<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1994
Commission File Number: 1-7795
UNC INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 54-1078297
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
175 Admiral Cochrane Drive
Annapolis, MD 21401
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code (410) 266-7333
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.
[ X ] Yes No
Number of shares of Common Stock, par $0.20, outstanding as of November
4, 1994: 17,508,547 (excluding 700,000 treasury shares held by a subsidiary).
<PAGE>
<PAGE> 2
UNC Incorporated, and Subsidiaries
INDEX
Page No.
Part I. Financial Information
Consolidated Statements of Earnings
Three Months and Nine Months Ended September 30, 1994 and 1993 1
Consolidated Balance Sheets
September 30, 1994 and December 31, 1993 2
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1994 and 1993 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 14
Exhibit Index 15
<PAGE>
<PAGE> 3
UNC Incorporated and Subsidiaries
Consolidated Statements of Earnings
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales and operating revenues $129,721 $105,529 $390,459 $283,242
Costs and expenses:
Cost and operating expenses 108,629 90,019 326,787 229,955
Selling, general and
administrative expenses 15,914 13,282 55,084 38,121
Restructuring charge 58,706
-------- -------- -------- --------
124,543 103,301 440,577 268,076
-------- -------- -------- --------
Operating income (loss) 5,178 2,228 (50,118) 15,166
Other income (expense):
Interest income 12 176 26 226
Interest expense (4,649) (3,975) (13,796) (9,592)
Other (504) (565) (1,290) (1,516)
-------- -------- -------- --------
(5,141) (4,364) (15,060) (10,882)
-------- -------- -------- --------
Earnings (loss) before income taxes
and extraordinary item 37 (2,136) (65,178) 4,284
Income tax benefit (provision) ( 7) 5,838 13,036 4,554
-------- -------- -------- --------
Earnings (loss) before extraordinary
item 30 3,702 (52,142) 8,838
Extraordinary item-early retirement
of debt, net of income taxes (532) (532)
-------- -------- -------- --------
Net earnings (loss) $ 30 $ 3,170 $(52,142) $ 8,306
======== ======== ======== ========
Earnings (loss) per share:
Earnings (loss) before extraordinary
item $ .21 (2.99) .51
Extraordinary item (.03) (.03)
-------- -------- -------- --------
Net earnings (loss) $ $ .18 $ (2.99) $ .48
======== ======== ======== ========
</TABLE>
<PAGE>
<PAGE> 4
UNC Incorporated and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---------- -----------
<S> <C> <C>
Assets
- - - - ------
Current assets:
Cash and short-term investments $ 1,647 $ 1,494
Accounts receivable, less allowance for
doubtful accounts of $7,526 and $6,366,
respectively 81,731 91,058
Unbilled costs and accrued profits on
contracts in progress 22,224 28,384
Inventories 69,452 109,766
Assets held for sale 42,746
Other 14,853 18,378
-------- --------
Total current assets 232,653 249,080
Assets held for sale-noncurrent 18,704 25,910
Property, plant and equipment, at cost 74,918 99,068
Less accumulated depreciation 28,467 32,037
-------- --------
Net property, plant and equipment 46,451 67,031
Cost in excess of net assets of acquired com-
panies, less accumulated amortization of $22,255
and $19,257, respectively. 140,984 141,718
Other assets 36,236 22,394
-------- --------
Total assets $475,028 $506,133
======== ========
</TABLE>
<PAGE>
<PAGE> 5
UNC Incorporated and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---------- -----------
<S> <C> <C>
Liabilities and Shareholders' Equity
- - - - ------------------------------------
Current liabilities:
Current portion of long-term debt $ 27,674 $ 6,529
Accounts payable 46,615 38,625
Income taxes 2,553 2,062
Accruals related to restructuring 14,527
Accruals and other current liabilities 49,798 51,664
-------- --------
Total current liabilities 141,167 98,880
Long-term debt, less current portion:
Revolving Senior Bank Debt, prime plus 1/2% due 1995 16,500
9 1/8% Senior Notes due 2003 100,000 100,000
7 1/2% Convertible Subordinated Debentures due 2006 69,000 69,000
Other 2,830 5,254
-------- --------
Total long-term debt, less current portion 171,830 190,754
Other long-term liabilities 48,431 51,013
-------- --------
Total liabilities 361,428 340,647
Shareholders' equity:
Series preferred stock, par value $1.00 per share;
Authorized 12,000,000 shares; 250,000 designated
Series A Junior Participating Preferred Stock,
none issued
Common stock, par value $0.20 per share; authorized
50,000,000 shares; issued 18,203,434 and
18,085,334 shares, respectively 3,641 3,617
Additional paid-in capital 122,770 121,746
Retained earnings (deficit) (1,583) 50,559
-------- --------
124,828 175,922
Less:
Treasury stock, at cost (700,000 shares) 8,750 8,750
Minimum pension liability adjustment 1,345 1,345
Unearned compensation-restricted stock 1,133 341
-------- --------
Total shareholders' equity 113,600 165,486
-------- --------
Total liabilities and shareholders' equity $475,028 $506,133
======== ========
<PAGE>
<PAGE> 6
UNC Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1993
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(52,142) $ 8,306
Adjustments to reconcile net earnings (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 9,860 7,988
Provision for restructuring 58,706
Provision for losses on accounts receivable 3,568 1,190
Deferred income taxes (benefit) (16,701) (5,182)
Income from leveraged lease (1,955)
Extraordinary loss on retirement of debt 626
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 4,929 (10,262)
(Increase) decrease in unbilled costs & accrued
profits on contracts in progress 6,160 (7,714)
(Increase) in inventories (14,096) (3,767)
(Increase) decrease in other current assets 7,178 (8,590)
(Increase) in other noncurrent assets (142) (1,505)
Increase (decrease) in accounts payable 7,990 (5,271)
Increase (decrease) in accruals and other
current liabilities (7,966) 509
Increase in income taxes payable 491 834
Increase (decrease) in other noncurrent
liabilities (156) 3,321
(Decrease) in discontinued operations
liabilities (3,434) (2,128)
-------- --------
Total adjustments 54,432 (34,573)
-------- --------
Net cash and short-term investments
provided (used) by operating activities 2,290 (21,645)
-------- --------
</TABLE>
<PAGE>
<PAGE> 7
UNC Incorporated and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1993
-------- --------
<S> <C> <C>
Cash flows from investing activities:
Net proceeds from sale of assets 6,237 4,860
Additions to property, plant and equipment (8,912) (7,067)
Acquisition of subsidiaries, net of cash acquired (1,785) (29,171)
Purchase of marketable securities (14,100)
Investment in leveraged lease (2,660)
Naval Products phase out 1,361
Other transactions (26)
-------- --------
Net cash and short-term investments
used by investing activities (4,460) (46,803)
-------- --------
Cash flows from financing activities:
Additions to debt 149,245 228,000
Reductions in debt (147,024) (160,589)
Other transactions 102 77
-------- --------
Net cash and short-term investments
provided by financing activities 2,323 67,488
-------- --------
Net increase in cash and short-term investments 153 (960)
Cash and short-term investments at beginning of year 1,494 1,968
-------- --------
Cash and short-term investments at end of period $ 1,647 $ 1,008
======== ========
</TABLE>
<PAGE>
<PAGE> 8
UNC Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
1. The accompanying unaudited financial statements, which should be read in
conjunction with the Consolidated Financial Statements included in the
Annual Report filed on Form 10-K for the year ended December 31, 1993.
The statements have been prepared in the ordinary course of business for
the purpose of providing information with respect to the interim periods,
and are subject to audit at the close of the year. It is the opinion of
the management of the Company that all adjustments (none of which were
other than normal recurring accruals) necessary for a fair presentation
of such periods have been included. Results of interim periods are not
necessarily indicative of results to be expected for the full year.
Certain prior period amounts have been reclassified to conform to the 1994
presentations.
