERNITRON CORPORATION), a
corporation organized and existing under the laws of the State of Delaware (the
"Borrower"), the financial institutions party to the Credit Agreement referred
to below (each a "Bank" and, collectively, the "Banks"), and BANQUE PARIBAS, as
agent (the "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 Borrower, the Banks and the Agent are parties to a Credit
Agreement, dated as of April 25, 1996 (as amended, modified or supplemented to
the date hereof, the "Credit Agreement");
WHEREAS, the Borrower desires to purchase 100% of the capital stock of
Teletrac, Inc. and enter into related transactions for an aggregate purchase
price of approximately $9,200,000 in cash (including all related fees and
expenses) plus 53,000 shares of the Borrower's common stock (collectively, the
"Acquisition"), and the Banks are willing to consent to the Acquisition, subject
to and on the terms and condition set forth herein;
WHEREAS, pursuant to the Consent to the Credit Agreement, dated as of
February 19, 1997, among the Borrower, the Banks and the Agent, the Banks
consented to the Borrower exchanging (the "Exchange Offer") 0.75 shares of its
common stock, par value $.01 per share (the "Common Stock") for each outstanding
share of its $1.20 Cumulative Exchangeable Redeemable Preferred Stock, par value
$.01 per share (the "Preferred Stock"). After the consummation of the Exchange
Offer, approximately 201,000 shares of Preferred Stock remain outstanding. The
Borrower desires the right to redeem (the "Preferred Stock Redemption") such
outstanding Preferred Stock in amounts acceptable to the Banks;
WHEREAS, the Borrower has requested that the Banks agree to amend certain
provisions of the Credit Agreement; and
<PAGE>
WHEREAS, the Banks are willing to amend certain provisions of the Credit
Agreement and consent to the Acquisition and the Preferred Stock Redemption in
each case, subject to and on the terms and conditions set forth herein;
NOW, THEREFORE, it is agreed:
1. Notwithstanding anything to the contrary contained in the Credit
Agreement, the undersigned Banks hereby consent to the Borrower effecting the
Acquisition, so long as (i) any Liens or Indebtedness issued or assumed in
connection with the Acquisition are otherwise permitted under the Credit
Agreement, (ii) upon the acquisition of any Subsidiary acquired pursuant to the
Acquisition, 100% of the capital stock of such Subsidiary is pledged and
delivered to the Collateral Agent for the benefit of the Secured Creditors under
the Pledge Agreement, (iii) within 10 days after the Acquisition, each such new
Subsidiary (x) executes and delivers a counterpart of the Subsidiaries Guaranty
and (y) secures the Borrower's obligations pursuant to the Credit Agreement and
the other Credit Documents (or such Subsidiary's obligations pursuant to a
Subsidiaries Guaranty) by executing a counterpart of the relevant Security
Documents and (iv) no Default or Event of Default then exists or would result
therefrom.
2. Notwithstanding anything to the contrary contained in Section 9.03 of
the Credit Agreement, the Banks hereby consent to the Borrower consummating the
Preferred Stock Redemption at a maximum price of $9.00 per share of Preferred
Stock (or $1,809,000 in the aggregate for all such remaining shares of Preferred
Stock), it being understood that the aggregate redemption price paid by the
Borrower in connection with the Preferred Stock Redemption will be included in
the definition of "Fixed Charges" as set forth in Section 11.01 of the Credit
Agreement.
3. Section 9.08 of the Credit Agreement is hereby amended by deleting in
its entirety the table appearing therein and inserting in lieu thereof the
following new table:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1997 $4,300,000
1998 $3,875,000
1999 $3,875,000
2000 $3,875,000
2001 $3,875,000
2002 $3,875,000
</TABLE>
- 2 -
<PAGE>
4. On and after the Second Amendment Effective Date (as defined below),
Schedule I to the Credit Agreement is hereby amended by deleting the column for
Revolving Loan Commitment in its entirety and inserting in lieu thereof the new
column for Revolving Loan Commitment set forth on Annex I attached hereto which
increases the Total Revolving Loan Commitment from $11,000,000 to $18,000,000.
