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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file number 1-7795
UNC INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 54-1078297
(State of incorporation) (I.R.S. employer
identification number)
175 Admiral Cochrane Drive
Annapolis, Maryland 21401
(Address of principal executive offices) (Zip code)
(410)266-7333
Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock,
Par Value $0.20 Per Share New York Stock Exchange
9 1/8% Senior Notes due 2003 New York Stock Exchange
7 1/2% Convertible Subordinated
Debentures due 2006 New York Stock Exchange
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 [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-
affiliates of the Registrant at March 1, 1995 was approximately
$92,074,000.
The number of shares of Registrant's Common Stock outstanding
on March 1, 1995 was 17,545,247 (excluding 700,000 shares held
in treasury). (Cover page continued)
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement,
expected to be filed by March 17, 1995, specifically excluding
the sections titled "Statement of Management Development and
Compensation Committee on Executive Compensation" and
"Comparison of Five-Year Cumulative Total Return Among UNC
Incorporated, NYSE Market Value Index and Peer Group Index", in
connection with the solicitation of proxies for its 1995 Annual
Meeting of Shareholders, are incorporated into Items 10, 11, 12
and 13 under Part III.
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UNC INCORPORATED AND SUBSIDIARIES
---------------------------------
Item 1. Business
The Company is a diversified supplier of products and services
to the aviation industry which includes: the overhaul of
aircraft engines, industrial gas turbine engines and aircraft
accessories, the manufacture and remanufacture of jet engine and
aircraft components and providing maintenance and training,
repair and logistical contract services.
In the second quarter of 1994, the Company recorded a
restructuring charge of $58.7 million ($47.0 million after-tax)
in connection with a strategic program to reduce its cost
structure and asset base in light of the continuing depressed
economic conditions in the aviation industry. The restructuring
charge consisted of $42.3 million to cover the closing of a
facility, the sale and disposition of two other businesses, the
consolidation of two other plants, and the downsizing of other
facilities. The balance of the charge of $16.4 million related
primarily to the write down to estimated realizable value of
certain inventory and under utilized property, plant and
equipment that was identified for sale.
ENGINE OVERHAUL DIVISION
UNC Engine Overhaul Division is comprised of three operations,
UNC Airwork, UNC Engine & Engine Parts and UNC Metcalf.
Together these three operations perform turbine engine overhaul
and maintenance, provide parts provisioning for business and
helicopter operators, regional airlines, helicopter operations,
and provide industrial power packages for land based industrial
use.
UNC Airwork is a leading independent provider of turbine
engine overhaul services. UNC Airwork overhauls and repairs
over 40 different engine models for a wide range of corporate
and commercial customers. In 1994, the auxiliary power unit
repair capabilities of UNC Accessory Services were transferred
to UNC Airwork operations in Millville, New Jersey. Also in
1994, the small engine overhaul operations conducted at Pacific
Airmotive in Burbank, California were consolidated into UNC
Airwork's facilities in Millville, New Jersey and Miami,
Florida. This consolidation places all major engine overhaul
capabilities in two strategic locations, making for a more cost
effective use of each unit's capabilities.
UNC Engine and Engine Parts provides parts and accessory
support for small gas turbine engines, as well as industrial
packages. Specializing in the support of the PT6 engine, this
unit has also expanded capabilities to meet the needs of PT6T
Twin Pac, JT15 D and Allison 250 operators. UNC Engine and
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Engine Parts maintains an inventory of PT6 spare engines and
also has one of the largest PT6 inventories of parts and
accessories in the industry.
Acquired in 1993, UNC Metcalf specializes in the overhaul and
repair of industrial turbine engine, particularly the Solar
Centaur and Saturn models. UNC Metcalf provides support
services that extend into all areas of operations including
engineering, installation, maintenance, parts repair and
rebuild. Additionally, UNC Metcalf has developed many
proprietary repair processes which provides customers with a low
cost alternative to parts replacement. UNC Metcalf also
provides complete "turnkey" service including on site contract
maintenance and operations.
Revenues of the Engine Overhaul Division were $131.6 million
in 1994 (25% of the Company's 1994 revenues).
COMPONENT SERVICES
UNC Component Services provides a wide range of repair,
remanufacturing and overhaul services for the commercial airline
industry as well as for the original equipment manufacturers.
This Division was formed in 1994 in order to combine all repair
services serving the same customer base under one management
providing a streamlined approach to the customer's needs.
UNC Accessory Services consists of four certified FAA repair
station facilities providing accessory overhaul, repair and test
services to aircraft operators including major airlines,
international airlines, national airlines, regional airlines,
package and freight carriers, and corporate operators. Services
are also provided to independent aircraft engine overhaul
facilities and aftermarket distributors. UNC Accessory Services
supports over fifty categories of aircraft accessories, covering
more than thirty thousand different parts. The items serviced
include landing gear, constant speed drives, radar components,
generators, transponders, pneumatic valves, cooling turbines,
flight control actuators, propellers, fuel system components,
hydraulic system components, and anti-skid brake system
components. New capabilities for regional turbo-prop aircraft
and newer generation turbine aircraft continue to be added.
UNC Accessory services was founded in 1951 and acquired by the
Company in 1989. UNC Accessory Services is an authorized
service center for leading original equipment manufacturers,
including Allied Signal Aerospace Products, Garrett General
Aviation Services, APPH, Chandler Evans, and HR Textron. The
Company believes it to be the largest independent supplier of
accessory support.
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UNC Tri-Remanufacturing, which was started by the Company in
1991, reconditions engine components to serviceable condition.
The remanufacturing business is supported by market driven
repair development and customers' desires to lower repair and
overhaul costs. UNC Tri-Remanufacturing's customers are the
commercial airlines who perform their own engine overhauls and
the independent and OEM engine overhaul shops and the military.
These customers generally lack the expertise, the ability to
develop approved repairs, and the volume of work on each
different part to justify in-house performance of this work.
UNC Artex, founded in 1957 and whose assets were acquired by
the Company in April 1993, expands the Company's repair and
remanufacturing capabilities through highly specialized repairs
of components including engine gearboxes and cases, as well as
aircraft component housings and other engine and aircraft parts
and accessories. UNC Artex's primary customers are the major
commercial airlines.
Revenues of the Component Services Division were $54.4 million
in 1994 (10% of the Company's 1994 revenues).
MANUFACTURING
UNC's Manufacturing Division supplies turbine engine and
airframe component parts for the prime engine and aircraft
original equipment manufacturers and the military. UNC
Manufacturing provides advanced capabilities from design to
production that result in high technology, precise tolerance and
advanced alloy parts. This Division consists of UNC Tri-
Manufacturing, UNC Johnson Technology and UNC Aerostructures -
Washington and Texas.
UNC Tri-Manufacturing, founded in 1955 and acquired by the
Company in 1988, is the largest of the three manufacturing units
and is a leading manufacturer of precision components, aircraft
parts and assemblies for turbine engines for commercial and
military aviation applications. Primary customers include
General Electric, Pratt & Whitney and the Department of Defense.
UNC Johnson Technology, founded in 1963 and acquired by the
Company in July 1993, provides high technology turbine nozzles
and vane manufacturing and repair, and specialized non-
conventional machining of super alloys such as electro-chemical
deep hole drilling, laser drilling, and electrical-discharge
machining. Customers include Pratt & Whitney, the Department of
Defense, and General Electric.
UNC Aerostructures - Washington, founded in 1965 and acquired
by the Company in 1993, is an experienced manufacturer of
structural components and sheet metal sub-assemblies for major
aircraft manufactures such as Boeing. UNC Aerostructures -
Texas, acquired by the Company in 1990, produces chemical-milled
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structures and performs metal finishing used in the production
of aircraft and engine components. Together, the two facilities
provide a complete manufacturing capability serving virtually
all major airframe and aerospace companies, leading industrial
subcontractors and the U.S. Military. Customers include,
Boeing, Northrop, Vought, Bell Helicopter, Lockheed and Grumman.
Revenues for Manufacturing Division were $93.7 million in 1994
(18% of the Company's 1994 revenues).
AVIATION SERVICES
UNC Aviation Services Division is a market leader in the
provision of aircraft maintenance, overhaul, logistics support
and aviation training services to the U.S. miliary, as well as
to domestic and foreign government agencies. The Division has
over 63 years of cumulative experience with an unblemished
record of distinguished contract performance. The Division has
three operating units, UNC Federal Services, UNC Contract Field
Services and UNC International Services. Work is performed at
military aviation training sites throughout the United States.
Contracts are both fixed price and cost plus incentive award fee
for multiple years with options. This business is managed
centrally at the Company's Annapolis, Maryland headquarters.
UNC Federal Services is a recognized leader of aircraft
maintenance and aircrew training to the U.S. military. The
market for these military contract services results from the
Department of Defense turning to the private sector to obtain
services for less than they would cost if they were performed by
government personnel. Awards of these contracts are generally
based on best value to the government. As a result, success in
obtaining the awards of these contracts requires both high
technical rating and low price.
In the second quarter of 1994, UNC Federal Services was
awarded the largest U.S. Navy helicopter maintenance contract at
NAS Whiting Field, Florida. This one year contract has four
option years and a total five year value of approximately $102
million. The contract was awarded to UNC Federal Services for
an unprecedented fourth consecutive time. This unit also won,
for a second time, the aircraft maintenance contract for the
U.S. Air Force Academy.
UNC Contract Field Services has for 32 years provided depot-
level and below depot-level maintenance, repair and logistical
services for virtually every DOD weapon system. Through the
Contract Field Teams (CFT) program, the Company serves the U.S.
Army, Navy, Air Force, NASA and Coast Guard. In 1994, Field
Teams began new efforts at the U.S. Army Corpus Christi Aviation
Depot and at the Anniston Army Depot which reflect the
Division's initiative to augment military depot workloads.
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UNC International Services provides maintenance program
management and logistical services to customers worldwide. The
Company is the largest U.S. service contractor to the Royal
Saudi Air Force providing F-5 technical and logistical support,
C-130 logistical support and other services. In 1994, the
Division won a new three year $30 million contract with the
Royal Saudi Naval Forces to provide technical support in Saudi
Arabia.
The Aviation Services Division had revenues of $246.1 million
in 1993 (47% of the Company's 1994 revenues).
COMPETITION
The businesses and markets in which the Company operates are
highly competitive.
The Company's engine overhaul operations competes primarily
with, and largely at the discretion of, the aircraft OEMs
including Allied Signal, General Electric, Pratt & Whitney and
Rolls-Royce. These operations also face significant competition
from a large number of other domestic and foreign facilities
such as Aviall, Standard Aero, National Airmotive, BizJet,
Keystone Helicopters, Aeromaritime, PHI, Celma, Turbo Power,
Turbotech Repairs, Desert Turbines, Air Force Turbines and
others. As exemplified by the Company's recent withdrawal from
the JT8 business, the Company's overhaul operations also compete
with sales of used engines.
The Company's component services operations compete with a
large number of smaller service facilities and with certain
OEM's that provide aftermarket services for their products.
Quality and reliability of service, prompt turn-around time,
price and customer service are major competitive factors in the
engine overhaul and component services businesses.
In providing contract aviation services to the military, the
Company's major competitors are Dyncorp, Reflectone, Serv-Air,
Northrop Worldwide Aviation Services, Beech Aviation Services,
Inc., Grumman Technical Services, and Lockheed Support Services,
Inc.
UNC Aviation Services Division holds a prominent position in
providing aviation and other maintenance services to the U.S.
Department of Defense and selected foreign governments. The
Division is one of only four companies holding a recurring
contract under the Contract Field Team (CFT) program. The
program allows these companies to provide maintenance services
to the Government on an as-needed basis through individual
orders. Other CFT contractors are Dyncorp, Lockheed, and Serv-
Air.