2. Inventories at September 30, 1994 and December 31, 1993:
(Dollars in thousands)
1994 1993
-------- --------
Component parts and materials $ 46,518 $ 84,016
Work in process 21,037 23,429
Supplies 1,897 2,321
-------- --------
$ 69,452 $109,766
======== ========
3. In the second quarter of 1994, the Company recorded a $58.7 million
($47.0 million after-tax) charge for restructuring which includes the
shutting down or sale and disposal of marginal operations, the
consolidation and downsizing of other operations, and the write down of
excess inventory and under utilized property, plant and equipment that has
been identified for sale to third parties to generate additional cash
flow.
4. Net sales of tangible products for the nine months ended September 30,
1994 amounted to $228.4 million and cost and operating expenses related
to tangible goods sold amounted to $181.3 million.
5. On September 30, 1994 the Company collected $19.8 million related to an
international contract. These funds were used to reduce revolving credit
debt which is included in the current portion of long-term debt. Accounts
payable of $13.5 million related to this contract was paid in early
October 1994.
At September 30, 1994 $24.5 million ($38.0 million if the $13.5 million
of above mention payables were included) of revolving credit debt which
is due in July 1995 was classified as current portion of long-term debt.
The Company intends to complete the renegotiation of its revolving credit
agreement for an extended term by the end of March 1995.
6. In July 1993, the Company issued $100 million principal amount of 9-1/8%
Senior Notes due 2003. The notes are guaranteed by all of the Company's
subsidiaries in the manner described below. The combined guarantors are
jointly and severally liable under the subsidiary guarantees.
<PAGE>
<PAGE> 9
The Company's obligations under the Notes are unconditionally guaranteed
by each of the Company's subsidiaries (the "Guarantees"). Each Guarantee
is a senior unsecured obligation of the subsidiary providing such
Guarantee and ranks pari passu with all senior unsecured indebtedness of
such subsidiary. The subsidiaries also have guaranteed the indebtedness
outstanding under the Company's revolving credit facility (the "Subsidiary
Bank Guarantees"). The Subsidiary Bank Guarantees are collateralized, in
general, by the accounts receivable and inventory of the subsidiaries and
therefore effectively rank senior to the Guarantees. The Guarantees are
in effect only for as long as the Subsidiary Bank Guarantees remain in
effect. If the Guarantees are terminated the Notes will be obligations
solely of the Company and will be effectively subordinated to all existing
and future indebtedness of the subsidiaries.
The following condensed consolidating information presents:
(1) Condensed financial statements as of September 30, 1994 and 1993, and
for the nine months ended September 30, 1994 and 1993 of (a) the
Company on a parent company only basis (Parent Company), (b) the
Combined Guarantors, and (c) the Company on a consolidated basis.
(2) The Parent Company with its investments in subsidiaries accounted for
on the equity method.
(3) Elimination entries necessary to consolidate the Parent Company and its
subsidiaries.
<PAGE>
<PAGE> 10
September 30, 1994 Condensed Consolidating Balance Sheet
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Assets
- - - - ------
Current assets:
Cash & short-term investments $ 509 $ 1,138 $ 1,647
Accounts receivable, net 475 81,256 81,731
Unbilled costs and accrued
profits on contracts in progress 22,224 22,224
Inventories 69,452 69,452
Assets held for sale 4,209 38,537 42,746
Other 704 14,149 14,853
-------- -------- ---------
Total current assets 5,897 226,756 232,653
-------- -------- ---------
Assets held for sale-noncurrent 18,090 614 18,704
Property, plant & equipment, net 830 45,621 46,451
Cost in excess of net assets
of acquired companies, net 140,984 140,984
Other noncurrent assets 9,233 27,003 36,236
Investments in and advances
to subsidiaries 296,494 $(296,494)
-------- -------- --------- ---------
Total assets $330,544 $440,978 $(296,494) $ 475,028
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 11
September 30, 1994 Condensed Consolidating Balance Sheet (continued)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
- - - - ------------------------------------
Current liabilities:
Current portion of long-term debt $ 2,068 $ 25,606 $ 27,674
Accounts payable 1,668 44,947 46,615
Accruals and other current liabilities 19,915 46,963 66,878
-------- -------- ---------
Total current liabilities 23,651 117,516 141,167
-------- -------- ---------
Long-term debt 171,092 738 171,830
Other noncurrent liabilities 13,451 34,980 48,431
-------- -------- ---------
Total liabilities 208,194 153,234 361,428
-------- -------- ---------
Common stock and additional paid
in capital 126,411 126,411
Retained earnings (deficit) (1,583) (1,583)
Equity of subsidiaries and
advances of parent 296,494 (296,494)
-------- -------- --------- ---------
124,828 296,494 (296,494) 124,828
Less:
Treasury stock at cost
(700,000 shares) 8,750 8,750
Minimum pension liability adjustment 1,345 1,345
Unearned compensation-restricted
stock 1,133 1,133
-------- -------- --------- ---------
Total shareholders' equity 122,350 287,744 (296,494) 113,600
-------- -------- --------- ---------
Total liabilities and
shareholders' equity $330,544 $440,978 $(296,494) $ 475,028
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 12
September 30, 1993 Condensed Consolidating Balance Sheet
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
(Dollars in thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Assets
- - - - ------
Current assets:
Cash & short-term investments $ 349 $ 659 $ $ 1,008
Marketable securities 14,100 14,100
Accounts receivable, net 3,680 83,583 87,263
Unbilled costs and accrued
profits on contracts in progress 27,131 27,131
Inventories 104,439 104,439
Other 879 13,084 13,963
-------- --------- --------- ---------
Total current assets 19,008 228,896 247,904
-------- --------- --------- ---------
Net assets of discontinued operations 6,548 11,882 18,430
Property, plant & equipment, net 2,866 66,429 69,295
Cost in excess of net assets
of acquired companies, net 112,936 112,936
Other noncurrent assets 14,688 9,266 23,954
Investments in and advances
to subsidiaries 335,965 (335,965)
-------- --------- --------- ---------
Total assets $379,075 $ 429,409 $(335,965) $ 472,519
======== ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 13
September 30, 1993 Condensed Consolidating Balance Sheet (continued)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
(Dollars in thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
- - - - ------------------------------------
Current liabilities:
Current portion of long-term debt $ 1,000 $ 5,866 $ $ 6,866
Accounts payable 116 31,403 31,519
Accruals and other current liabilities 8,908 27,340 36,248
-------- --------- --------- ---------
Total current liabilities 10,024 64,609 74,633
-------- --------- --------- ---------
Long-term debt, less current portion 190,500 3,284 193,784
Other noncurrent liabilities 5,385 34,301 39,686
-------- --------- --------- ---------
Total liabilities 205,909 102,194 308,103
-------- --------- --------- ---------
Common stock and additional paid -
in capital 125,363 125,363
Retained earnings 47,803 47,803
Equity of subsidiaries and
advances from parent 335,965 (335,965)
-------- --------- --------- ---------
173,166 335,965 (335,965) 173,166
Less treasury stock at cost
(700,000 shares) 8,750 8,750
-------- --------- --------- ---------
Total shareholders' equity 173,166 327,215 (335,965) 164,416
-------- --------- --------- ---------
Total liabilities and
shareholders' equity $379,075 $ 429,409 $(335,965) $ 472,519
======== ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 14
Nine Months Ended September 30, 1994 Condensed Consolidating
Statement of Earnings
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Sales and operating revenues $ $ 390,459 $ 390,459
Costs and expenses:
Costs and operating expenses 326,787 326,787
Selling, general and administrative
expenses 14,413 40,671 55,084
Restructuring charge 4,800 53,906 58,706
Allocated expenses (5,328) 5,328
--------- --------- ---------
13,885 426,692 440,577
--------- --------- ---------
Operating income (loss) (13,885) (36,233) (50,118)
Other income (expense):
Interest income 18 8 26
Interest expense (10,777) (3,019) (13,796)
Other (1,311) 21 (1,290)
Equity in income (loss) of
subsidiaries (31,888) $ 31,888
--------- --------- --------- ---------
(43,958) (2,990) 31,888 (15,060)
--------- --------- --------- ---------
Earnings (loss) before income taxes (57,843) (39,223) 31,888 (65,178)
Income tax benefit 5,701 7,335 13,036
--------- --------- --------- ---------
Net earnings (loss) $ (52,142) $ (31,888) $ 31,888 $ (52,142)
========= ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 15
Nine Months Ended September 30, 1994 Condensed Consolidating