Each Bank listed on Annex I attached hereto whose Revolving Loan Commitment is
increased by this Second Amendment, (each, an "Increasing Bank") hereby
acknowledges and agrees that from and after the Second Amendment Effective Date
its Revolving Loan Commitment shall be the amount set forth opposite such
Increasing Bank's name on Annex I attached hereto, as such amount may be reduced
from time to time in accordance with the terms of the Credit Agreement.
5. The Company hereby agrees that on or after the Second Amendment
Effective Date and upon the request of the Collateral Agent, it will execute
such amendments to the Mortgages as the Collateral Agent shall require in
connection with the transactions contemplated by this Second Amendment.
6. In order to induce the Banks to enter into this Second Amendment, the
Borrower hereby represents and warrants that on the Second Amendment Effective
Date, both before and after giving effect to this Second Amendment and the
transactions contemplated hereby, (1) no Default or Event of Default shall exist
and (2) all of the representations and warranties contained in the Credit
Documents shall be true and correct in all material respects, with the same
effect as though such representations and warranties had been made on and as of
the Second Amendment Effective Date (it being understood that any representation
or warranty made as of a specific date shall be true and correct in all material
respects as of such specific date).
7. This Second 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.
8. This Second 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 Borrower and the Agent.
9. THIS SECOND 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.
- 3 -
<PAGE>
10. The headings of the several sections of this Second Amendment are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision hereof.
11. This Second Amendment shall become effective as of the date hereof
(the "Second Amendment Effective Date") when (1) each Credit Party, the Required
Banks, the Increasing Banks and the Collateral Agent shall have signed a copy
hereof (whether the same or different copies) and shall have delivered
(including by way of telecopier) the same to the Agent and (2) the Borrower
shall have executed and delivered to the Agent for the benefit of each
Increasing Bank a new Revolving Note reflecting the increase in the Revolving
Loan Commitment of each such Increasing Bank.
* * *
- 4 -
<PAGE>
ANNEX I
-------
<TABLE>
<CAPTION>
Revolving Loan
Bank Commitment
- ---- ----------------
<S> <C>
Banque Paribas $4,000,000.00
Paribas Capital Funding LLC 3,036,000.00
Prime Income Trust 0
First Source Financial LLP 4,090,000.00
IBJ Schroder Bank & Trust Company 3,437,000.00
The First National Bank of Chicago 3,437,000.00
----------------
Total: 18,000,000.00
</TABLE>
- 5 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Second Amendment to be duly executed and delivered as of the date first
above written.
AXSYS TECHNOLOGIES, INC.
as Borrower
By /s/ Elliott W. Konopko
--------------------------
Name: Elliott N. Konopko
Title: Vice President
PRECISION AEROTECH, INC.
as Subsidiary Guarantor
By /s/ Elliott W. Konopko
--------------------------
Name: Elliott N. Konopko
Title: Vice President
SPEEDRING, INC.
as Borrower
By /s/ Elliott W. Konopko
--------------------------
Name: Elliott N. Konopko
Title: Vice President
SPEEDRING SYSTEMS, INC.
as Subsidiary Guarantor
By /s/ Elliot W. Konopko
--------------------------
Name: Elliott N. Konopko
Title: Vice President
- 6 -
<PAGE>
BANQUE PARIBAS,
Individually, as Agent and as Collateral Agent
By /s/ D. Ercole
--------------------------
Name: D. Ercole
Title: Vice President
By /s/ Edward Irwin
--------------------------
Name: Edward Irwin
Title: Vice President
PARIBAS CAPITAL FUNDING LLC
By /s/ Jeffrey Youle
--------------------------
Name: Jeffrey Youle
Title: Director
PRIME INCOME TRUST
By /s/ Rafael Scolari
--------------------------
Name: Rafael Scolari
Title: Vice President Portfolio Manager
FIRST SOURCE FINANCIAL LLP,
By First Source Financial, Inc.