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With respect to the Company's manufacturing operations, UNC
Tri-Manufacturing's principle competitors are The Barnes Group,
Ketema and Chemtronics, and UNC Johnson Technology's
competition exists in the form of OEM in-house capabilities and
Chromalloy, Meyer Tool, Howmet and Walbar. UNC Aerostructures
competes with Ace Clearwater, Dynabil Industries, Monitor
Aerospace, AeroChem and ChemFab. UNC Tri-Remanufacturing and
UNC Artex's principal competitors are Windsor Airmotive,
Chromalloy, NORDAM PSD and Pyromet. Price, quality and customer
service are major competitive factors in this business.
RESEARCH AND DEVELOPMENT; PATENTS:
The Company does not currently have any employees who are
engaged full-time in research and development activities;
however, certain employees from time to time render services of
a research and development nature as part of their regular
duties. The Company owns a number of patents, but does not
consider that patent protection is essential to the successful
operation of its businesses.
GOVERNMENT REGULATION:
UNC Airwork, UNC Accessory Services, UNC Tri-Remanufacturing,
UNC Johnson Technology and UNC Artex are all licensed FAA repair
stations in their respective specialties. UNC Accessory
Services, UNC Tri-Remanufacturing and UNC Artex are certified by
the FAA and hold current C.A.S.E. Registry as well as various
approvals by international aviation administration
organizations. The principal activities of the Company's
discontinued submarine propulsion unit manufacturing business
are regulated by the Department of Energy ("DOE"). The Company
is also subject to comprehensive regulations designed to
maximize safety in the handling of hazardous materials. In
addition, certain properties of the Company relating to its
discontinued minerals business are affected by special federal
and state environmental laws and regulations. See the
description of environmental proceedings included in Note 10 to
the Company's Consolidated Financial Statements included on
pages 26 through 28.
BACKLOG:
As of December 31, 1994, the total contract price of the
backlog of orders for manufactured engine and airframe parts and
aviation contract services for the military, including option
years, believed to be firm was approximately $670.2 million, and
approximately 42% of the orders or services represented thereby
have been or are currently expected to be filled during 1995.
As of December 31, 1993, such total was approximately $776.8
million.
EMPLOYEES:
As of December 31, 1994, the Company had 5,410 employees.
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EXPORT SALES:
For information related to sales to foreign countries,
reference is made to Note 16 to the Company's Consolidated
Financial Statements included on page 33.
ITEM 2. PROPERTIES.
The principal executive offices of the Company are located at
175 Admiral Cochrane Drive, Annapolis, Maryland. The executive
offices are subject to a lease expiring in 1997 with renewal
options and an option to purchase and are comprised of
approximately 34,000 square feet in a modern office building.
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The following table sets forth certain information regarding
the Company's operating facilities as of December 31, 1994.
<TABLE>
<CAPTION>
Approximate
Location Square Footage Title
--------- ---------------- ---------
<S> <C> <C>
Engine Overhaul Division(1)
Millville, New Jersey 260,000 Leased
Miami, Florida 46,000 Leased
Odessa, Texas 32,000 Leased
Coconut Creek, Florida 4,000 Leased
Component Services Division
Bayshore, New York 41,000 Owned
Ft. Lauderdale, Florida 21,000 Leased
Grand Prairie, Texas 41,700 Owned
Ronkonkoma, New York(2) 60,000 Leased
Millville, New Jersey 20,000 Leased
Addison, Texas 20,000 Leased
Terre Haute, Indiana 66,000 Leased
Manufacturing Division
Terre Haute, Indiana 212,000 Owned
Muskegon, Michigan 101,600 Owned
Weatherford, Texas 110,000 Leased
Everett, Washington 150,000 Leased
Aviation Services Division
Annapolis, Maryland 5,100 Leased
Oklahoma City, Oklahoma 36,700 Leased
San Antonio, Texas 10,000 Leased
Pensacola, Florida 2,600 Leased
______________________
(1) The Engine Overhaul Division also leases facilities in four
states aggregating approximately 10,000 square feet.
(2) Lease expires March 31, 1995 and will not be renewed.
Operation have been consolidated at the Bayshore, New York
facility.
</TABLE>
The Company owns its former engine parts manufacturing plant
in Norwich, Connecticut containing approximately 72,000 square
feet and owns its former engine overhaul plan in Burbank,
California containing approximately 100,000 square feet. In
addition, the Company owns the facilities of its discontinued
submarine propulsion unit manufacturing business in Montville,
Connecticut which includes a modern steel frame building
containing approximately 432,000 square feet.
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ITEM 3. LEGAL PROCEEDINGS.
See the description of a litigation and contingencies
appearing in Note 10 of Notes to Consolidated Financial
Statements included on pages 26 through 28.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The principal market for the common stock of UNC Incorporated
is the New York Stock Exchange. At December 31, 1994, there
were 6,715 holders of record of common stock. The accompanying
table sets forth the high and low prices for UNC's common stock
in the periods indicated. See Note 7 of Notes to Consolidated
Financial Statements for a description of restrictions on the
payment of dividends.
1994 1993
Quarter Ended High Low High Low
------------- ------ ------ ------ ------
March 31 $11.75 $ 9.13 $ 6.63 $ 5.50
June 30 $10.25 $ 5.13 $ 7.13 $ 5.38
September 30 $ 6.50 $ 5.25 $ 6.88 $ 5.88
December 31 $ 6.50 $ 4.88 $ 9.50 $ 6.50
---------------- ----------------
Closing Price,
December 30 and 31, respectively
$ 6.00 $ 9.38
--------------------------------
The closing price of the Company's common stock on February 28,
1995 was $5.63.
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ITEM 6. SELECTED FINANCIAL DATA.
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
OPERATING RESULTS
Revenues $525,833 $438,293 $365,152 $360,571 $356,255
======== ======== ======== ======== ========
<S> <C> <C> <C> <C> <C>
Earnings (loss) from:
Continuing operations
before extraordinary
item $(67,932) $ 11,594 $ 11,369 $(25,485) $ 5,219
Discontinued operations 34,100 (128)
Extraordinary item -
early retirement of debt (532) (1,700)
-------- -------- -------- -------- --------
Net earnings (loss) $(67,932) $ 11,062 $ 11,369 $ 6,915 $ 5,091
======== ======== ======== ======== ========
Earnings (loss) per share:
Continuing operations
before extraordinary
item $ (3.89) $ .67 $ .66 $ (1.49) $ .31
Discontinued operations 1.99 (.01)
Extraordinary item (.03) (.10)
-------- -------- -------- -------- --------
Net earnings (loss) $ (3.89) .64 $ .66 $ .40 $ .30
======== ======== ======== ======== ========
Average number of shares
outstanding 17,474 17,356 17,279 17,128 17,082
FINANCIAL POSITION DATA
Working capital $100,174 $150,200 $128,150 $ 88,379 $130,266
Current ratio 1.7 to 1 2.5 to 1 3.1 to 1 1.5 to 1 3.2 to 1
Total assets $468,034 $506,133 $391,082 $455,094 $409,980
Total long-term debt,
including current
portion $214,323 $197,283 $125,723 $177,829 $186,971
Shareholders' equity $ 98,897 $165,486 $155,639 $143,492 $136,488
Total debt to
capitalization 68.4% 54.4% 44.7% 55.3% 57.8%
Return on average
shareholders' equity 6.9% 7.6% 4.9% 3.8%
OTHER
Capital expenditures $ 10,299 $ 11,250 $ 6,602 $ 7,280 $ 24,235
Depreciation and
amortization $ 12,727 $ 11,477 $ 10,378 $ 10,196 $ 12,345
Employees 5,410 6,430 3,383 3,852 4,612
Shareholders 6,715 7,029 7,371 8,936 9,193
</TABLE>
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See Notes 2, 13 and 17 of Notes to Consolidated Financial
Statements for matters affecting continuing operations and Note
3 of Notes to Consolidated Financial Statements for a
description of acquisitions. Capital expenditures in 1994
include $0.5 million from the acquisition of the contract
backlog of Anadite and $1.9 million in 1993 from the acquisition
of the contract backlog of Heintz.
ITEM 7. 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 overhaul of aircraft engines, industrial gas
turbine engines and aircraft accessories, the manufacture and
remanufacture of jet engine and aircraft components and
providing maintenance and training, repair and logistical
contract services.
1994 Compared with 1993
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. The Company's analysis of
industry market conditions indicates that the soft industry
cycle will continue for the next two years through 1996 and that
many of our markets will see little real growth during this
period. As a result 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 inventory and under utilized property, plant and
equipment that has been identified for sale 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 and Miami, Florida. The
Company positioned 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, which was sold in December 1994. These actions were
taken due to the under utilization of the Weatherford facility
caused by the depressed market condition being experienced by
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OEM's in connection with the construction of new aircraft and a
sharp reduction in the number of military helicopter overhauls
that were 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 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 which includes
operating expense reductions of $9.0 million and interest
expense of $6.0 million.
During the first six months 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 and sold its
helicopter overhaul and refurbishment business. In addition,
the Company is preparing for the orderly liquidation of assets
identified for sale under this program and has generated
approximately $10 million of cash, net of restructuring
expenses. The Company completed the auction of certain fixed
assets at its Pacific Airmotive subsidiary in January 1995,
generating approximately $2.6 million in cash, and 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 1995.
At year end the Company's employee head count was 5,410, down
slightly more than 1,000 employees compared with the beginning
of the year, reflecting the results of tight cost controls and
restructuring efforts.
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.
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Revenues were $525.8 million in 1994 compared with $438.3
million in 1993, an increase of $87.5 million (20%) and
operating income for 1994 reflects a loss of $61.0 million
compared with income of $23.4 million in 1993. Included in the
1994 results were a restructuring provision of $58.7 million, 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, and a $14.0 million fourth
quarter 1994 multi-employer pension withdrawal adjustment.
Without these adjustments operating income would have been $21.3
million in 1994.
Revenues for the Engine Overhaul Division in 1994 decreased
$23.6 million (15%) to $131.6 million. 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. The JT8 reductions were
partially offset by revenue increases of $3.1 million generated
by UNC Metcalf acquired in the third quarter of 1993 and
$1.3 million from a leveraged lease transaction. In December
1994, the Company sold a McDonnell Douglas DC-10-30 aircraft for
$6.8 million. The aircraft was acquired in September 1993 for
$2.7 million under a leveraged lease. Revenues and operating
income from the leveraged lease in 1994 and 1993 were $2.6
million and $1.3 million, respectively ($1.5 million and $0.8
million net of income taxes in 1994 and 1993, respectively).
Therefore, the $6.8 million of proceeds from the sale was
sufficient to cover the carrying value of the lease.
Operations of the Engine Overhaul Division generated a loss
of $5.6 million in 1994 compared with income of $5.5 million in
1993. Included in the 1994 results is a $14 million non-
recurring charge for the withdrawal from a multi-employer
pension plan (see Note 13 of Notes to Consolidated Financial
Statements) and a one-time charge of $1.0 million for an
increase in the allowance for doubtful accounts for receivables
related to litigation and the bankruptcy of certain customers.
Without these adjustments operating income would have been
$9.4 million in 1994.
Revenues for the Component Services Division in 1994 decreased
$8.8 million (14%) to $54.4 million, principally due to
increased pricing pressures from existing competition in the
component services markets. Operating income was $1.2 million
in 1994 and $8.3 million in 1993. Included in the 1994 results
was a one-time charge of $1.0 million for an increase in the
allowance for doubtful accounts related to the settlement of
certain receivables. Without this adjustment income would have
been $2.2 million in 1994. The decrease in operating income in
1994 is principally due to the reduction in volume.
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The Company's Manufacturing Division revenues for 1994 of
$93.7 million increased $16.1 million (21%) compared with 1993.
The increase in 1994 revenues is principally due to revenues
generated by UNC Johnson Technology and UNC Aerostructures,
Washington acquired in the third quarter of 1993, offset by
lower volume at the Company's other manufacturing facilities.
Operating income was $5.2 million in 1994 compared with $10.8
million in 1993. 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 $8.7 million in 1994.