Statement of Cash Flows
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
------- ---------- ------------
(Dollars in thousands)
<S> <C> <C> <C>
Net cash flow from (used by) operations $ (10,110) $ 12,400 $ 2,290
--------- --------- ----------
Cash flows from investing activities:
Additions to property, plant and
equipment (304) (8,608) (8,912)
Acquisition of subsidiaries (1,785) (1,785)
Net proceeds from sale of assets 6,237 6 237
--------- --------- ---------
Net cash and short-term investments
provided (used) by investing
activities (304) (4,156) (4,460)
--------- --------- ---------
Cash flows from financing activities:
Additions to debt 111,085 38,160 149,245
Reductions in debt (119,425) (27,599) (147,024)
Other transactions, net 102 102
Net cash transfers to (from) parent 18,148 (18,148)
--------- --------- ---------
Net cash and short-term investments
provided (used) by financing
activities 9,910 (7,587) 2,323
--------- --------- ---------
Net increase (decrease) in cash and
short-term investments (504) 657 153
Cash and short-term investments at
beginning of year 857 637 1,494
--------- --------- ---------
Cash and short-term investments at
end of period $ 353 $ 1,294 $ 1,647
========= ========= =========
</TABLE>
<PAGE>
<PAGE> 16
Nine Months Ended September 30, 1993 Condensed Consolidating
Statement of Earnings
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Sales and operating revenues $ $ 283,242 $ $ 283,242
Costs and expenses
Costs and operating expenses 229,955 229,955
Selling, general and administrative
expenses 9,434 28,687 38,121
Allocated expenses (10,098) 10,098
--------- --------- --------- ---------
(664) 268,740 268,076
--------- --------- --------- ---------
Operating income 664 14,502 15,166
Other income (expense)
Interest income 216 15 226
Interest expense (8,031) (1,561) (9,592)
Other (1,531) 15 (1,516)
Equity in income of subsidiaries 15,616 (15,616)
--------- --------- --------- ---------
6,270 (1,536) (15,616) (10,882)
--------- --------- --------- ---------
Earnings before income taxes
and extraordinary item 6,934 12,966 (15,616) 4,284
Income tax benefit (provision) 1,904 2,650 4,554
--------- --------- --------- ---------
Earnings before extraordinary item 8,838 15,616 (15,616) 8,838
Extraordinary item (532) (532)
--------- --------- --------- ---------
Net earnings $ 8,306 $ 15,616 $ (15,616) $ 8,306
========= ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 17
Nine Months Ended September 30, 1993 Condensed Consolidating
Statement of Cash Flows
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
------- ---------- ------------
(Dollars in thousands)
<S> <C> <C> <C>
Net cash flow from operations $ (6,801) $ (8,976) $ (12,553)
--------- --------- ---------
Cash flows from investing activities:
Net proceeds from sale of assets 4,805 4,805
Additions to property, plant and
equipment (33) (2,249) (2,262)
Acquisition of subsidiaries, net of
cash acquired (5,865) (5,865)
Purchase of marketable securities (14,000) (14,000)
Investment in leverage lease (2,660) (2,660)
Naval Products phase out 1,361 1,361
Other transactions, net (26) (26)
--------- --------- ---------
Net cash and short-term investments
provided (used) by investing
activities (15,432) (31,371) (46,803)
--------- --------- ---------
Cash flows from financing activities:
Additions to debt 228,000 228,000
Reductions in debt (160,417) (172) (160,589)
Other transactions, net 77 77
Net cash transfers to (from) parent (46,724) 46,724
--------- --------- ---------
Net cash and short-term investments
provided by financing activities 20,936 46,552 67,488
--------- --------- ---------
Net increase (decrease) in cash and
short-term investments (1,297) 337 (960)
Cash and short-term investments at
beginning of year 1,646 322 1,968
--------- --------- ---------
Cash and short-term investments at
end of period $ 349 $ 659 $ 1,008
========= ========= =========
<PAGE>
<PAGE> 18
UNC Incorporated and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Continuing Operations
Overview
The Company's operations are conducted in one business segment which
includes: the manufacture and remanufacture of jet engines and aircraft
components, the overhaul of aircraft accessories, aircraft engines, and
providing maintenance and training, repair and logistical contract services.
The Company has taken steps to reduce its cost structure and asset base in
light of the continuing depressed economic conditions in the aviation
industry. In the second quarter of 1994 the Company recorded a $58.7 million
provision for restructuring which includes the shutting down of a marginal
operation, an allowance for the sale and disposition of two other businesses,
the consolidation and downsizing of other operations, and the write down of
excess inventory and under utilized property, plant and equipment that has
been identified for sale to third parties to generate additional cash flow.
The provision for restructuring consists of $42.3 million to cover the
closing of a facility, the sale and disposition of two other businesses, the
consolidation of two plants and the downsizing of other facilities. The
Company has closed its engine overhaul facility in Burbank, California and
consolidated its engine overhaul business principally at its facilities in
Millville, New Jersey. The Company will position for sale and disposition
its chemical milled aircraft and engine components facility in Weatherford,
Texas, and its helicopter overhaul and refurbishment facility in Ozark,
Alabama. These actions are being taken due to the under utilization of the
Weatherford facility caused by the depressed market condition being
experienced by OEM's in connection with the construction of new aircraft and
due to a sharp reduction in the number of overhauls that can be expected in
the foreseeable future at the Ozark facility. The Company has also
consolidated two of its accessory overhaul plants located in Long Island, New
York into one facility. The balance of the provision of $16.4 million
relates principally to the write down to estimated realizable value of
certain excess inventory and under utilized property, plant and equipment
that has been identified for sale on the open market. When fully implemented
the restructuring program is expected to generate $85.0 million of cash, net
of restructuring expenses, through asset sales over a period of twenty-four
months from its implementation in July 1994 and result in annual cost savings
of approximately $15.0 million including operating expense reductions of $9.0
million and interest expense of $6.0 million.
During the first quarter (three months ended September 30, 1994) of this
restructuring program, as stated, the Company closed its engine overhaul
operations in Burbank, California and transferred these operations to its
Millville, New Jersey and Miami, Florida facilities. In addition, the
<PAGE>
<PAGE> 19
Company is preparing for the orderly liquidation of assets identified for
sale under this program and has generated approximately $6.0 million of cash.
The Company is also in negotiations with third parties for the sale of various
other assets that were identified in the restructuring program, including the
sale of its Burbank, California property. The Company expects the negotiations
of the sale of the Burbank property to be completed in the first quarter
of 1995.
An amended agreement was signed on October 5, 1994 with the Mohegan Tribe of
Indians of Connecticut. This agreement provides for the Mohegan Tribe to
purchase for $25.0 million the property which was previously used by the
Company for its submarine propulsion manufacturing business. Also in
October, 1994 Federal legislation was enacted which allows the property to be
placed into trust for the Mohegan Tribe once the Department of Interior
accords final approval. An additional $2.0 million will be paid to the
Company for, among other things, obtaining acceptance of the property into
trust for the Mohegan Tribe. Activity is proceeding toward the final
approval and closing of the transaction.
Quarter Ended September 30, 1994 Compared with Quarter Ended
- - - - ------------------------------------------------------------
September 30, 1993.
- - - - ------------------
Revenues were $129.7 million for the third quarter of 1994 compared with
$105.5 million in the 1993 quarter, an increase of $24.2 million (23%) and
operating income for the 1994 quarter increased $3.0 million to $5.4 million.
The Company's Manufacturing Division revenues for the 1994 quarter of
$27.0 million decreased $1.1 million (4%) compared with the 1993 quarter.
Revenues generated by UNC Johnson Technology and UNC Aerostructures acquired
in 1993 were more than offset by lower revenues at the Company's other
manufacturing facilities. Operating income decreased $0.6 million to $2.7
million in the 1994 quarter compared with the 1993 quarter, principally due
to lower volume resulting from the weak aviation manufacturing market.