its Agent/Manager
By /s/ James W. Wilson
--------------------------
Name: James W. Wilson
Title: Senior Vice President
- 7 -
<PAGE>
IBJ SCHRODER BANK & TRUST COMPANY
By /s/ Mark H. Minter
--------------------------
Name: Mark H. Minter
Title: Director
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Amy L. Golz
--------------------------
Name: Amy L. Golz
Title: Vice President
- 8 -
<PAGE>
THIRD AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment"), dated as of
May 30, 1997, among AXSYS TECHNOLOGIES INC. (f/k/a VERNITRON CORPORATION, a
corporation organized and existing under the laws of the State of Delaware (the
"Borrower"), the financial institutions party to the Credit Agreement referred
to below (each a "Bank" and, collectively, the "Banks"), and BANQUE PARIBAS, as
agent (the "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 Borrower, the Banks and the Agent are parties to a Credit
Agreement, dated as of April 25, 1996 (as amended, modified or supplemented to
the date hereof, the "Credit Agreement");
WHEREAS, pursuant to the Second Amendment to the Credit Agreement, the
Banks consented to the acquisition (the "Acquisition") by the Borrower of the
capital stock of Teletrac, Inc. ("Teletrac") on the terms and conditions set
forth therein, including the purchase of 100% of the capital stock of Teletrac
for an aggregate purchase price of approximately $9,200,000 in cash (including
all related fees and expenses) plus 53,000 shares of the Borrower's common
stock;
WHEREAS, the terms of the Acquisition have been modified, to wit, (i) the
total consideration paid by the Borrower for the Acquisition shall consist of
(x) 53,000 shares of the Borrower's common stock, plus (y) approximately
$9,100,000 in cash as such amount is reduced by the fair market value
(determined upon the execution and delivery of the definitive documentation
evidencing the Acquisition) of up to 100,000 additional shares of the Borrower's
common stock, and (ii) the Borrower shall acquire no less than 85% of the
capital stock of Teletrac, with the existing shareholders retaining the
remaining capital stock t hereof (the "Retained Shares");
WHEREAS, the Borrower shall have the right (and, under certain
circumstances, the obligation) to purchase the Retained Shares in exchange for
up to 100,000 shares of the Borrower's common stock at a fixed exchange rate to
be determined upon the execution and delivery of the definitive documentation
evidencing the Acquisition;
<PAGE>
WHEREAS, after giving effect the Acquisition, Mr. Stephen W. Bershad would
fail to control shares of capital stock of the Borrower entitling him to
exercise at least 40% of the combined voting power of the Voting Securities; and
WHEREAS, the Banks are willing to amend certain provisions of the Credit
Agreement and consent to the Acquisition, in each case, subject to and on the
terms and conditions set forth herein;
NOW, THEREFORE, it is agreed:
1. Notwithstanding anything to the contrary contained in the Credit
Agreement and the Second Amendment, the undersigned Banks hereby consent to the
Borrower effecting the Acquisition on the terms and conditions set forth in this
Third Amendment, provided that (i) any Liens or Indebtedness issued or assumed
in connection with the Acquisition are otherwise permitted under the Credit
Agreement, (ii) upon the acquisition of any Subsidiary acquired pursuant to the
Acquisition, all capital stock, owned by the borrower, of such Subsidiary is
pledged and delivered to the Collateral Agent for the benefit of the Secured
Creditors under the Pledge Agreement, (iii) within 10 days after the
Acquisition, each such new Subsidiary (x) executes and delivers a counterpart of
the Subsidiaries Guaranty and (y) secures the Borrower's obligations pursuant to
the Credit Agreement and the other Credit Documents (or such Subsidiary's
obligations pursuant to a Subsidiaries Guaranty) by executing a counterpart of
the relevant Security Documents, (iv) the shareholders owning the Retained
Shares consent to the actions to be taken pursuant to clause (ii) and (iii)
above, (v) no Default or Event of Default then exists or would result from any
of the foregoing and (vi) any consideration paid by the Borrower or any of its
Subsidiaries for the Retained Shares pursuant to any put or call rights shall be
paid solely through the shares of the Borrower's capital stock, it being
understood that the Banks hereby consent to the Borrower issuing up to 100,000
shares of its' common stock to purchase the Retained Shares as described in the
fourth whereas clause above.
2. The definition of "Change of Control" contained in Section 11 of the
Credit Agreement is hereby amended by deleting the percentage "40%" appearing in
clause (ii) thereof and inserting in lieu thereof the percentage "35%".
3. Notwithstanding anything to the contrary contained in the Second
Amendment, the Second Amendment Effective Date shall be the date upon which the
Third Amendment Effective Date occurs so long as all conditions set forth in
Section 11 of the Second Amendment have been satisfied by the Third Amendment
Effective Date.