Aviation Services Division revenues of $246.1 million
increased $103.9 million in 1994. 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 $5.0 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 and resulting savings from
the consolidation of its operations.
Selling, general and administrative expenses in 1994 were
$69.8 million or 13.3% of sales compared with $54.0 million or
12.3% of sales in 1993. The increase in selling, general and
administrative expense in 1994 is due to expenses of the
companies acquired during 1993 and increased international
marketing efforts. Additionally, included in the 1994 period is
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 described
above) and the write-off of expenses of $0.7 million incurred in
connection with an acquisition that was not consummated.
Without this one-time charge selling, general and administrative
expenses would have been approximately 12.2% of sales in 1994.
Activity under the Company's contract service operations,
which principally involve maintenance of aircraft and basic
aviation training, 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
<PAGE>
<PAGE> 17
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. "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 1994, the Company was the 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 reductions, the Company's
manufacturing operation have focused their marketing efforts for
the past several years on commercial rather than military
products. The Company's OEM customers continue to significantly
reduce the number of suppliers and their own procurement staffs.
The Company remains a part of the reduced subcontractor base and
as such has obtained new contracts that may not have been
available 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.
<PAGE>
<PAGE> 18
Interest expense increased $4.7 million in 1994 principally
due to higher average debt levels resulting from acquisitions
made in 1993, the full year effect of the Senior Notes issued in
July 1993 and higher interest rates.
The income tax benefit for 1994 of $13.5 million was $9.7
million higher than the $3.8 million benefit for 1993. This
increase is due to the recognition of income tax benefits, net
of allowances on the pre-tax losses incurred in 1994. (See Note
11 of Notes to Consolidated Financial Statements).
1993 Compared with 1992
Revenues were $438.3 million in 1993 compared with $365.2
million in 1992, an increase of $73.1 million (20%). Operating
income in 1993 was $23.4 million compared with $25.4 million in
1992, a decrease of $2.0 million (7%). The reduction in
operating income in 1993 was principally due to losses recorded
on the JT8 product line, which were partially offset by higher
levels of income from the Manufacturing and Aviation Services
Divisions.
Revenues for the Engine Overhaul Division in 1993 decreased
$11.4 million (7%) to $155.3 million and operating income
decreased $4.4 million to $5.5 million. The reduction in
revenues was principally due to a decrease in airline JT8 engine
overhauls partially offset by an increase in business aviation
and regional airline engine overhauls, revenues of $2.6 million
generated by the newly acquired business, UNC Metcalf, and $1.3
million from a leveraged lease transaction. The decrease in JT8
revenues of $17.5 million reflects the prevailing economic
conditions within the industry which have significantly reduced
the demand for the overhaul of airline JT8 engines, and the
Company's resultant decision to withdraw from the JT8 overhaul
business. In 1994, as part of its restructuring program, the
Company closed its Burbank, California facility which had been
engaged in the overhaul of JT8 engines. Operating income
decreased to $4.4 million due to lower volume from JT8 overhauls
and reduced margins in the competitive business aviation and
commuter airline markets, partially offset by income generated
by UNC Metcalf and from a leveraged lease transaction of $1.3
million.
Revenues for the Component Services Division increased $0.9
million (2%) to $63.2 million in 1993, principally due to
revenues of $3.4 million generated by UNC Artex acquired in 1993
which was partially offset by the decision to eliminate certain
lower margin product lines and from increased pricing pressures
from existing competition. Operating income decreased $1.2
million (13%) due to lower volume and pricing pressures which
was partially offset by income contributed by UNC Artex acquired
in the second quarter of 1993.
<PAGE>
<PAGE> 19
The Company's Manufacturing Division revenues for 1993 of
$77.6 million increased $30.5 million (65%) compared with 1992
and operating income increased $4.7 million to $10.8 million.
The increase in revenues in 1993 was due to activities on new
contracts received during 1993, revenues of $16.3 million
generated by the newly acquired businesses, UNC Johnson
Technology and UNC Aerostructures, Washington (formerly UNC All
Fab) acquired during 1993 and the contract backlog acquired from
Heintz. Revenues and operating income in 1993 and 1992 include
claims filed under U.S. government contracts of approximately
$2.0 million and $2.2 million, respectively. The 1993 claim was
to recover amounts related to increased performance costs
resulting from constructive changes, defective specifications
and government caused delays; the 1992 claim was for costs
associated with termination of a contract for the convenience of
the government. The increase in operating income was
attributable to $2.9 million generated by the businesses
acquired in 1993 and the positive effects of manufacturing and
quality improvement programs, partially offset by reduced
margins on new contracts due to competitive pressures within the
industry.
Aviation Services Division revenues of $142.2 million
increased $53.1 million (60%) in 1993. The acquisition of UNC
Lear Siegler in October 1993 contributed $41.6 million to 1993
revenues, and the revenues of UNC Helicopter, acquired in
June 1992, increased $4.1 million. Revenues under U.S.
government contracts to provide aviation training and
maintenance increased $4.8 million, primarily due to increased
helicopter maintenance business which was partially offset by
reduced pilot training activities. Also, 1993 revenues include
a $2.0 million contract claim against the U.S. government
following a favorable Federal Circuit Court of Appeals ruling in
February 1993 (See Note 10 of Notes to Consolidated Financial
Statements) and $0.6 million related to a claim for fees
improperly withheld under a government contract. Operating
income increased $3.1 million to $8.5 million due to income
generated by UNC Lear Siegler of $2.3 million and the $2.6
million in claims, partially offset by lower margins at UNC
Helicopter and the effects of reduced pilot training activities
on certain contracts.
Selling, general and administrative expenses in 1993 were
$54.0 million or 12.3% of sales compared with $45.3 million or
12.4% of sales in 1992. Although selling, general and
administrative expenses decreased as a percentage of revenues,
total costs increased in 1993 primarily due to the expenses
associated with companies acquired during 1993, increased
international marketing efforts and a non-recurring reduction in
1992 of a $1.3 million accrual for certain costs associated with
the termination of an equipment lease.
<PAGE>
<PAGE> 20
Total interest expense increased $2.1 million (18%) in 1993
due to additional expense of the Senior Notes issued July 29,
1993, and continuing expense on the 11 1/2% debentures which
could not be redeemed until September 7, 1993. Interest expense
related to continuing and discontinued operations increased $2.4
million and decreased $0.3 million, respectively. The decrease
in interest expense related to discontinued operations is
expected to continue as cash proceeds generated by the
discontinued operations through the disposal date are used to
repay debt attributable to discontinued operations and as the
net assets of discontinued operations decrease.
The income tax benefit for 1993 of $3.8 million was $5.3
million higher than the $1.5 million tax provision for 1992.
This difference is due principally to recognition in the third
quarter of 1993 of $5.8 million of income tax benefits.
Statement of Financial Accounting Standard No. 109 (SFAS No.
109), "Accounting for Income Taxes" requires recognition of
income tax benefits for loss carryforwards, credit carryforwards
and certain temporary differences for which tax benefits have
not previously been recorded when realization of those benefits
becomes more likely than not. Various events occurred during
the year that caused the Company to re-evaluate the probable
realization of the benefits from existing tax assets.
Specifically, the acquisition of four new businesses, the
awarding of approximately $227 million in new contracts
increasing the Company's backlog in the third quarter to
approximately $522 million, the decision to withdraw from the
unprofitable third-party JT8 airline engine overhaul product
line and other events caused the Company to conclude that the
realization of various future tax benefits is more likely than
not. As a result, the carrying value of the Company's net
deferred tax asset was increased in 1993 by $7.6 million of
which $1.8 million was allocated to reduce goodwill arising from
acquisition of new businesses and $5.8 million was recognized as
a current period tax benefit. (See Note 11 of Notes to
Consolidated Financial Statements.)
1992 Compared with 1991
Aviation revenues were $365.2 million in 1992 compared with
$358.1 million in 1991, an increase of $7.1 million (2%). Total
revenues in 1991 of $360.6 million included sales of
$2.5 million related to a non-aviation subsidiary which was sold
in 1991. Operating income in 1992 was $25.4 million compared
with a loss of $7.0 million in 1991. Operating income in 1991
was affected by adjustments related to the carrying value of
certain inventories, increases in allowances for doubtful
accounts receivable related to services performed for certain
commercial airlines which were in liquidation or in troubled
financial condition and the write-down of goodwill related to a
defense oriented business.
<PAGE>
<PAGE> 21
Revenues of $166.7 million in 1992 from the Engine Overhaul
Division increased $12.7 million (8%) and operating income
increased $9.6 million to $9.8 million in 1992. The higher
revenues generated were chiefly due to an increase in the number
of large engine overhauls during 1992 while small engine sales
remained level with 1991 activity. The increase in operating
income is principally due to 1991 being affected by the write-
down of certain inventories, increases in the allowances for
doubtful accounts related to receivables from troubled airlines
and a non-recurring charge applicable to the write-down to the
appraised value of property underlying an investment in a non-
affiliated company. Exclusive of these items, operating income
in 1992 would have decreased $1.4 million from 1991 principally
as a result of competitive pricing pressures on large engine
overhauls partially offset by a reduction in the labor force.
Revenues of $62.3 million in 1992 from the Component Services
Division increased $6.2 million (11%) while operating income
decreased $0.3 million to $9.5 million in 1992. The increased
revenues were due to aggressive marketing initiatives
particularly in foreign markets. Operating income in 1992 was
negatively impacted by costs incurred in the consolidation of
the Connecticut operations with the Long Island facilities in
order to be more efficient and competitive within the industry.
The Company's Manufacturing Division revenues for 1992 of
$47.1 million decreased $14.3 million (23%) compared with 1991
due to reduced volume at the Company's Terre-Haute, Indiana
manufacturing facilities resulting from the completion of
certain low margin military contracts in 1991 and lower sales of
approximately $3.7 million at the Alloy Spot Welders unit, which
was sold in June 1992. Partially offsetting these decreases was
approximately $2.2 million of revenue in 1992 related to a claim
filed under a U.S. government contract for costs associated with
the termination of the contract for the convenience of the
government. Operating income, however, increased $4.9 million
to $6.1 million in 1992 due in part to the results of
manufacturing and quality control improvement programs initiated
in the latter part of 1991, and the recoupment of certain costs
associated with the claim for the contract terminated for the
convenience of the government. This increase was partially
offset by a $1.2 million reduction in operating income from the
Alloy Spot Welders unit and the adverse effect of certain price
concessions provided to principal customers in 1991.
Aviation Services Division revenues of $89.1 million increased
$2.5 million (3%) in 1992 due to the acquisition in June 1992 of
UNC Helicopter, a company engaged in the overhaul of
helicopters, which generated $3.3 million in revenues,
offsetting a reduction of $0.8 million in other contract
services. Activities under certain contracts involving aviation
<PAGE>
<PAGE> 22
training and maintenance decreased in 1992 due to reduced pilot
training requirements. This decrease was offset by the phase-in
of activities on new contracts and expanded work scope under
certain existing contracts. Operating income for 1991 was
adversely affected by a $1.3 million unfavorable contract cost
adjustment, a $1.1 million reduction in contract profitability
upon re-award after competitive bid and an $8.0 million write-
down of the Company's investment in this business. Exclusive of
these adjustments operating income increased $2.6 million, to
$5.4 million, due to contract price redetermination,
improvements resulting from cost reduction programs implemented
under fixed price contracts and the acquisition of the higher
margin helicopter business.
Selling, general and administrative expenses decreased from
$49.5 million or 13.7% of sales in 1991 to $45.3 million or 12.4
% of sales in 1992 reflecting Company-wide cost-containment
efforts and a $1.3 million reduction of an accrual for certain
costs associated with the termination of an equipment lease.
Total interest expense decreased $6.5 million (35%) in 1992
principally due to a significant reduction in debt levels and
lower interest rates. Interest expense related to continuing
and discontinued operations decreased $4.5 million and
$2.0 million, respectively. The decrease in interest expense
related to discontinued operations is expected to continue as
cash proceeds generated by the discontinued operations through
the disposal date are used to repay debt attributable to
discontinued operations and as the net assets of discontinued
operations decrease.