Revenues of $44.4 million in the 1994 quarter from the Overhaul Division
decreased $8.1 million (15.4%) compared with the 1993 quarter. The reduction
in revenues is principally due to decreases in JT8 overhauls resulting from
the Company's decision to withdraw from the JT8 overhaul business in late
1993 and to a lesser extent reductions in small engine and accessory
overhauls due to increased pricing pressures from existing competition.
Operating income was $2.2 million in the 1994 quarter compared with an
operating loss of $1.6 million in the 1993 period. The improvement in
operating income in the 1994 quarter is principally due to the elimination of
losses incurred in JT8 overhauls.
<PAGE>
<PAGE> 20
Aviation Services Division revenues of $58.3 million increased $33.4 million
in the 1994 quarter. The increase in revenues is principally due to revenues
contributed by UNC Lear Siegler acquired in October 1993 and consolidated
into the Aviation Services Division. Operating income was $2.7 million in
the 1994 quarter compared with an operating loss of $.02 million in the 1993
quarter. The improvement in operating income in the 1994 quarter is
principally due to earnings from the acquisition of UNC Lear Siegler.
Selling, general and administrative expenses in the 1994 quarter were $15.9
million or 12.3% of sales compared with $13.3 million or 12.6% of sales in
the 1993 quarter. The increase in selling, general and administrative
expenses in the 1994 quarter is due to expenses of the companies acquired
during 1993 and increased international marketing efforts.
Nine Months Ended September 30, 1994 Compared with Nine Months Ended
- - - - --------------------------------------------------------------------
September 30, 1993.
- - - - -------------------
Revenues were $390.5 million for the nine months ended September 30, 1994
compared with $283.2 million in the 1993 period, an increase of $107.2
million (38%) and operating income for the 1994 period reflects a loss of
$50.1 million compared with income of $15.2 million in the 1993 period.
Adjusting for the second quarter restructuring provision of $58.7 million and
a one-time charge of $9.6 million for adjustments related to the carrying
value of certain long term manufacturing contracts, increases in allowance
for doubtful accounts as well as other operating items described below,
operating income would have been $18.2 million in the 1994 period.
The Company's Manufacturing revenues for the 1994 period of $81.5 million
increased $21.8 million (37%) compared with the 1993 period. The increase in
revenues in the 1994 period is principally due to revenues generated by UNC
Johnson Technology and UNC Aerostructures acquired in 1993, offset by lower
volume at the Company's other manufacturing facilities. Operating income was
$5.3 million in the 1994 period compared with $6.5 million in the 1993
period. The 1994 period includes a one-time charge of $3.5 million for an
adjustment to cost estimates on long term manufacturing contracts. Without
this adjustment operating income would have been $8.8 million in the 1994
period.
Revenues of $129.4 million in the 1994 period from the Overhaul Division
decreased $20.4 million (13.7%) compared with the 1993 period. The reduction
in revenues is principally due to decreases in JT8 overhauls, resulting from
the Company's decision to withdraw from the JT8 overhaul business in late
1993, and accessory overhauls, due to increased pricing pressures from
existing competition. These reductions were partially offset by revenues of
$3.0 million generated by UNC Metcalf acquired in 1993 and $2.0 million from
a leveraged lease transaction. Operating income was $7.9 million in the 1994
<PAGE>
<PAGE> 21
period. The 1994 period includes a one-time charge of $2.0 million for
increases in allowances for doubtful accounts for receivables related to
ongoing litigation with a customer and to the settlement of certain other
receivables in order to expedite the collection of cash. Without this
adjustment income would have been $9.9 million in the 1994 period.
Aviation Services Division revenues of $179.6 million increased $105.9
million in the 1994 period. The increase in revenues is principally due to
revenues contributed by UNC Lear Siegler acquired in October 1993 and
consolidated into the Aviation Services Division. Operating income increased
$7.6 million after adjusting for a $2.0 million nonrecurring claim against
the U.S. government (for costs incurred prior to 1993) which was recorded in
the first quarter of 1993. The increase in operating income is principally
due to earnings contributed from the acquisition of UNC Lear Siegler.
Selling, general and administrative expenses in the 1994 period were $55.1
million or 14.1% of sales compared with $38.1 million or 13.5% of sales in
the 1993 period. The increase in selling, general and administrative expense
in the 1994 period is due to expenses of the companies acquired during 1993
and increased international marketing efforts. Additionally the 1994 period
includes a one-time charge of approximately $5.7 million related to increases
in allowances for doubtful notes and accounts (included in this amount are
the allowance adjustments mentioned above) and the write-off of expenses
incurred in the unsuccessful Aviall acquisition. Without this one-time
charge selling, general and administrative expenses would have been
approximately 12.7% of sales.
Activity under the Company's contract service operations, which principally
involve basic aviation training and maintenances of aircraft, appears to have
stabilized in the short term after having declined in recent years as a
result of reduction in defense spending. Continuation of this trend,
however, cannot be assured as the Defense Department is continuing to close
various military bases where the Company provides contract services. A
portion of the workload of these bases is being relocated to bases where the
Company already performs aircraft maintenance functions. Further
consolidation of military training and maintenance contracts is expected as
bases are eliminated and other defense cuts reduce the value of individual
contracts. However, the Company expects that continued pressures on defense
spending could increase the outsourcing of services currently being provided
by military and other government personnel to lower cost providers such as
the Company. Additional opportunities for work from Army, Air Force and Navy
depots may result from the recommendations made by the Congressionally-
mandated DoD-Industry Depot Maintenance Task Force on which UNC was
represented. For example, the employees of the Newark Aerospace Guidance and
Metrology Depot in Ohio selected the Company in open competition and the
Company has formed an alliance named UNC Newark with these employees. UNC
Newark will compete for the Air Force "privatization-in-place" contract which
is scheduled to begin in conjunction with that base closure in October 1995.
<PAGE>
<PAGE> 22
"Privatization-in-place" is a concept under which facilities will be
transferred to local jurisdictions and the depot work will be performed by
commercial companies. In February, the Company was successful bidder on a
contract to provide maintenance and logistic support to the Royal Saudi Naval
Forces. This contract with total potential revenues over a three year period
of approximately $20 million, will expand the Company's presence in Saudi
Arabia and offset possible additional future reductions in defense spending.
In June, the Company was awarded for the fourth time a five year $102 million
contract by the U.S. Navy Air Training Command to provided complete
maintenance and logistic support for the Navy's TH-57 helicopter fleet.
Continued effort on the part of the U.S. government to further reduce defense
spending is affecting the demand for aircraft engines used in military
applications and could have an impact on the Company's manufacturing
operations. In an effort to reduce the potential effect of these reduction,
the Company's manufacturing operation have focused their marketing efforts
for the past several years more on commercial rather than military products.
The Company's original equipment manufacturer customers continue to reduce
significantly their number of suppliers and their own procurement staffs.
The Company's manufacturing operations remain a part of the reduced
subcontractor base and as such have obtained new contracts that the Company
believes may have not been available to the Company in the past when the base
of suppliers was much larger. Although the Company's Manufacturing Division
provided its principal customers with price concessions during 1992, 1993,
and 1994 in anticipation of receiving additional future orders, the Company
believes that increased volume from these anticipated additional orders,
together with on-going productivity enhancement and cost reduction programs
should mitigate the effect of the price concessions. Furthermore, during the
second half of 1993 and the first quarter of 1994 the Company expanded its
backlog as well as its customer base, by acquiring the contract backlog of
two financially pressured competitors. The work-in-process of these
contracts has been transferred to existing Company facilities along with the
required tooling and inventories.
Interest expense increased $4.2 million in the nine month period ended
September 30, 1994 principally due to higher average debt levels resulting
from acquisitions made in 1993 and higher interest rates.
Liquidity and Capital Resources
- - - - -------------------------------
As previously discussed, the Company expects that its restructuring program
will generate approximately $85.0 million in cash, net of restructuring
expenses, from the sale of excess assets over a period of twenty-four months
from its implementation in July 1994 and result in annual cost savings of
approximately $15.0 million including operating expense reductions of $9.0
million and interest expense of $6.0 million. The cash generated will be
used to reduce debt. Assets sold relative to the Company's restructuring
program amounted to $6.0 million during the third quarter of 1994.