4. In order to induce the Banks to enter into this Third Amendment, the
Borrower hereby represents and warranties that on the Third Amendment Effective
Date,
- 2 -
<PAGE>
both before and after giving effect to this Third Amendment and the transactions
contemplated hereby, (1) no Default or Event of Default shall exist and (2) all
of the representations and warranties contained in the Credit Documents shall be
true and correct in all material respects, with the same effect as though such
representations and warranties had been made on and as of the Third Amendment
Effective Date (it being understood that any representation or warranty made as
of a specific date shall be true and correct in all materials respects as of
such specified date).
5. This Third 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.
6. This Third 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 Borrower and the Agent.
7. THIS THIRD 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.
8. The headings of the several sections of this Third Amendment are
inserted for convenience only and shall not in any way affect the meaning or
construction of any provision hereof.
9. This Third Amendment shall become effective as of the date hereof (the
"Third Amendment Effective Date") when each Credit Party, the Required Banks and
the Collateral Agent shall have signed a copy hereof (whether the same or
different copies) and shall have delivered (including by way of telecopier) the
same to the Agent.
- 3 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Third Amendment to be duly executed and delivered as of the date first
above written.
AXSYS TECHNOLOGIES, INC.,
as Borrower
By /s/ Raymond F. Kunzman
-----------------------
Name: Raymond F. Kunzmann
Title: Vice President
PRECISION AEROTECH, INC.,
as Subsidiary Guarantor
By /s/ Raymond F. Kunzmann
-----------------------
Name: Raymond F. Kunzmann
Title: Vice President
SPEEDRING, INC.,
as Subsidiary Guarantor
By /s/ Raymond F. Kunzman
-----------------------
Name: Raymond F. Kunzmann
Title: Vice President
SPEEDRING, INC.,
as Subsidiary Guarantor
By /s/ Raymond F. Kunzmann
-----------------------
Name: Raymond F. Kunzmann
Title: Vice President
- 4 -
<PAGE>
BANQUE PARIBAS
individually, as Agent and as Collateral Agent.
By /s/ D. Ercole
-----------------------
Name: D. Ercole
Title: Vice President
By /s/ Jeffrey Youle
-----------------------
Name: Jeffrey Youle
Title: Senior Vice President
PARIBAS CAPITAL FUNDING LLC
By /s/ Eric Careen
-----------------------
Name: Eric Careen
Title: Director
PRIME INCOME TRUST
By /s/ Rafael Scolari
-----------------------
Name: Rafael Scolari
Title: Vice President Portfolio Manager
FIRST SOURCE FINANCIAL LLP
By First Source Financial, Inc.,
its Agent/Manager
By /s/ John Walding
-----------------------
Name: John Walding
Title: Vice President
- 5 -
<PAGE>
IBJ SCHRODER BANK & TRUST COMPANY
By /s/ Mark H. Minter
-----------------------
Name: Mark H. Minter
Title: Director
THE FIRST NATIONAL OF CHICAGO
By /s/ Amy S. Golz
-----------------------
Name: Amy S. Golz
Title: Vice President
- 6 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF AXSYS TECHNOLOGIES, INC. AS OF JUNE 30, 1997 AND
THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 415
<SECURITIES> 0
<RECEIVABLES> 18,426
<ALLOWANCES> 432
<INVENTORY> 26,270
<CURRENT-ASSETS> 45,840
<PP&E> 23,224
<DEPRECIATION> 8,952
<TOTAL-ASSETS> 74,695
<CURRENT-LIABILITIES> 22,660
<BONDS> 26,056
0
0
<COMMON> 30
<OTHER-SE> 23,564
<TOTAL-LIABILITY-AND-EQUITY> 74,695
<SALES> 58,849
<TOTAL-REVENUES> 58,849
<CGS> 43,111
<TOTAL-COSTS> 43,111
<OTHER-EXPENSES> 10,409
<LOSS-PROVISION> 66
<INTEREST-EXPENSE> 1,343
<INCOME-PRETAX> 3,960
<INCOME-TAX> 1,594
<INCOME-CONTINUING> 2,366
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,366
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.69
</TABLE>