<PAGE>
<PAGE> 23
Liquidity and Capital Resources
The elements contributing to the Company's free cash flow for
the years 1994 and 1993 are shown in the following table.
<TABLE>
<CAPTION>
(Dollars in thousands)
1994 1993
-------- --------
<S> <C> <C>
Net earnings (loss) $(67,932) $ 11,062
Depreciation and amortization 12,727 11,477
Change in working capital and other (16,571) (19,854)
Capital expenditures (10,299) (11,250)
Funds used by discontinued operations (5,115) (5,624)
Restructuring and non-recurring charges,
net of taxes 68,660
-------- --------
Free cash flow (18,530) (14,189)
Other:
Acquisitions, including purchased work
in progress and contract backlog (8,711) (48,477)
Debt assumed in acquisitions (8,415)
Proceeds from sale of assets, net 10,201
Less:
Bond discount 479
-------- --------
Net increase in debt (17,040) (71,560)
Total debt, beginning of year 197,283 125,723
-------- --------
Total debt, end of year $214,323 $197,283
======== ========
</TABLE>
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, which includes operating expense reductions of
$9.0 million and interest expense of $6.0 million. The cash
generated will be used to reduce debt.
Long-term debt, including current portion, was $214.3 million
at December 31, 1994, compared with $197.3 million at December
31, 1993. The borrowing capacity under the Company's Revolving
Credit Facility as of December 31, 1994 was $75 million, reduced
by outstanding letters of credit which aggregated $15.5 million.
The Company's unused availability under the facility was $19.5
million at December 31, 1994. The Company is currently in
discussions with several lenders concerning a new medium term
<PAGE>
<PAGE> 24
revolving credit facility. The Company anticipates closing on
this line in April 1995. At such time, it is anticipated the
revolving credit will be classified as a long-term liability.
The Company's debt-to-capitalization ratio at December 31, 1994,
was 68.4% compared with 54.4% at December 31, 1993. At
December 31, 1994, the Company's working capital was
$100.2 million with a current ratio of 1.7 to 1 compared with
$150.2 million and a current ratio of 2.5 to 1 at December 31,
1993. The reduction in working capital is primarily the result
of classification of $40.0 million due under the Company's
revolving credit agreement as a current liability at
December 31, 1994 and accruals related to the restructuring
program and multi-employer pension plan.
Capital expenditures in 1994 amounted to $10.3 million. It
is anticipated that capital expenditures in 1995 will be
comparable to 1994 and will be financed from internally
generated funds, lease arrangements and revolving credit
borrowings.
The Company's operations are subject to a variety of federal,
state and local laws and regulations relating to the
environment. The Company believes that its facilities are
operated substantially in compliance with applicable
environmental laws and regulations on an overall basis, however,
as described below some areas require remedial action.
A subsidiary of the Company has been involved in environmental
reclamation of a former uranium mill and mill tailings facility
since 1988. The reclamation plan has been approved by the U.S.
Nuclear Regulatory Commission and the U.S. Environmental
Protection Agency ("EPA") and reclamation activities are
proceeding on schedule and within budget. Site reclamation is
scheduled to be completed by the end of 1997. Also, one of the
Company's manufacturing subsidiaries, Chemical Dynamics, Inc. is
negotiating with the State of Texas environmental authorities
regarding a number of environmental matters at the subsidiary's
facilities, which were acquired in 1990. Based on the results
of a recent arbitration, the former owner of the subsidiary will
be responsible for two-thirds of future site assessment and any
related remediation costs. Accordingly, the Company does not
believe that costs incurred in connection with these matters
will have a material adverse impact on the financial condition
of the Company.
During 1993, the State of New Mexico passed the New Mexico
Mining Act ("Act"), which imposes certain reclamation and other
regulatory obligations on operators of existing and new mining
operations. A number of mines operated by the Company's
subsidiary, United Nuclear Corporation, at various times during
the period 1970 through 1982 may be covered by the Act. It is
<PAGE>
<PAGE> 25
impossible to determine, based on the provisions of the Act and
regulations issued by the State, the extent to which these mines
may be covered by the Act and, if covered, to estimate the cost
of remediation or the timing and extent of remedial action which
may be required.
Based on the Company's assessment of the matters described
above, the Company does not believe that costs and expenses to
be incurred by the Company in connection with these and other
environmental matters will have a material adverse impact on the
Company. For further details with respect to environmental
matters, see Note 10 of Notes to Consolidated Financial
Statements.
Impact of Inflation
The Company believes that inflation did not have a material
effect on the results of operations or financial condition in
1994.
<PAGE>
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
UNC Incorporated and Subsidiaries
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts)
Year Ended December 31,
------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Sales and operating revenues $525,833 $438,293 $365,152
Costs and expenses
Costs and operating expenses 444,375 360,869 294,489
Selling, general and administrative
expenses 69,768 53,987 45,283
Restructuring charge 58,706
Multi-employer pension plan
withdrawal charge 14,000
-------- -------- --------
586,849 414,856 339,772
Operating income (loss) (61,016) 23,437 25,380
Other income (expense)
Interest income 67 396 331
Interest expense (18,549) (13,865) (11,431)
Other (1,917) (2,217) (1,429)
-------- -------- --------
(20,399) (15,686) (12,529)
-------- -------- --------
Earnings (loss) before income taxes and
extraordinary item (81,415) 7,751 12,851
Income tax benefit (provision) 13,483 3,843 (1,482)
-------- -------- --------
Earnings (loss) before extraordinary
item (67,932) 11,594 11,369
Extraordinary item - early retirement
of debt, net of income taxes (532)
-------- -------- --------
Net earnings (loss) $(67,932) $ 11,062 $ 11,369
======== ======== ========
Earnings (loss) per share
Earnings (loss) before extraordinary
item $ (3.89) $ .67 $ .66
Extraordinary item (.03)
-------- -------- --------
Net earnings (loss) $ (3.89) $ .64 $ .66
======== ======== =========
</TABLE>
<PAGE>
<PAGE> 27
UNC Incorporated and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts)
December 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
Assets
Current assets
Cash $ 2,619 $ 1,494
Accounts receivable, less allowance
for doubtful accounts of $3,706
and $6,366, respectively 89,279 91,058
Unbilled costs and accrued profits on
contracts in progress 14,097 28,384
Inventories 85,110 109,766
Assets held for sale 49,174
Other 8,168 18,378
-------- --------
Total current assets 248,447 249,080
Assets held for sale-noncurrent 2,300 20,600
Property, plant and equipment, at cost
Land, buildings and improvements 22,081 27,073
Machinery and equipment 51,397 71,995
-------- --------
73,478 99,068
Less accumulated depreciation and amortization 28,789 32,037
-------- --------
Net property, plant and equipment 44,689 67,031
Cost in excess of net assets of acquired
companies, less accumulated amortization
of $23,397 and $19,257, respectively 140,128 141,718
Other noncurrent assets 32,470 27,704
-------- --------
Total assets $468,034 $506,133
======== ========
</TABLE>
<PAGE>
<PAGE> 28
UNC Incorporated and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Dollars in thousands except per share amounts)
December 31,
--------------------
1994 1993
-------- --------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $ 42,971 $ 6,529
Accounts payable 38,918 38,625
Income taxes 3,521 2,062
Accruals and other current liabilities 62,863 51,664
-------- --------
Total current liabilities 148,273 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 2,352 5,254
-------- --------
Total long-term debt, less current portion 171,352 190,754
Other noncurrent liabilities 49,512 51,013
-------- --------
Total liabilities 369,137 340,647
Shareholders' equity
Series preferred stock, par value $1 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
18,242,134 and 18,085,334 shares, respectively 3,648 3,617
Additional paid-in capital 122,940 121,746
Retained earnings (deficit) (17,373) 50,559
-------- --------
109,215 175,922
Less
Treasury stock, at cost (700,000 shares) 8,750 8,750
Minimum pension liability adjustment 540 1,345
Unearned compensation - restricted stock 1,028 341
-------- --------
Total shareholders' equity 98,897 165,486
-------- --------
Total liabilities and shareholders' equity $468,034 $506,133
======== ========
</TABLE>
<PAGE>
<PAGE> 29
UNC Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Dollars in thousands)
Year Ended December 31,
------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings (loss) $(67,932) $ 11,062 $ 11,369
Adjustments to reconcile net earnings (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 12,727 11,477 10,378
Provision for pension withdrawal liability 14,000
Provision for restructuring 58,706
Provision for losses on accounts receivable 4,296 1,602 2,450
Income from leveraged lease (2,475) (1,263)
Deferred income taxes (benefit) (14,587) (5,258) 1,440
Gain on disposition of assets and other (350) (583) (6)
Extraordinary loss on retirement of debt 625
Changes in assets and liabilities, net of
effect of acquisitions and divestitures:
(Increase) decrease in accounts receivable (4,228) 33 (1,417)
Decrease in receivable from litigation
settlement 67,500
(Increase) decrease in unbilled costs and
accrued profits on contracts in progress 14,065 (8,974) (2,609)
(Increase) in inventories (19,665) (9,082) (5,238)
(Increase) decrease in other current assets 5,688 (7,111) 1,333
(Increase) decrease in other noncurrent assets 389 (640) (4,497)
Increase (decrease) in accounts payable 341 (3,408) (6,026)
Increase (decrease) in accruals and other
current liabilities (10,255) 5,855 (2,384)
Increase (decrease) in income taxes payable 1,459 1,195 (14,629)
(Decrease) in other noncurrent liabilities (6,559) (1,446) (1,429)
(Decrease) in discontinued operations
liabilities (5,115) (5,721) (4,986)
-------- -------- --------
Total adjustments 48,437 (22,699) 39,880
-------- -------- --------
Net cash and short-term investments provided
(used) by operating activities (19,495) (11,637) 51,249
-------- -------- --------
</TABLE>
<PAGE>
<PAGE> 30
UNC Incorporated and Subsidiaries
Consolidated Statements of Cash Flows (Cont.)
<TABLE>
<CAPTION>
(Dollars in thousands)
Year Ended December 31,
------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from investing activities:
Net proceeds from sale of assets 11,713 10,843 4,738
Additions to property, plant and equipment (10,299) (11,250) (6,602)
Acquisition of subsidiaries, net of cash acquired (4,911) (48,477) (7,741)
Proceeds from sale of leveraged lease 6,758
Investment in leveraged lease (2,697)
Other transactions, net 39 1 11,072
-------- -------- --------
Net cash and short-term investments provided
(used) by investing activities 3,300 (51,580) 1,467
-------- -------- --------
Cash flows from financing activities:
Additions to debt 201,085 228,632 204,500
Reductions in debt (184,045) (265,966) (256,719)
Issuance of 9 1/8% Senior Notes 100,000
Exercise of stock options 280 77 231
-------- -------- --------
Net cash and short-term investments
provided (used) by financing activities 17,320 62,743 (51,988)
-------- -------- --------
Net increase (decrease) in cash 1,125 (474) 728
Cash at beginning of year 1,494 1,968 1,240
-------- -------- --------
Cash and short-term investments at end of year $ 2,619 $ 1,494 $ 1,968
======== ======== ========
</TABLE>
<PAGE>
<PAGE> 31
UNC Incorporated and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained
Shares Par Value Capital Earnings Other Total
---------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1991 17,839,484 $ 3,568 $ 120,546 $ 28,128 $ (8,750)* $143,492
Net earnings 11,369 11,369
Award of restricted
stock under the
employees' stock plan 113,000 22 525 547
Exercise of stock
options 49,850 10 221 231
---------- --------- ---------- -------- -------- --------
Balance at
December 31, 1992 18,002,334 3,600 121,292 39,497 (8,750) 155,639
Net earnings 11,062 11,062
Award of restricted
stock under the
employees' stock plan 65,000 13 381 394
Exercise of stock
options 18,000 4 73 77
Minimum pension
liability adjustment (1,345) (1,345)
Unearned compensation -
restricted stock (341) (341)
---------- --------- ---------- -------- -------- --------
Balance at
December 31, 1993 18,085,334 3,617 121,746 50,559 (10,436) 165,486
Net loss (67,932) (67,932)
Award of restricted
stock under the
employees' stock plan 97,000 19 926 945
Exercise of stock
options 59,800 12 268 280
Minimum pension
liability adjustment 805 805
Unearned compensation -
restricted stock (687) (687)
---------- --------- ---------- -------- -------- --------
Balance at
December 31, 1994 18,242,134 $ 3,648 $ 122,940 $(17,373) $(10,318) $ 98,897
========== ========= ========== ======== ======== ========
</TABLE>
*Treasury Stock
<PAGE>
<PAGE> 32
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
------------------------------------------
(a) Basis of Presentation. The accompanying financial
statements include the accounts of UNC Incorporated and its
subsidiaries ("the Company") after elimination of all
significant intercompany accounts and transactions. Certain
prior year amounts have been reclassified to conform to the 1994
presentation.