<PAGE>
<PAGE> 23
Long-term debt, including current portion, was $199.5 million at September
30, 1994 compared to $197.3 million at December 31, 1993. The increase in
long-term debt of $2.2 million was a result of operating cash requirements of
the nine month period ended September 30, 1994. The Company's debt-to-
capitalization ratio at September 30, 1994 was 63.7% compared with 54.4% at
December 31, 1993. The Company has a Revolving Credit Facility which
provides for the availability of $75 million, reduced by outstanding letters
of credit which aggregated $9.3 million at September 30, 1994. The unused
availability under the facility was $41.2 million at September 30, 1994. In
August 1994 the Company's Revolving Credit capacity was increased from $65
million to $75 million. At September 30, 1994, the Company's working capital
was $91.5 million with a current ratio of 1.7 to 1 compared with $150.2
million with a current ratio of 2.5 to 1 at December 31, 1993. This
reduction is due in part to the classification at September 30, 1994 of the
Company's Revolving debt which is due July 24, 1995 as a current liability.
The Company intends to renegotiate the debt for an extended term at which
time the Company anticipates it will be classified as long-term debt. (Also,
see Note 5 of Notes to Consolidated Financial Statements.)
Capital expenditures for the nine month period ended September 30, 1994
amounted to $8.9 million compared with $7.1 million for the nine month period
ended September 30, 1993. The expenditures in the 1994 period include one-
time payments of $2.1 million for tooling purchased in accordance with a
prior agreement, this tooling is being held for sale, and $1.0 million for
machinery and equipment acquired in connection with the Anadite carve out.
It is anticipated that capital expenditures for the remainder of 1994 will be
less than depreciation and amortization expense and will be financed from
internally generated funds, lease arrangements and revolving credit
borrowings.
<PAGE>
<PAGE> 24
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - - - -----------------------------------------
(a) Exhibits Description
- - - - ------------ -----------------------------------------------
Exhibit 10.31 Amendment and Waiver, dated as of August 8, 1994, to
the Second Amended and Restated Credit Agreement,
dated as of July 24, 1992, among UNC Incorporated or
UNC Airwork Corporation, the several banks and other
financial institutions from time to time parties
thereto and Chemical Bank as agent for the Banks.
Exhibit 11 Computation of Earnings Per Common Share.
Exhibit 27 Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K:
- - - - --- ---------------------
No reports on Form 8-K were filed by the Company
during the quarter ended September 30, 1994.
<PAGE>
<PAGE> 25
UNC Incorporated and Subsidiaries
SIGNATURE
Pursuant to requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
UNC Incorporated
Date: November 14, 1994 By: /s/ Robert L. Pevenstein
---------------------------
Robert L. Pevenstein
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
<PAGE> 26
UNC Incorporated and Subsidiaries
SEQUENTIAL EXHIBIT INDEX
Exhibit
Sequential
Number Description
Exhibit 10.31 Amendment and Waiver, dated as of August 8,
1994, to the Second Amended and Restated Credit
Agreement, dated as of July 24, 1992, among UNC
Incorporated or UNC Airwork Corporation, the
several banks and other financial institutions
from time to time parties thereto and Chemical
Bank as agent for the Banks.
Exhibit 11 Computation of Earnings Per Common Share
Exhibit 27 Financial Data Schedule (electronic filing only).
<PAGE>
<PAGE> 27
Exhibit 10.31
AMENDMENT AND WAIVER
AMENDMENT AND WAIVER, dated as of August 8, 1994 (this
"Amendment"), to the Second Amended and Restated Credit Agreement, dated as
of July 24, 1992 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among UNC INCORPORATED, a Delaware corporation
(the "Company" or "UNC"), UNC AIRWORK CORPORATION (formerly known as Airwork
Corporation), a Delaware corporation ("Airwork"; together with the Company,
the "Borrowers"), the several banks and other financial institutions from
time to time parties thereto (the "Banks") and CHEMICAL BANK, a New York
banking corporation, as agent for the Banks (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrowers have requested that the Aggregate
Commitment under the Credit Agreement be increased to $75,000,000 and that
certain financial covenants contained in the Credit Agreement be amended; and
WHEREAS, subject to the terms and conditions set forth herein,
the Banks are willing to (i) permit certain of the Banks to temporarily
increase their respective Commitments up to an Aggregate Commitment of
$75,000,000 and (ii) make certain other amendments to the Credit Agreement,
as set forth herein;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the parties hereto agree as follows:
1. Definitions. As used in this Amendment,
terms defined herein are used as so defined and, unless otherwise defined,
terms defined in the Credit Agreement are used herein as therein defined.
Unless otherwise indicated, all Section and subsection references are to the
Credit Agreement.
2. Amendment of Subsection 1.1. Subsection 1.1
of the Credit Agreement is hereby amended as follows:
(a) by amending the definition of "Accounts" by deleting
therefrom the percentage "3%" and inserting in lieu thereof the following
percentage: "9%";
(b) by amending the definition of "Consolidated Current
Liabilities" by inserting immediately preceding the period (".") at the
end thereof the following phrase: "; provided that for purposes of
determining compliance with subsection 6.1(a), amounts outstanding under
this Agreement shall not be considered Consolidated Current Liabilities";
(c) by amending the definition of "Consolidated Net Income" by
inserting immediately preceding the period (".") at the end thereof the
following:
<PAGE>
<PAGE> 28
"; and provided, further, that solely for purposes of
determining compliance with the provisions of subsection 6.1(b)
'Consolidated Net Income' with respect to any period which
includes the Company's fiscal quarter ending June 30, 1994,
there shall be added to the amount otherwise determined in
accordance with the above procedures the Restructuring Charge";
(d) by inserting the following definitions therein in the
appropriate alphabetical order:
"'August 1994 Amendment': the amendment,
dated as of August 8, 1994, to this Agreement.
'August 1994 Amendment Effective Date':
August 8, 1994, or such later date on which all conditions
precedent set forth in the August 1994 Amendment shall have
been satisfied or waived.
'Operating Profit Ratio': for any period,
the ratio of (A) Consolidated Operating Profit plus
depreciation plus other non-cash charges plus Consolidated
Lease Expense minus capital expenditures of the Company and its
Subsidiaries for such period, to (B) Consolidated Interest
Expense.
'Mandatory Reduction Date': the earlier to
occur of (i) the first date on which the proceeds received by
the Company and its Subsidiaries from any sales of assets
(other than sales of inventory in the ordinary course of
business) occurring after the August 1994 Amendment Effective
Date equal or exceed $20,000,000 in the aggregate and (ii)
December 31, 1994.
'Restructuring Charge': the aggregate
amount of (i) the restructuring charge taken by the Company
during the fiscal quarter ended June 30, 1994, as determined in
accordance with GAAP and reflected on the consolidated
financial statements of the Company for the period ended June
30, 1994 required to be delivered in accordance with subsection
5.1(b) and (ii) all other charges reflected in such financial
statements that were taken by the Company in connection with
the restructuring of the Company and its Subsidiaries commenced
in July 1994; provided that the Restructuring Charge shall in
no event exceed $68,400,000.".
3. Amendment of Subsection 1.2. Subsection 1.2
of the Credit Agreement is hereby amended by inserting at the end of
subparagraph (a) thereof the following sentence:
<PAGE>
<PAGE> 29
"Notwithstanding the foregoing, accounts receivable or inventory of the
Company or its Subsidiaries shall not be excluded from the definition of
Eligible Accounts or Eligible Inventory solely as a result of
reclassification of such accounts receivable or inventory as "assets held
for sale" on the consolidated balance sheet of the Company and its
Subsidiaries in connection with the restructuring of the Company and its
Subsidiaries commenced in July 1994."
4. Amendment of Subsection 2.1. Subsection 2.1
of the Credit Agreement is hereby amended by deleting subparagraph 2.1(a)
thereof in its entirety and inserting in lieu thereof the following
subparagraph:
"(a) Subject to the terms and conditions hereof, each Bank
severally agrees to make revolving credit loans to UNC (individually, a
"UNC Loan"; collectively, the "UNC Loans") and to Airwork (individually,
an "Airwork Loan"; collectively, the "Airwork Loans") from time to time
during the Commitment Period in an aggregate principal amount at any one
time outstanding not to exceed the Commitment Percentage of such Bank
times the lesser of (i) the Aggregate Commitment at such time, minus the
amount of the Exposure at such time and (ii) the Borrowing Base in effect
at such time, minus the amount of the Exposure at such time. The
Commitments shall be available to each of the Borrowers in an aggregate
amount not to exceed (i) in the case of UNC, the Aggregate Commitment,
and (ii) in the case of Airwork, $34,000,000 (as each of such amounts set
forth in clauses (i) and (ii) may be reduced upon any reduction of the
Commitments in accordance with subsection 2.5, such Borrower's
"Commitment Portion"); provided, however, that in no event shall the
aggregate amount of the Loans outstanding to all Borrowers plus the
outstanding Exposure exceed the amount of the Commitments then in effect.
During the Commitment Period the Borrowers may use the Commitments by
borrowing, prepaying the Loans in whole or in part, and reborrowing, all
in accordance with the terms and conditions hereof.".
5. Amendment of Subsection 2.4. Subsection 2.4
of the Credit Agreement is hereby amended by inserting at the end thereof the
following new subparagraph (d):
"(d) In the event that the Operating Profit Ratio
for the period of four consecutive fiscal quarters ending December 31,
1994 is less than 1.50 to 1.00, the Borrowers jointly and severally agree
to pay to the Agent for the account of each Bank a fee for each such Bank
equal to (i) such Bank's Commitment Percentage times (ii) $162,500. Such
<PAGE>
<PAGE> 30
fee shall be payable on the earlier to occur of (A) the date of delivery
of the officer's certificate with respect to such period pursuant to
subsection 5.2(b) and (B) the 120th day after the end of the Company's
fiscal year ending December 31, 1994.".
6. Amendment of Subsection 2.5. Subsection 2.5
of the Credit Agreement is hereby amended by inserting immediately after the
subsection heading thereof the subparagraph designation "(a)" and by
inserting at the end thereof the following new subparagraph (b):
"(b) On the Mandatory Reduction Date, (i) the Aggregate
Commitment shall be automatically reduced to $65,000,000, (ii) the
Company's Commitment Portion shall be automatically reduced to
$65,000,000, and (iii) the respective Commitments of the Banks shall be
automatically amended as set forth on Schedule II.".
7. Amendment of Subsection 2.6. Subsection 2.6
is hereby amended by inserting at the end thereof the following new
subparagraphs (c) and (d):
"(c) On the Mandatory Reduction Date, (i) UNC shall make
prepayment of outstanding UNC Loans in an amount equal to the excess, if
any, of the sum of (A) the aggregate amount of UNC Loans outstanding on
such date and (B) the Exposure on such date over UNC's Commitment Portion
(after giving effect to the provisions of subsection 2.5(b)), together
with accrued interest to the date of such prepayment and any amounts
owing by such Borrower pursuant to subsection 2.16 and (ii) Airwork shall
make such borrowings from and prepayments to the Banks as shall be
required to cause the aggregate principal amount of outstanding Airwork
Loans of each Bank hereunder to equal such Bank's Commitment Percentage
(after giving effect to the provisions of subsection 2.5(b)) of the total
Loans outstanding on such date, together with accrued interest on any
amounts so prepaid and any amounts owing by such Borrower pursuant to
subsection 2.16. Notwithstanding the provisions of subsection 2.12, any
such required prepayments shall be made to the Banks on a non-pro rata
basis in such amounts as shall be required to cause the aggregate
principal amount of UNC Loans and Airwork Loans, respectively, of each
Bank remaining outstanding after such prepayments to equal such Bank's
Commitment Percentage (after giving effect to the provisions of
subsection 2.5(b)) of the total outstanding UNC Loans and Airwork Loans.
Unless the Borrowers otherwise elect, the application of prepayments
referred to in this subsection 2.6(c) shall be made first to prepay
Reference Rate Loans before being applied to prepay Eurodollar Loans.
<PAGE>
<PAGE> 31
(d) If any Letters of Credit are outstanding on the Mandatory
Reduction Date, each of the Banks shall be deemed to have unconditionally
and irrevocably sold and/or purchased, in each case without recourse or
warranty, such undivided interests and participations in all outstanding
Letters of Credit as shall be required to cause each Bank's percentage
participation in the obligations under each outstanding Letter of Credit
to equal such Bank's Commitment Percentage (after giving effect to the
provisions of subsection 2.5(b)) of the obligations under such Letter of
Credit.".
8. Amendment of Subsection 5.2. Subsection 5.2
is hereby amended by inserting in subparagraph (d) thereof, immediately
preceding the semi-colon (";") at the end thereof, the following: "and (c)
such other supporting documents relating to the Agent's collateral monitoring
procedures as the Agent may from time to time request".
9. Amendment of Subsection 6.1. Subsection 6.1
of the Credit Agreement is hereby amended as follows:
(a) by deleting from subparagraph (b) thereof the columns
entitled "Period" and "Interest Coverage" and inserting in lieu thereof
the following:
"PeriodInterest Coverage
Effective Date through
September 30, 1992 1.60 to 1.00
October 1, 1992 through
September 30, 1993 2.00 to 1.00
October 1, 1993 through
March 31, 1994 1.50 to 1.00
April 1, 1994 through
June 30, 1994 1.20 to 1.00
July 1, 1994 through
September 30, 1994 1.35 to 1.00
October 1, 1994 through
December 31, 1994 1.30 to 1.00
January 1, 1995 and
thereafter2.00 to 1.00";
<PAGE>
<PAGE> 32
(b) by deleting from subparagraph (c) thereof the columns
entitled "Period" and "Operating Profit" and inserting in lieu thereof
the following:
"Period Operating Profit
Effective Date through
September 30, 1992 1.50 to 1.00
October 1, 1992 through
September 30, 1993 1.75 to 1.00
October 1, 1993 through
December 31, 1993 1.50 to 1.00
January 1, 1994 through
March 31, 1994 1.40 to 1.00
April 1, 1994 through
June 30, 1994 1.15 to 1.00
July 1, 1994 through
September 30, 1994 1.35 to 1.00
October 1, 1994 through
December 31, 1994 1.40 to 1.00
January 1, 1995 and
thereafter 1.75 to 1.00";
(c) by deleting from subparagraph (d) thereof the columns
entitled "Period" and "Debt to Net Worth" and inserting in lieu thereof
the following:
"Period Debt to Net Worth
October 1, 1992 through
September 30, 1993 1.50 to 1.00
October 1, 1993 through
December 31, 1993 1.75 to 1.00
January 1, 1993 through
March 31, 1994 1.95 to 1.00
<PAGE>
<PAGE> 33
April 1, 1994 through
September 30, 1994 3.00 to 1.00
October 1, 1994 through
December 31, 1994 2.85 to 1.00
January 1, 1995 and
thereafter 1.60 to 1.00"; and
(d) by deleting subparagraph (e) thereof in its entirety and
inserting in lieu thereof the following subparagraph (e):
"(e) Maintenance of Net Worth. (i) As of
any date set forth below, permit Consolidated Net Worth as at
any date set forth below to be less than the amount set forth
below as "Net Worth" opposite such date and (ii) as of the last
day of any fiscal quarter ending after December 31, 1994,
permit Consolidated Net Worth to be less than (A) $135,000,000
plus (B) 50% of Consolidated Net Income from December 31, 1991
through the end of such fiscal quarter:
DateNet Worth
June 30, 1994$112,000,000
September 30, 1994$112,000,000
December 31, 1994$114,000,000".
10. Amendment of Subsection 6.3. Subsection 6.3
of the Credit Agreement is hereby amended as follows:
(a) by inserting after the phrase "Enter into any" therein the
following phrase: "transaction of acquisition or";
(b) by deleting subparagraphs (c) and (e) thereof; and
(c) by redesignating subparagraphs (d) and (f) thereof as
subparagraphs (c) and (d), respectively.