(b) Long-Term Contracts. Revenues under fixed-price
production contracts are primarily recognized under the
percentage-of-completion method and are measured principally on
a cost-to-cost basis. Cost estimates are reviewed periodically
as the work progresses, and adjustments to revenues are
reflected in the period in which revisions to such estimates are
deemed necessary. Revenues under fixed rate per hour service
contracts are recognized as services are performed based on
actual hours incurred under the contracts. Performance award
fees incorporated in certain government contracts are recognized
when there is sufficient information to assess expected contract
performance. Provisions for estimated losses on contracts are
recorded when identified.
(c) Inventories. Valuation of inventories is at the lower of
cost or market, utilizing the first-in, first-out and average
cost methods.
(d) Depreciation and Amortization. The Company's property,
plant and equipment are depreciated and amortized over their
estimated useful lives by the straight-line method, using
periods ranging from 10 to 30 years for buildings and
improvements and from 3 to 10 years for machinery and equipment.
(e) Cost in Excess of Net Assets of Acquired Companies. The
excess of acquisition cost over the fair value of tangible and
identifiable intangible net assets of acquired companies at date
of acquisition is amortized on a straight-line basis over
periods ranging from 10 to 40 years. The Company assesses the
recoverability of cost in excess of net assets of acquired
companies by determining whether the amortization of this
intangible asset over its remaining life can be recovered
through estimated future operating cash flows.
(f) Pension Plans and Postretirement Benefits. Substantially
all non-union employees of the Company are covered under defined
contribution plans. The cost of these plans is a fixed
percentage of the participants' eligible compensation. In
addition, the Company provides benefits to a limited number of
<PAGE>
<PAGE> 33
active and retired employees under an unfunded contributory
defined benefit post retirement health care plan. Also, the
Company participates in a multi-employer defined benefit pension
plan for certain active and retired union employees. The
Company's policy is to fund these benefits in accordance with
the provisions of the collective bargaining agreement.
(g) Income Taxes. Effective January 1, 1993, the Company
adopted Financial Accounting Standards No. 109, Accounting for
Income Taxes ("SFAS No. 109"). Under SFAS No. 109, deferred
income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets
and liabilities. Additionally, the benefits from utilization of
net operating loss carryforwards affects the income tax
provision of continuing and discontinued operations. Investment
tax credits are accounted for using the flow-through method.
There was no cumulative effect of adopting SFAS No. 109 on the
consolidated financial statements.
(h) Earnings Per Share. The calculation of earnings per share
of common stock is based on the weighted average number of
shares outstanding, assuming the exercise of stock options where
the impact is dilutive.
2. Restructuring
-------------
In the second quarter of 1994, the Company recorded a
restructuring charge of $58.7 million ($47.0 million after-tax)
in connection with a strategic program to reduce its cost
structure and asset base in light of the continuing depressed
economic conditions in the aviation industry. The restructuring
charge consisted of $42.3 million to cover the closing of a
facility, the sale and disposition of two other businesses, the
consolidation of two other plants, and the downsizing of other
facilities. The balance of the charge of $16.4 million related
primarily to the write down to estimated realizable value of
certain inventory and under utilized property, plant and
equipment that was identified for sale.
In order to improve the future performance of its engine
overhaul operations the Company closed its engine overhaul
facility in Burbank, California and consolidated its engine
overhaul business at its facilities in Millville, New Jersey and
Miami, Florida. The restructuring charge includes accruals for
closure of this facility as well as severance and related costs.
Under this program the Company also positioned 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 which was sold in
December 1994.
<PAGE>
<PAGE> 34
3. Acquisitions
------------
During 1993 and 1992, the Company acquired the entities
described below, which were accounted for by the purchase method
of accounting. The results of operations of the acquired
companies are included in the Company's statement of earnings
for the periods in which they were owned by the Company.
In April 1993, the Company acquired substantially all of the
assets and technology, and assumed certain liabilities of Artex
Tool Corporation and Stockton Enterprises (collectively "Artex")
for $5.2 million which was funded through a borrowing under the
Company's revolving credit agreement. Artex is engaged in the
remanufacture and repair of aircraft engine gear box housings,
wheels and other aircraft and engine parts and accessories.
Following its acquisition this operation was renamed UNC Artex.
Under the terms of the purchase agreement, the Company may be
required to make additional payments of up to $1.2 million,
contingent upon Artex achieving certain profit levels during the
three year period ending May 1, 1996. The excess of the
purchase price over the estimated fair value of the tangible and
identifiable intangible net assets acquired is amortized over a
period of twenty-five years using the straight-line method. Any
future amounts earned under the terms of this agreement will be
recorded as additional cost in excess of net assets of acquired
companies.
In July 1993, the Company acquired substantially all of the
assets and technology, and assumed certain liabilities of
Johnson Technology ("Johnson"), a division of Freedom Forge
Corporation for $14.5 million in cash and $4 million in notes,
payable in annual installments through July 1997. The cash
portion of the purchase price was funded from proceeds received
from the sale of 9 1/8% Senior Notes (see Note 7 of Notes to
Consolidated Financial Statements). Johnson provides
proprietary turbine nozzle and vane manufacturing and repairs,
and specialized non-conventional machining of super alloys such
as electro-chemical deep hole drilling, laser milling, and
electro-discharge machining. Following its acquisition, this
operation was renamed UNC Johnson Technology. Under the terms
of the purchase agreement, the Company may be required to make
additional payments contingent upon Johnson achieving certain
gross profit levels during a five year period ending in
September 1998 of up to $5 million of which $1.0 million was
paid in the fourth quarter of 1994. The excess of the purchase
price over the estimated fair value of the tangible and
identifiable intangible net assets acquired is amortized over a
period of forty years using the straight-line method. Any
future amounts earned under the terms of this agreement will be
recorded as additional cost in excess of net assets of acquired
companies.
<PAGE>
<PAGE> 35
In August 1993, the Company acquired the assets and technology
and assumed certain liabilities of All Fab, Inc. ("All Fab") an
aerostructure supplier for a major airframe manufacturer. All
Fab serves the aviation industry as a manufacturer of major
aircraft structural components and sheet metal sub-assemblies.
Following its acquisition, this operation was renamed UNC
Aerostructures, Washington. The purchase price consisted of
$2.7 million in cash and $3.1 million in notes. The notes
consist of a $1.8 million note bearing interest at 8% and a
$1.3 million note bearing interest at the prime rate plus one
half of one percent and payable in variable installments through
December 1998. The excess of the purchase price over the
estimated fair value of the tangible and identifiable intangible
net assets acquired is amortized over a period of forty years
using the straight-line method.
In August 1993, the Company acquired substantially all the
assets and technology, and assumed certain liabilities of
Metcalf Servicing Company ("Metcalf") for $4.5 million in cash
and the Company elected to retire $1.3 million of bank
indebtedness of Metcalf. Metcalf serves the industrial turbine
engine market with overhauls, parts repair and contract
maintenance services. Following its acquisition, this operation
was renamed UNC Metcalf Servicing, Inc. The excess of the
purchase price over the estimated fair value of the tangible and
identifiable intangible net assets acquired is amortized over a
period of twenty-five years using the straight-line method.
In October 1993, the Company acquired substantially all the
assets and assumed certain liabilities of Lear Siegler
Management Services Corp. ("Lear Siegler"). Lear Siegler
provides contract services for the operation, maintenance and
repair of aircraft, land vehicles and marine vehicles for the
U.S. Department of Defense and the armed services of foreign
governments. Following its acquisition, this operation was
renamed UNC Lear Siegler. The purchase price was $17.4 million.
The excess of the purchase price over the estimated fair value
of the tangible and identifiable intangible net assets acquired
is amortized over a period of twenty-five years using the
straight-line method.
Under the terms of the earn-out provisions of agreements
related to acquisitions prior to 1992, the Company paid
$3.7 million in 1994, $3.7 million in 1993, and $3.7 million in
1992.
<PAGE>
<PAGE> 36
4. Contracts in Progress
---------------------
Unbilled costs and accrued profits on production contracts in
progress consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------
(Dollars in thousands) 1994 1993
-------- --------
<S> <C> <C>
U.S. government contracts and
subcontracts:
Costs incurred and accrued profits
on contracts in progress $ 14,192 $ 22,826
Less progress billings to date 7,389 8,974
-------- --------
Unbilled costs and accrued profits
on contracts in progress 6,803 13,852
Commercial contracts:
Costs incurred and accrued profits
on contracts in progress 7,294 14,532
-------- --------
Total unbilled costs and accrued
profits on contracts in progress $ 14,097 $ 28,384
======== ========
</TABLE>
Amounts billed under contracts in progress and included in
accounts receivable at December 31, 1994 were $3.1 million under
U.S. government prime and subcontracts and $2.2 million under
commercial contracts. At December 31, 1993 these amounts were
$4.4 million and $3.0 million, respectively. Also, included in
accounts receivable at December 31, 1994 and 1993, were other
amounts due from the U.S. government totaling $42.2 million and
$31.0 million, respectively, including unbilled amounts of
$18.3 million and $17.1 million in 1994 and 1993, respectively.
Unbilled amounts are recoverable from the customer upon
shipment of the product, presentation of bills or completion of
the contract. The Company believes that a substantial portion
(approximately 80%) of these unbilled amounts will be collected
in 1995.
Included in unbilled costs at December 31, 1994 and 1993 is
$2.0 million of cost applicable to a $3.2 million claim for
equitable adjustment filed by the Company under a contract with
the U.S. government. The claim, which includes direct costs,
overhead, general and administrative costs and profit, arises
from constructive change orders on the part of the government,
defective specifications, government caused delays and other
<PAGE>
<PAGE> 37
issues in connection with a contract to provide aircraft nozzle
segment assemblies to the U.S. Air Force. The Company has been
advised by outside legal counsel that a basis for entitlement
exists and that recovery of the recorded amount of the claim is
probable.
Also included in unbilled costs at December 31, 1994 and 1993
is a claim for $630,000 which the Company believes was
improperly withheld by the U.S. government in connection with a
contract to provide aircraft intermediate level maintenance,
repair and overhaul services at six Naval Air Stations. The
claim arises from the U.S. government unilaterally imposing a
previously undisclosed conversion formula to the determination
of the amount earned, contrary to contract terms. In December
1993 the Company received a favorable ruling on the claim from
the Armed Services Board of Contract Appeals which overturned
the government's previous position and instructed the government
to reconsider the matter. The Company believes it will prevail
in realizing the amount of the claim that has been recorded in
accordance with the terms of the contract.