11. Amendment of Subsection 6.4. Subsection 6.4
of the Credit Agreement is hereby amended by adding to the end thereof the
following:
<PAGE>
<PAGE> 34
"Notwithstanding the foregoing, the Company or any Subsidiary may sell
any asset which, prior to the August 1994 Amendment Effective Date, was
identified in writing to the Banks as an asset proposed to be sold
pursuant to the restructuring plan implemented by the Company and its
Subsidiaries beginning in July 1994 (the "Restructuring Plan"). In
addition, the Company or any Subsidiary may, by written notice to the
Banks delivered after the August 1994 Amendment Effective Date, identify
additional assets proposed to be sold pursuant to the Restructuring Plan.
Except as otherwise permitted in clauses (a) through (d) above, no such
asset identified after the August 1994 Amendment Effective Date shall be
sold by the Company or any Subsidiary unless (i) the Banks shall have
received written notice identifying such asset not less than ten (10)
Business Days prior to such sale and (ii) the Agent, on behalf of the
Required Banks, shall not have objected in writing to such proposed sale
within five (5) Business Days following receipt of such notice.".
12. Amendment of Subsection 6.6. Subsection 6.6
of the Credit Agreement is hereby amended as follows:
(a) by inserting after the phrase "investment in, any Person,"
the following phrase: "including by means of the purchase of all or
substantially all of the assets of such Person,";
(b) by deleting subparagraphs (d) and (f) thereof; and
(b) by redesignating subparagraphs (e) and (g) thereof as
subparagraphs (d) and (e), respectively.
13. Waiver of Subsections 6.3 and 6.6. Provided
that the Company shall have received written notice from the Agent, on behalf
of the Banks, to the effect that the Banks have completed their due diligence
review of the proposed acquisition by the Company or a Subsidiary thereof of
certain backlog and related assets of Gentz Industries and that based on such
review the Banks have no objection to such acquisition, the provisions of
subsections 6.3 and 6.6 of the Credit Agreement shall be waived to the extent
necessary to permit the Company or any Subsidiary to acquire such backlog and
related assets of Gentz Industries.
14. Amendment of Schedule II. The Credit
Agreement is hereby amended by deleting Schedule II thereto in its entirety
and inserting in lieu thereof, and designating as Schedule II to the Credit
Agreement, Schedule I attached hereto.
15. Amendment of Commitments. On the August 1994
Amendment Effective Date, the following events shall occur:
<PAGE>
<PAGE> 35
(1) each of the Borrowers shall make such borrowings from and
repayments to the Banks as shall be required to cause the aggregate
principal amount of outstanding Loans of each Bank under the Credit
Agreement to equal such Bank's Commitment Percentage (after giving effect
to the provisions of this Amendment) of the total Loans outstanding after
giving effect to such borrowings and repayments and the other provisions
of this Amendment; and
(2) if any Letters of Credit are outstanding on the August 1994
Amendment Effective Date, each of the Banks shall be deemed to have
unconditionally and irrevocably sold and/or purchased, in each case
without recourse or warranty, such undivided interests and participations
in all outstanding Letters of Credit as shall be required to cause each
Bank's percentage participation in the obligations under each outstanding
Letter of Credit to equal such Bank's Commitment Percentage (after giving
effect to the provisions of this Amendment) of the obligations under such
Letter of Credit.
16. Conditions Precedent. The agreement of each
Bank and the Agent to enter into this Amendment is subject to the
satisfaction of the following conditions precedent:
(1) the Agent shall have received, with a counterpart for each
Bank, this Amendment, duly executed and delivered by the parties hereto;
(2) each of the Borrowers shall have duly executed and
delivered to the Agent, for the account of each Bank the Commitment of
which after giving effect to this Amendment will be different from its
Commitment prior to the August 1994 Amendment Effective Date, (i) an
endorsement to the UNC Revolving Credit Note previously executed by UNC
in favor of such Bank and (ii) an endorsement to the Airwork Revolving
Credit Note previously executed by Airwork in favor of such Bank, each of
which endorsements shall be in substantially the form of Exhibit A
hereto, with appropriate insertions;
(3) the Agent shall have received a consent in the form of
Exhibit B attached hereto, duly executed and delivered by each of the
Subsidiary Guarantors;
(4) no Default or Event of Default shall have occurred and be
continuing;
<PAGE>
<PAGE> 36
(5) all representations and warranties of each of the Borrowers
contained in the Credit Agreement, or otherwise made in connection
therewith, shall be true and correct in all material respects on and as
of the Amendment Effective Date as if made on and as of such date (unless
stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date);
(6) the Agent shall have received, (i) for the account of each
Bank, an amendment fee equal to 3/8 of 1% of such Bank's Commitment as in
effect immediately prior to the August 1994 Effective Date, (ii) for the
account of each Bank whose Commitment will be increased as a result of
the August 1994 Amendment, a facility fee equal to 1/2 of 1% of the
amount of such increase, and (iii) for the account of each party, if any,
to whom such fees are payable, all other fees payable by each of the
Borrowers to the Agent or any Bank on or before the August 1994 Amendment
Effective Date;
(7) the Agent shall have received, with a counterpart for each
Bank, copies of the resolutions, in form and substance satisfactory to
the Agent, of the board of directors of each of the Borrowers and each of
the Subsidiary Guarantors authorizing such party to execute and deliver
the documents to be executed and delivered in connection herewith,
certified by the Secretary or an Assistant Secretary of such party as of
the August 1994 Amendment Effective Date, which certificate shall state
that such resolutions have not been amended, modified, revoked or
rescinded;
(8) the Agent shall have received a certificate, dated the
August 1994 Amendment Effective Date, of a Responsible Officer of each of
the Borrowers as to the facts specified in paragraphs (4) through (6)
above; and
(9) the Agent shall have received, with a counterpart for each
Bank, a written legal opinion of Richard Lange, Esq., General Counsel to
the Borrowers, confirming in substance the legal opinions rendered by
such General Counsel on the Effective Date.
17. Consent of Banks to Amendments. Execution
and delivery of this Amendment by each Bank shall constitute the consent of
such Bank to the amendments, if any, of such Bank's Commitment as set forth
on Schedule I attached hereto and to all further amendments as set forth in
this Amendment.
18. Limited Effect. Except as expressly amended
herein, the Credit Agreement shall continue to be, and shall remain, in full
force and effect in accordance with its terms.
<PAGE>
<PAGE> 37
19. Counterparts. This Amendment may be executed
by the parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
20. GOVERNING LAW. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
21. Expenses. The Borrowers jointly and
severally agree (i) to pay or reimburse the Agent for all its reasonable
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of this Amendment and any other documents prepared
in connection herewith, and consummation of the transactions contemplated
hereby and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Agent and (ii) to pay or reimburse the Agent
for all its reasonable out-of-pocket costs and expenses incurred in
connection with the enforcement or preservation of any rights under the
Amendment and any other such documents.
IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed and delivered in New York, New York by their properly and
duly authorized officers as of the day and year first above written.
UNC INCORPORATED
By: /s/ Gregory M. Bubb
-----------------------------
Title: Gregory M. Bubb
UNC AIRWORK CORPORATION (formerly
known as Airwork Corporation)
By: /s/ Gregory M. Bubb
-----------------------------
Title: Gregory M. Bubb
CHEMICAL BANK
as Agent and as a Bank
By: /s/ Robert Wood
-----------------------------
Title: Robert Wood
<PAGE>
<PAGE> 38
CONTINENTAL BANK
By: /s/ W. Russ Covode
----------------------------
Title: W. Russ Covode
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Robert Gillison
----------------------------
Title: Robert Gillison
<PAGE>
<PAGE> 39
SCHEDULE I
----------
COMMITMENTS
-----------
Prior to Mandatory Reduction Date
- - - - ---------------------------------
</TABLE>
<TABLE>
<CAPTION>
Commitment
Bank Commitment Percentage
- - - - ---- ---------- ----------
<S> <C> <C>
CHEMICAL BANK $27,500,000 36.67*%
CONTINENTAL BANK $22,500,000 30.00%
NATIONSBANK OF NORTH
CAROLINA, N.A. $25,000,000 33.33*%
----------- ----------
$75,000,000 100.00%
=========== ==========
After Mandatory Reduction Date
- - - - ------------------------------
Commitment
Bank Commitment Percentage
- - - - ---- ---------- ----------
CHEMICAL BANK $22,500,000 34.62%*
CONTINENTAL BANK $22,500,000 34.62%*
NATIONSBANK OF NORTH
CAROLINA, N.A. $20,000,000 30.77%*
----------- ----------
$65,000,000 100.00%
=========== ==========
</TABLE>
________________
* Rounded to the nearest one hundredth of a percent.