5. Inventories
-----------
Inventories as of December 31, 1994 and 1993, consist of the
following:
December 31,
(Dollars in thousands) 1994 1993
-------- --------
Component parts and materials $ 61,282 $ 84,016
Work in progress 21,161 23,429
Supplies 2,667 2,321
-------- --------
$ 85,110 $109,766
======== ========
6. Assets Held for Sale
--------------------
Assets held for sale which are stated at their estimated net
realizable value consist principally of the real estate,
facilities and certain inventories of the Company's former
engine overhaul business which was closed in 1994, the
facilities and inventories of its chemical milled aircraft and
engine components facility in Weatherford, Texas which has been
positioned for sale or disposition and certain other inventory
and under-utilized property and equipment that has been
identified for sale. It also includes the real estate and
facilities of the Company's discontinued submarine propulsion
manufacturing and minerals segments. The Company expects to
recover the recorded value of these assets during 1995 except
for $2.3 million which has been classified as noncurrent.
<PAGE>
<PAGE> 38
7. Long-Term Debt
--------------
<TABLE>
<CAPTION>
December 31,
---------------------
(Dollars in thousands) 1994 1993
-------- --------
<S> <C> <C>
Revolving Senior Bank Debt,
prime plus 1/2% due 1995 $ 40,000 $ 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 5,323 11,783
-------- --------
214,323 197,283
Less: Current portion 42,971 6,529
-------- --------
$171,352 $190,754
======== ========
</TABLE>
The Company has a revolving credit agreement which provides
for a credit line through July 1995. The borrowing capacity on
this line as of December 31, 1994 was $75 million, reduced by
outstanding letters of credit which aggregated $15.5 million.
The Company's unused availability under the agreement was
$19.5 million at December 31, 1994. Interest payable on the
borrowings is prime-based with decreasing rates available based
on the Company's performance under certain covenants and at
December 31, 1994 was 9%. The Company has agreed to pay an
annual commitment fee of 1/2 of 1% on the unused portion of the
line and certain other fees. The revolving credit is
collateralized by the Company's accounts receivable and
inventories. The agreement contains covenants which, among
other things, include provisions for the maintenance of certain
financial ratios and limitations on the sale of assets and
prohibits the payment of cash dividends. As a result of
restructuring, the Company was out of compliance under certain
loan covenants of its revolving credit agreement which were
amended by the lending banks. The Company is currently in
discussions with several lenders concerning a new medium term
revolving credit facility. The Company anticipates closing on
a new line of credit in April 1995.
On July 29, 1993 the Company issued $100.0 million of 9 1/8%
Senior Notes due July 15, 2003. The Notes are redeemable on or
after July 15, 1998 at the option of the Company at declining
premiums through 2000 and at principal amount thereafter. The
debt indenture contains certain covenants which, among other
things, allow additional borrowings based on certain financial
ratios and restrict the payment of cash dividends.
<PAGE>
<PAGE> 39
The 7 1/2% Convertible Subordinated Debentures due 2006 are
convertible into shares of the Company's common stock at a
conversion price of $15.40 per share and are redeemable (subject
to certain restrictions) at the option of the Company at
declining premiums through 1996 and at the principal amount
thereafter. Annual sinking fund payments of $4.2 million
commence in 1996.
Included in other assets at December 31, 1994 and 1993,
respectively, was approximately $3.9 million and $4.3 million of
unamortized issue costs incurred in connection with the issuance
of the 9 1/8% Senior Notes and the 7 1/2% Convertible
Subordinated Debentures.
Annual maturities of long-term debt during the next five years
are as follows: 1995, $42,971,000; 1996, $5,317,000; 1997,
$5,317,000; 1998, $4,318,000; 1999, $4,200,000.
The estimated fair values of the 7 1/2% Convertible
Subordinated Debentures, and the 9 1/8% Senior Notes, based on
quoted market prices, were approximately $53.2 million and
$89.0 million at December 31, 1994 and $65.6 million and
$103.0 million at December 31, 1993. The Company believes that
the carrying amount of its remaining debt approximates fair
value.
8. Other Liabilities
-----------------
Accruals and other current liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
(Dollars in thousands) 1994 1993
-------- --------
<S> <C> <C>
Multi-employer pension plan liability $ 3,000
Pension plans 2,910 $ 2,405
Payroll and related expenses 26,807 26,652
Accrued interest 6,473 5,817
Accruals related to discontinued operations 4,671 4,228
Accruals related to restructuring 7,812
Other 11,190 12,562
-------- --------
$ 62,863 $ 51,664
======== ========
</TABLE>
At December 31, 1994 and 1993, other noncurrent liabilities
include approximately $16.0 million and $21.6 million,
respectively, of accruals related to discontinued operations,
including amounts accrued for environmental remediation
activities of approximately $14.0 million at December 31, 1994.
<PAGE>
<PAGE> 40
9. Preferred Stock Purchase Rights
-------------------------------
On September 25, 1987, the Board of Directors of the Company
declared a dividend of one Preferred Share Purchase Right for
each share of common stock outstanding on October 19, 1987.
Each Right entitles the holder to acquire one one-hundredth of
a share of newly created Series A Junior Participating Preferred
Stock at an exercise price of $50 per one one-hundredth of a
Preferred Share. The Rights trade with the common stock and are
not exercisable or transferable apart from the common stock
until 10 days after a person or group acquires, or announces a
tender offer for 20% or more of the Company's outstanding common
stock.
If the Company is acquired in a merger or other business
combination, each Right will entitle its holder to purchase, at
the Right's then-current exercise price, a number of the
acquiring company's shares having a market value at that time of
twice the Right's exercise price. In addition, if someone
acquires 20% or more of the Company's outstanding common stock,
each Right will entitle its holder (other than the acquiring
person) to purchase, at the Right's then-current exercise price,
a number of the Company's common shares having a market value of
twice the Right's exercise price.
Prior to the acquisition by someone of beneficial ownership
of 20% or more of the Company's common stock, the Rights are
redeemable for $.01 per Right either at the option of the Board
of Directors or automatically in connection with the
consummation of any tender offer at a cash price per share equal
to or greater than the price approved by stockholders at a
special meeting which would be called under certain
circumstances in accordance with procedures contained in the
Rights Plan. The Rights expire on October 19, 1997.
10. Litigation and Contingencies
----------------------------
For several years the Company has had a contract claim
outstanding against the U.S. Navy for costs incurred in
connection with new wage determinations issued by the U.S.
Department of Labor and incorporated into a U.S. Navy contract.
The company had recorded $2.0 million of revenue in connection
with this claim in 1993. In September 1994, the Company and the
U.S. Navy agreed to settle the claim pursuant to which the
Company was paid $2,050,000.
<PAGE>
<PAGE> 41
During 1993, the State of New Mexico passed the New Mexico
Mining Act ("Act"), which imposes certain reclamation
obligations on owners and operators of existing and new mining
operations. The State has asserted that a number of mines
operated by the Company's subsidiary, United Nuclear Corporation
("United Nuclear"), at various times during the period 1970
through 1982 may be covered by the Act. Regulations for
compliance with the
Act were issued in 1994. However, the regulations did not
clarify the extent to which mines previously operated by United
Nuclear may be covered by the Act. The Company has been advised
by outside counsel that United Nuclear's defenses have merit,
and it is contesting the State's assertions.
One of the Company's manufacturing subsidiaries, Chemical
Dynamics, Inc., is negotiating with Texas environmental
authorities regarding a number of environmental matters at the
subsidiary's facilities, which were acquired in 1990. Based on
the results of a recent arbitration against the former owner,
the subsidiary has been awarded a substantial portion of
remediation and compliance costs it has incurred, and the former
owner of the subsidiary will be responsible for two-thirds of
future site assessment and any related remediation costs.
Accordingly, the Company does not believe that costs incurred in
connection with these matters will have a material adverse
impact on the financial condition of the Company.
A subsidiary of the Company, UNC Nuclear Industries, Inc.
("UNI"), is one of several corporate defendants in a
consolidated legal action commenced in U.S. District Court for
the Western District of Washington in 1990, alleging that the
defendants, as government contractors with the U.S. Department
of Energy ("DOE") at the Hanford Nuclear Reservation, caused
property damage and personal injuries by releases of toxic and
radioactive substances into the environment since approximately
1945. Effective October 1, 1994, DOE has entered into an
agreement with UNI whereby UNI, at the direction of DOE,
transferred defense of the case to a single defendant contractor
and its outside counsel, and DOE has expressly agreed to
indemnify UNI in respect of any liability arising from the
litigation.
A uranium mill and mill tailings facility of a subsidiary of
the Company, United Nuclear, located in Church Rock, New Mexico
was placed on the National Priorities List by the U.S.
Environmental Protection Agency ("EPA") in 1982, pursuant to the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"). EPA issued an Administrative Order in
1989 requiring remediation of ground water on or adjacent to the
site that is the same as those contained in the reclamation plan
<PAGE>
<PAGE> 42
submitted to the Nuclear Regulatory Commission ("NRC") in 1988
by United Nuclear in accordance with its license with the NRC.
United Nuclear has been remediating the site in accordance with
the Administrative Order and the NRC license and the Company
believes that it has adequately accrued in the accompanying
balance sheet the reclamation and remediation cost presently
anticipated at the Church Rock facility.
Individual subsidiaries of the Company have been named under
CERCLA, along with a number of other parties, as a Potentially
Responsible Party at several waste disposal sites. The Company
believes that the cost associated with the cleanup of certain of
these sites will be recoverable under U.S. government contracts
and the cost associated with the other sites will not have a
material adverse effect on the Company.
On April 8, 1992, the Federal Communications Commission
("FCC") took steps to continue a proceeding with respect to
retrospective rates charged by the former Western Union to
several carriers, including TRT Communications, Inc. ("TRT"), a
former subsidiary of the Company. In January 1995, after a 1988
remand from a federal appeals court which vacated an earlier
determination by the FCC with respect to such rates on the
ground that there was no legal basis for it, the FCC determined
that the rates being sought by the former Western Union are
appropriate. If such determination were upheld following an
appeal, the amount that would be payable by TRT, and indemnified
by the Company to the purchaser of TRT, including interest to
February 6, 1995, would be approximately $4.6 million. Outside
counsel to the Company has opined that the likelihood of
recovery by the former Western Union against TRT is remote.
The Company is involved in litigation with respect to a
promissory note issued by the Company in July 1981 in connection
with the acquisition of Normco Contractors, Inc. ("Normco"), a
former subsidiary of the Company that was discontinued in 1984
and sold in 1985. The plaintiff, a former owner of Normco, has
brought this action to obtain payment of $2.2 million allegedly
due under the note. The Company did not make payment on the
note because the Company believes that, under the terms of the
note and the related purchase agreement, payment was contingent
upon Normco attaining certain operating profit levels that were
not achieved during the period it was in operation. The
plaintiff's motion for summary judgment was granted in March
1992. However, in July 1993 the appellate court reversed and
remanded the case for trial. Following trial, in April 1994, a
jury verdict was rendered in plaintiff's favor for the amount of
the note, interest and attorney's fees. The Company has
appealed the verdict on the ground of prejudicial conduct by the
trial judge as well as on legal grounds that are essentially the
same as those argued in its previous successful appeal. While
<PAGE>
<PAGE> 43
the ultimate outcome of this litigation cannot be determined at
this time, the Company continues to believe that it has
meritorious defenses with respect to any liability under the
note.
In 1986 the Company sold a subsidiary, National Automatic Tool
Company to NATCO, Inc. for cash and notes secured by the assets
of the former subsidiary. NATCO Inc. subsequently defaulted on
the notes and the Company in 1990 exercised its rights under its
security interest and the assets of NATCO Inc. were surrendered
to the Company and liquidated. A Trustee in bankruptcy for
NATCO Inc. subsequently filed an action against the Company
seeking, among other things, to set aside the transfer of the
assets. In August 1994, the Company settled this action by
payment of $68,000 to the Trustee.
The Company and a subsidiary, UNC Airwork Corporation, are
defendants in litigation commenced in New York by Energy
Services, Inc. ("ESI") seeking $3.4 million in alleged contract
damages relating to a proposal to provide and install electrical
generating and other related equipment for a third party. The
Company and Airwork believe they have meritorious defenses to
ESI's claims. Airwork has filed a counterclaim against ESI and
an affiliate, Energy Maintenance Corporation ("EMC") for more
than $1.7 million. In December 1994, the trial court granted
Airwork's motion for partial summary judgment against EMC, on a
separate claim, in the amount of $458,000. Additional motions
for summary judgment are pending. The Company believes it
probable that EIS and an affiliate will be found liable for
Airwork's remaining claims, and that any recovery against the
Company and Airwork is remote.
In June 1992, the Company sold substantially all of the
operating assets and technology of Alloy Spot Welders ("Alloy")
for $3.4 million, which approximated the Company's investment in
Alloy. The sales price consisted of $1.0 million in cash and
$2.4 million in notes, payable over five years and
collateralized by the assets of the business. The purchaser of
Alloy filed for protection under Chapter 11 of the Federal
Bankruptcy Code in December 1993. Upon emerging from bankruptcy
in December 1994, Alloy's obligations to the Company were
settled.
The Company and its subsidiaries are also parties to various
other legal actions and administrative proceedings and subject
to various claims arising in the ordinary course of business.
The Company believes that the disposition of these matters will
not have a material adverse effect on the financial position of
the Company.
<PAGE>
<PAGE> 44
11. Income Taxes
------------
During 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 109 (SFAS No.
109), "Accounting for Income Taxes" which supersedes SFAS No.
96. Similar to SFAS No. 96, SFAS No. 109 retains an asset and
liability approach to accounting for income taxes. This
standard also requires recognition of income tax benefits for
loss carryforwards, credit carryforwards and certain temporary
differences for which tax benefits have not previously been
recorded. The tax benefits recognized must be reduced by a
valuation allowance where it is more likely than not that the
benefits may not be realized. The Company adopted SFAS No. 109
as of January 1, 1993. There was no cumulative effect of this
change in accounting for income taxes on the consolidated
financial statements.
<TABLE>
<CAPTION>
The income tax provision for continuing operations consists of the
following:
Year Ended December 31,
--------------------------------
(Dollars in thousands) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Federal: Current $ 103 $ 396 $ (1,668)
Deferred (14,230) (5,664) 1,557
-------- -------- --------
(14,127) (5,268) (111)
State: Current 1,001 1,019 1,710
Deferred (357) 406 (117)
-------- -------- --------
644 1,425 1,593
-------- -------- --------
Total tax provision (benefit) $(13,483) $ (3,843) $ 1,482
======== ======== ========
</TABLE>
<PAGE>
<PAGE> 45
The tax provision for continuing operations differs from the
amount computed using the statutory federal income tax rate as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
(Dollars in thousands) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Tax expense (benefit) at statutory rate $(27,681) $ 2,635 $ 4,370
Amortization and write-off of cost in excess of
net assets of acquired companies 1,009 1,019 1,008
State taxes, net of federal tax benefit
and reduction of state tax accrual 425 1,238 566
Utilization of net operating loss carryforwards (4,353)
Change in the valuation allowance for deferred
tax assets 13,692 (8,242)
Foreign sales tax benefits (381) (302)
Other (547) (191) (109)
-------- -------- --------
Tax expense (benefit) at actual rate $(13,483) $ (3,843) $ 1,482
======== ======== ========
</TABLE>
<PAGE>
<PAGE> 46
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1994 and 1993 are presented below.
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993
-------- --------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts $ 503 $ 2,270
Inventories, principally due to additional cost
inventoried for tax purposes and financial
statement allowances 1,666 5,199
Employee benefits, principally due to accrual
for financial reporting purposes 11,264 5,788
Accrual for costs of restructuring 12,112
Accrual for disposal of discontinued operations 5,820 7,914
Net operating loss carryforward 14,540
Alternative minimum tax credit carryforwards 1,730 2,528
General business credit carryforwards 1,552
Other 4,549 4,389
-------- --------
Total gross deferred tax assets 52,184 29,640
Less - valuation allowance (17,041) (3,349)
-------- --------
Net deferred tax assets 35,143 26,291
-------- --------
Deferred tax liabilities:
Plant and equipment, principally due to basis
differences (8,617) (12,454)
Contract income recognized for financial
reporting purposes (1,232) (3,570)
Other (320) (367)
-------- --------
Total gross deferred tax liabilities (10,169) (16,391)
-------- --------
Net deferred tax asset $ 24,974 $ 9,900
========= ========
</TABLE>
<PAGE>
<PAGE> 47
The change in the valuation allowance for the twelve months
ended December 31, 1994 was an increase of $13,692,000,
resulting from the Company's evaluation of the realizability of
future income tax benefits.
At December 31, 1994 and 1993, other current assets include
net deferred tax assets of approximately $3.2 million and
$6.8 million and other noncurrent assets include net deferred
tax assets of approximately $21.7 million and $3.1 million,
respectively. Also, at December 31, 1994 and 1993, current
liabilities include $3.5 million and $2.1 million, respectively
of income taxes payable.
The Company has net operating loss carryforwards of
$42,765,000 for regular income tax reporting purposes $8,727,000
of which will expire in 2008 and $34,038,000 of which will
expire in 2009. The Company also has net operating loss
carryforwards of $35,475,000 available for purposes of federal
alternative minimum tax of which $1,454,000 will expire in 2008
and $34,021,000 in 2009. At December 31, 1994 the Company has
alternative minimum tax credit carryforwards of approximately
$1,730,000 which are available to reduce future Federal regular
income taxes over an indefinite period.
12. Incentive Compensation Plans
----------------------------
The Company has stock plans, approved by the shareholders,
which provide for the granting of options and restricted stock
to officers and key employees. Options are granted at no less
than fair market value on the date of grant, become exercisable
in increments, in some instances partially conditioned on the
attainment of specific performance objectives, and expire
between six and ten years from the date of grant.
The 1990 Stock Option Plan for Key Employees, which was
adopted in 1990 and approved by shareholders at the 1991 Annual
Meeting, reserved 1,125,000 shares of common stock, either
previously unissued shares or shares held in treasury, for
issuance upon the exercise of options or as stock appreciation
rights or as restricted stock awards. The exercise of an option
is conditioned upon the holder, (i) purchasing at fair market
value, within ninety days of the grant, stock equal to twenty-
five percent of the number of options granted, and (ii)
continuing as beneficial owner of all such stock through the
time of exercise. Options are granted at no less than fair
market value on the date of grant, expire in ten years and vest
in five annual installments of twenty percent each January 1
following the date of grant. The 1985 stock plan for Key
Employees terminated as of December 31, 1994, and no further
options will be granted under the plan. However, 830,740
options remain outstanding and will be exercisable in future
years in accordance with the terms of the plan.
<PAGE>
<PAGE> 48
As of December 31, 1994, officers and employees eligible under
the 1985 and 1990 plans have purchased 217,375 shares of the
Company's common stock in the open market in order to qualify
under the terms of these plans and held outstanding options to
purchase an additional 1,912,996 shares.
A summary of certain plan information related to stock options
is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
(Number of Shares) 1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Outstanding at beginning of year 1,788,896 1,735,946 1,958,677
Granted 423,000 159,000 62,500
Exercised (59,800) (18,000) (49,850)
Expired or canceled (239,100) (88,050) (235,381)
--------- --------- ---------
Outstanding at end of year 1,912,996 1,788,896 1,735,946
========= ========= =========
Exercisable at end of year 1,126,521 1,281,521 1,075,421
Available for grant at end of year 0 132,470 203,420
Price range of options
Outstanding $ 3.19- $ 3.19- $ 3.19-
9.75 8.63 8.63
Exercised $ 6.57- $ 3.88- $ 3.19-
3.88 5.75 6.06
</TABLE>
13. Pension Plans and Other Postretirement Benefits
-----------------------------------------------
The Company sponsors defined contribution plans that cover
substantially all of its employees. Contributions are based
upon a percentage of the employee's compensation. The cost of
these plans was $2,125,000, $3,283,000 and $2,543,000 in 1994,
1993 and 1992, respectively.
A defined benefit plan is also maintained for a limited number
of union personnel at the Company's Burbank, California overhaul
division. The cost of this plan was $81,000 in 1994, $193,000
in 1993 and $169,000 in 1992. In connection with the
restructuring program in the second quarter of 1994, the Company
recorded a curtailment loss of $460,000 as a result of the
closing of this facility and the termination of the employees
who were covered under this defined benefit plan. The projected
benefit obligation and the fair value of plan assets at December
31, 1994 were $1,461,000 and $1,001,000, respectively. The
weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.25% in
<PAGE>
<PAGE> 49
1994. The expected long-term rate of return on assets was 7.25%
in 1994. Plan assets consist principally of investments in
commercial paper, marketable securities, certificates of deposit
and U.S. government obligations.
A subsidiary of the Company, UNC Airwork Corporation
("Airwork"), has been a participating employer in a multi-
employer pension plan covering its hourly employees who are
members of United Auto Workers ("UAW") Local 2315. The plan is
administered by trustees appointed by the UAW. Airwork has been
making contributions under the plan on the basis of a portion of
its hourly payroll based on collective bargaining, and has
expensed such contributions on a current basis. The Company's
contribution to the plan, as required by the union contract, was
$383,000 in 1994, $313,000 in 1993 and $318,000 in 1992. The
Company anticipates negotiating a new pension arrangement with
the union during 1995.
During 1994, the plan's trustees informed participating
employers that the plan's obligations were substantially
underfunded, that funding deficiencies were incurred in the
previous three plan years, and that a substantial increase in
employer contributions would be required. This underfunded
status of the plan is not a result of Airwork not meeting its
contractual obligations, as Airwork has consistently complied
with its funding responsibilities in accordance with the terms
of the collective bargaining agreement. On January 31, 1995,
the UAW provided participating employers with an amendment to
their respective collective bargaining agreements that would
have the effect of terminating the plan as to each employer
entering into such an amendment and, by doing so, withdrawing
from the plan. Airwork entered into such an amendment,
recognizing that participating employers not withdrawing from
the plan would be liable for underfunding on an ongoing basis,
that under the circumstances most employers would withdraw from
the plan, and that, as probably the largest participating
employer, Airwork's liability could be substantial. As a result
of the UAW's action, and confirming Airwork's expectations,
employers representing approximately 95% of the plan
participants withdrew from the plan on January 31, 1995.
Under the rules and regulations of the Internal Revenue
Service ("IRS") regarding multi-employer plans, all employers
who participate in an underfunded multi-employer plan and
withdraw are assessed a withdrawal liability. Payment of the
withdrawal liability is made over future years while annual
funding deficiencies, if not waived by the IRS, would be paid
at the time the waiver is denied. As a result of its withdrawal
from the plan, Airwork recognized as a non-recurring expense in
1994 its portion of the plan's unfunded liabilities and annual
funding deficiencies which it estimated to be approximately
$14.0 million.
<PAGE>
<PAGE> 50
The Company contributes to another multi-employer plan that
covers approximately 486 employees under a U.S. government
contract for services at Sheppard Air Force Base. The cost for
this plan was $507,000, $712,000 and $224,000 in 1994, 1993, and
1992, respectively. The contract was awarded to the Company in
July 1992.
The Company has non-qualified unfunded supplementary executive
retirement plans covering certain officers and directors for
which the Company has purchased cost recovery life insurance.
The Company is the sole owner and beneficiary of such policies.
The amount of coverage is designed to provide sufficient
revenues to recover substantially all costs of the plans if the
assumptions made regarding mortality experience, policy earnings
and other factors are realized. As of December 31, 1994 and
1993 the projected benefit obligation was $12,972,000 and
$13,003,000, respectively, and the accumulated benefit
obligation was $12,640,000 and $12,589,000, respectively, which
is included in other noncurrent liabilities. The cost of these
plans was $2,280,000, $1,232,000 and $976,000 for 1994, 1993 and
1992, respectively. The discount rate used in determining the
pension liabilities was 8% at December 31, 1994 and 7.25% at
December 31, 1993. At December 31, 1994 the additional minimum
liability exceeded the unamortized transition amount by
$540,000, net of deferred income taxes, at December 31, 1993 the
minimum liability was $1,345,000 net of deferred income taxes.