<PAGE>
<PAGE> 40
EXHIBIT A
---------
FORM OF ENDORSEMENT No. __
---------------------------
Dated as of ____ __, 1994
__________, a Delaware corporation (the "Borrower"), and
__________ (the "Lender") hereby agree that the Note issued by the Borrower
to the Lender dated July 24, 1992 (as amended, supplemented or modified from
time to time, the "Note") is hereby amended and modified by this Endorsement
No. __ as follows:
Pursuant to the terms of the Amendment, dated as of August 8, 1994,
to the Second Amended and Restated Credit Agreement, dated as of July 24,
1992 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among UNC INCORPORATED, UNC AIRWORK CORPORATION
(formerly known as Airwork Corporation), the several banks and other
financial institutions from time to time parties thereto (the "Banks") and
CHEMICAL BANK, as agent for the Banks, pursuant to the terms of which certain
Banks are increasing the amount of their Commitments (as defined in the
Credit Agreement), the Note is hereby amended by (i) deleting "$_____" as it
appears in the top left corner of the Note and substituting, in lieu thereof,
"$_____" and (ii) deleting clause (a) from the first paragraph of the Note
and substituting, in lieu thereof, a new clause (a), which shall be and read
as follows: "(a) _________ DOLLARS ($_____) and".
<PAGE>
<PAGE> 41
Except as expressly amended hereby, the Note remains in full force
and effect. The Borrower authorizes the Lender to, and the Lender agrees
that it will, insert the following legend on the face of the Note: "This
Note has been amended pursuant to Endorsement No. __ hereto, dated as of
_____ __, 1994." The Lender agrees to attach this Endorsement to the Note.
___________________________
By:__________________________
Title:
____________________________
By:__________________________
Title:
<PAGE>
<PAGE> 42
EXHIBIT B
---------
FORM OF CONSENT
---------------
Each of the undersigned hereby acknowledges receipt of a copy of
and consents to the execution and delivery by the Borrowers (as defined in
the Credit Agreement referred to below) of the Amendment, dated as of August
8, 1994 (the "Amendment"), to the Second Amended and Restated Credit
Agreement, dated as of July 24, 1992 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"; terms defined in the
Credit Agreement being used herein as so defined), among UNC Incorporated,
UNC Airwork Corporation (formerly known as Airwork Corporation), the
financial institutions party thereto and Chemical Bank, as Agent. Each of
the undersigned hereby consents, confirms and agrees with the Agent that the
Subsidiary Guarantee is and shall remain in full force and effect after
giving effect to such Amendment, shall continue to secure the Obligations and
is hereby ratified and confirmed in all respects. Each of the undersigned
further consents, confirms and agrees with the Agent that the Subsidiary
Security Agreement, if any, to which it is a party is and shall remain in
full force and effect after giving effect to such Amendment, shall continue
to secure the Obligations and is hereby ratified and confirmed in all
respects. Each of the undersigned hereby acknowledges that the Agent and the
Banks are entering into the Amendment in reliance upon the respective
agreements of the undersigned set forth in this paragraph and the continuing
effect of the Subsidiary Guarantee and the Subsidiary Security Agreements.
UNC Holdings, Inc. UNC Engine & Engine Parts,
UNC Tri-Industries, Inc. Inc. (formerly known as
UNC Airwork Corporation Engine & Engine Parts,
(formerly known as Inc.)
Airwork Corporation) UNC Texas CAMCO Incorporated
UNC Pacific Airmotive (formerly known as Texas
Corporation, Inc. CAMCO Incorporated)
(formerly known as UNC Chemical Dynamics
Pacific Airmotive Incorporated
Corporation) UNC Artex, Inc.
Burnside-Ott Aviation UNC Manufacturing
Training Center, Inc. Technology, Inc.
UNC Accessory Overhaul UNC Nuclear Industries, Inc.
Group, Inc. Reclamation Inc.
UNC Aviation Services, Inc. UNC Recovery Corporation
UNC Helicopter, Inc. United Nuclear Corporation
UNC CAMCO Incorporated UNC Cornucopia Mining
(formerly known as Company, Inc.
CAMCO Incorporated) UNC International Sales, Inc.
<PAGE>
<PAGE> 43
UNC ARDCO Incorporated UNC Air Capital Incorporated
(formerly known as UNC Johnson Technology, Inc.
ARDCO Incorporated) UNC Lear Siegler, Inc.
UNC All Fab, Inc.
UNC Metcalf Servicing, Inc.
By: _____________________
Name: Gregory M. Bubb
Title: Treasurer of each
of the above
Subsidiary
Guarantors
<PAGE>
<PAGE> 44
Exhibit 11
UNC Incorporated and Subsidiaries
Computation of Earnings Per Common Share
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- --------------------
1994 1993 1994 1993
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Earnings (loss) before extraordinary
item $ 30 $ 3,702 $(52,142) $ 8,838
Extraordinary item - early retirement
of debt, net of income taxes (532) (532)
-------- -------- -------- --------
Net earnings (loss) $ 30 $ 3,170 $(52,142) $ 8,306
======== ======== ======== ========
Calculation of primary earnings
per share:
Average common shares outstanding
during the year primary (1) 17,503 17,381 17,461 17,346
-------- -------- -------- --------
Earnings (loss) per share, primary (2):
Earnings (loss) before extraordinary
item $ $ .21 $ (2.99) $ .51
Extraordinary item (.03) (.03)
-------- -------- -------- --------
Net earnings (loss) $ $ .18 $ (2.99) $ .48
======== ======== ======== ========
<FN>
(1) Exclusive of 700,000 shares of treasury stock for all periods presented.
(2) For all periods presented the earnings (loss) per share assuming full
dilution is the same as primary.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet at 9/30/94, the consolidated earnings for the nine
months ended 9/30/94, the consolidated statement of cash flows for the nine
months ended 9/30/94 and the notes to consolidated financial statements and is
qualified in its entirety by reference to such financial statements and notes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 1,647
<SECURITIES> 0
<RECEIVABLES> 89,257
<ALLOWANCES> 7,526
<INVENTORY> 69,452
<CURRENT-ASSETS> 232,653
<PP&E> 74,918
<DEPRECIATION> 28,467
<TOTAL-ASSETS> 475,028
<CURRENT-LIABILITIES> 141,167
<BONDS> 171,830
<COMMON> 3,641
0
0
<OTHER-SE> 109,959
<TOTAL-LIABILITY-AND-EQUITY> 475,028
<SALES> 228,360<F1>
<TOTAL-REVENUES> 390,459
<CGS> 181,335<F1>
<TOTAL-COSTS> 326,787
<OTHER-EXPENSES> 58,706<F2>
<LOSS-PROVISION> 3,568<F3><F4>
<INTEREST-EXPENSE> 13,796
<INCOME-PRETAX> (65,178)
<INCOME-TAX> (13,036)
<INCOME-CONTINUING> (52,142)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52,142)
<EPS-PRIMARY> (2.99)
<EPS-DILUTED> (2.99)
<PAGE>
<FN>
<F1>See Note 4 of Notes to Consolidated Financial Statements
<F2>The $58,706 represent a Restructuring charge - see
Consolidated Statement of Earnings.
<F3>The provision for doubtful accounts and notes is included with Selling,
General and Administrative Expenses in the Consolidated Statement of Earnings.
<F4>It also appears in the Consolidated Statement of Cash Flows under the
title "Provision for losses on accounts receivables".
</FN>
</TABLE>