These amounts have been reflected in the accompanying
consolidated balance sheets as reductions in stockholders'
equity at December 31, 1994 and 1993.
Postretirement health care and life insurance benefits are
provided to a limited number of participating employees who
become eligible for benefits after reaching normal retirement
age while employed by the Company. The plan, which is an
unfunded contributory defined benefit plan, covers less than 8%
of the Company's employees. Effective January 1, 1993, the
Company adopted the provisions of the Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS No. 106
requires the Company to accrue the estimated cost of such
retiree benefits payments, other than pensions, during the
employee's active service period. The Company previously
expensed the cost of these benefits as claims were paid. The
Company is amortizing the unrecognized net loss and unrecognized
transition obligation over 20 years.
<PAGE>
<PAGE> 51
The actuarial and recorded liabilities for the postretirement
health care and life insurance benefits at December 31, were as
follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993
-------- --------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 1,320 $ 1,935
Full eligible active plan participants 48 65
Other active participants 627 466
-------- --------
Total accumulated postretirement benefit
obligation $ 1,995 $ 2,466
Unrecognized net loss (329) (674)
Unrecognized transition obligation (1,437) (1,732)
-------- --------
Accrued postretirement benefit cost $ 229 $ 60
======== ========
</TABLE>
The net periodic postretirement benefit cost for 1994 was
$360,000 and included $76,000 of service cost, $172,000 of
interest and $112,000 amortization of the transition obligation.
The cost for 1993 was $240,000 and included $25,000 of service
costs, $135,000 of interest and $80,000 amortization of the
transition obligation.
For measurement purposes, an 8% and a 7.25% discount rate was
used in determining the accumulated postretirement benefit
obligation as of December 31, 1994 and 1993, respectively.
Also, a 12% annual rate of increase in the per capita cost of
covered health care benefits was assumed for 1994; the rate was
assumed to decrease gradually to 6% for 2002 and remain at that
level thereafter. The health care cost trend rate assumption
has a significant effect on the amounts reported. A 1% increase
in the assumed health care cost trend rates would increase the
accumulated postretirement benefit obligation as of December 31,
1994 by approximately $250,000 and the aggregate of the service
and interest cost components of net periodic postretirement
benefit cost for the year then ended by approximately $40,000.
The Company also contributes in accordance with a union
agreement to a multi-employer health benefit plan for retirees.
The cost of this plan was $1,865,000, $959,000 and $954,000 in
1994, 1993 and 1992, respectively.
<PAGE>
<PAGE> 52
14. Leases
------
In December 1994 the Company sold a McDonnell Douglas DC-10-30
aircraft which had previously been covered under a leveraged
lease. The net proceeds received of $6.8 million approximated
the Company's investment in the lease. Income from the
leveraged lease in 1994 and 1993 was $2.6 million and
$1.3 million, respectively ($1.5 million and $0.8 million net of
income taxes in 1994 and 1993, respectively).
The Company entered into several agreements for the sale and
leaseback of certain equipment which resulted in gains totaling
approximately $2.6 million in 1993. The gains were deferred and
are being credited in income as rent expense adjustments over
the lease terms. The leases are classified as operating leases
and the rental commitments and rental expenses are included in
the following summary.
The Company has noncancellable operating leases covering
certain real property and equipment used in its operations.
Minimum rental commitments under these leases at December 31,
1994, were as follows: 1995, $7,803,000; 1996, $6,324,000; 1997,
$5,192,000; 1998, $4,381,000; 1999, $4,068,000; and thereafter,
$3,488,000. Rental expenses for the years 1994, 1993 and 1992
were $8,720,000, $5,702,000, and $6,147,000, respectively.
15. Cash Flows
----------
Cash payments for income taxes were $0.8 million,
$1.8 million, and $14.1 million in 1994, 1993 and 1992,
respectively. In these years, interest payments were
$17.6 million, $10.7 million and $13.0 million, respectively.
In connection with the acquisition of companies, the Company
assumed liabilities of $44.5 million in 1993 (see Note 3 of
Notes to Consolidated Financial Statements).
16. Business Segment Information
----------------------------
The Company's operations are conducted within one business
segment which includes: the overhaul of aircraft engines,
industrial gas turbine engines, and aircraft accessories, the
manufacture and remanufacture of jet engine and aircraft
components and providing maintenance and training, repair and
logistical contract services.
<PAGE>
<PAGE> 53
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
(Dollars in thousands) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Sales to federal government $223,127 $161,562 $102,049
======== ======== ========
Sales to foreign countries $ 85,667 $ 46,662 $ 36,097
======== ======== ========
Capital additions $ 10,299 $ 11,250 $ 6,602
======== ======== ========
Depreciation and amortization expense $ 12,727 $ 11,477 $ 10,378
======== ======== ========
</TABLE>
17. Quarterly Summary (Unaudited)
-----------------------------
<TABLE>
<CAPTION>
(Dollars in thousands First Second Third Fourth Total
except per share amounts) Quarter Quarter Quarter Quarter Year
--------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994
----------------------------
Revenues $ 138,412 $ 122,326 $ 129,721 $ 135,374 $ 525,833
Operating income (loss) 8,450 (63,746) 5,178 (10,898) (61,016)
Net earnings (loss) 2,462 (54,634) 30 (15,790) (67,932)
Net earnings (loss) per share .14 (3.12) (.90) (3.89)
Year Ended December 31, 1993
----------------------------
Revenues $ 82,971 $ 94,742 $ 105,529 $ 155,051 $ 438,293
Operating income 5,925 7,013 2,228 8,271 23,437
Earnings before extra-
ordinary item 2,215 2,921 3,702 2,756 11,594
Net earnings 2,215 2,921 3,170 2,756 11,062
Earnings per share:
Earnings before extra-
ordinary item .13 .17 .21 .16 .67
Net earnings .13 .17 .18 .16 .64
</TABLE>
See Note 2 for a description of the restructuring charge in
the second quarter of 1994.
See Note 13 for a description of the multi-employer pension
withdrawal adjustment in the fourth quarter of 1994.
See Notes 4 and 10 for a description of amounts recorded
related to certain contract claims against the U.S. government
of $2.0 million in the first quarter and $2.6 million in the
fourth quarter of 1993.
<PAGE>
<PAGE> 54
See Note 11 for a description of a tax benefit of $5.8 million
recorded in the third quarter of 1993.
See Note 14 for a description of income from a leveraged lease
of $1.3 million ($0.8 million net of income taxes) recorded in
the fourth quarter of 1993.
18. Net sales of tangible products in 1994 amounted to $303.6
million and cost and operating expenses related to tangible
goods sold amounted to $244.4 million.
19. Guarantor Subsidiaries
----------------------
In July 1993, the Company issued $100 million principal amount
of 9 1/8% Senior Notes due 2003 (see Note 7 of Notes to
Consolidated Financial Statements). 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.
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 December 31, 1994 and
1993 and for the years ended December 31, 1994, 1993 and
1992 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> 55
UNC INCORPORATED
Condensed Consolidating Balance Sheet
As of December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Assets
------
Current assets:
Cash $ 1 519 $ 1,100 $ 2,619
Accounts receivable, net 640 88,639 89,279
Unbilled costs and accrued
profits on contracts in progress 14,097 14,097
Inventories 85,110 85,110
Assets held for sale 18,449 30,725 49,174
Other 1,168 7,000 8,168
-------- -------- ---------
Total current assets 21,776 226,671 248,447
-------- -------- ---------
Assets held for sale nonrecurrent 2,300 2,300
Property, plant & equipment, net 790 43,899 44,689
Cost in excess of net assets
of acquired companies, net 140,128 140,128
Other noncurrent assets 10,011 22,459 32,470
Investments in and advances
to subsidiaries 304,392 $(304,392)
-------- -------- --------- ---------
Total assets $336,969 $435,457 $(304,392) $ 468,034
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 56
UNC INCORPORATED
Condensed Consolidating Balance Sheet (Cont.)
As of December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt $ 14,400 $ 28,571 $ 42,971
Accounts payable 1,387 37,531 38,918
Accruals and other current liabilities 25,643 40,741 66,384
-------- -------- ---------
Total current liabilities 41,430 106,843 148,273
-------- -------- ---------
Long-term debt 171,000 352 171,352
Other noncurrent liabilities 16,892 32,620 49,512
-------- -------- ---------
Total liabilities 229,322 139,815 369,137
-------- -------- ---------
Common stock and additional paid
in capital 126,588 126,588
Retained earnings (deficit) (17,373) (17,373)
Equity of subsidiaries and
advances of parent 304,392 $(304,392)
-------- -------- --------- ---------
109,215 304,392 (304,392) 109,215
Less:
Treasury stock at cost
(700,000 shares) 8,750 8,750
Minimum pension liability adjustment 540 540
Unearned compensation-restricted
stock 1,028 1,028
-------- -------- --------- ---------
Total shareholders' equity 107,647 295,642 (304,392) 98,897
-------- -------- --------- ---------
Total liabilities and
shareholders' equity $336,969 $435,457 $(304,392) $ 468,034
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 57
UNC INCORPORATED
Condensed Consolidating Balance Sheet
As of December 31, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Assets
-------
Current assets:
Cash & short-term investments $ 857 $ 637 $ 1,494
Accounts receivable, net 1,456 89,602 91,058
Unbilled costs and accrued
profits on contracts in progress 28,384 28,384
Inventories 109,766 109,766
Other 5,334 13,044 18,378
-------- -------- ---------
Total current assets 7,647 241,433 249,080
-------- -------- ---------
Net assets of discontinued operations 18,000 2,600 20,600
Property, plant & equipment, net 3,042 63,989 67,031
Cost in excess of net assets
of acquired companies, net 141,718 141,718
Other noncurrent assets 20,147 7,557 27,704
Investments in and advances
to subsidiaries 336,762 $(336,762)
-------- -------- --------- ---------
Total assets $385,598 $457,297 $(336,762) $ 506,133
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 58
UNC INCORPORATED
Condensed Consolidating Balance Sheet (Cont.)
As of December 31, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt $ 1,000 $ 5,529 $ 6,529
Accounts payable 935 37,690 38,625
Accruals and other current liabilities 16,530 37,196 53,726
-------- -------- ---------
Total current liabilities 18,465 80,415 98,880
-------- -------- ---------
Long-term debt 180,500 10,254 190,754
Other noncurrent liabilities 12,397 38,616 51,013
-------- -------- ---------
Total liabilities 211,362 129,285 340,647
-------- -------- ---------
Common stock and additional paid
in capital 125,363 125,363
Retained earnings 50,559 50,559
Equity of subsidiaries and
advances of parent 336,762 $(336,762)
-------- -------- --------- ---------
175,922 336,762 (336,762) 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 341 341
-------- -------- --------- ---------
Total shareholders' equity 174,236 328,012 (336,762) 165,486
-------- -------- --------- ---------
Total liabilities and
shareholders' equity $385,598 $457,297 $(336,762) $ 506,133
======== ======== ========= =========
</TABLE>
<PAGE>
<PAGE> 60
UNC INCORPORATED
Condensed Consolidating Statement of Earnings (Loss)
Year Ended December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales and operating revenues $ 2,600 $ 523,233 $ 525,833
Costs and expenses
Costs and operating expenses 444,375 444,375
Selling, general and administrative
expenses 18,213 51,555 69,768
Restructuring charge 4,800 53,906 58,706
Multi-employer pension plan withdrawal
charge 14,000 14,000
Allocated expenses (22,803) 22,803
--------- --------- ---------
210 586,639 586,849
--------- --------- ---------
Operating income 2,390 (63,406) (61,016)
Other income (expense)
Interest income 23 44 67
Interest expense (14,924) (3,625) (18,549)
Other (1,934) 17 (1,917)
Equity in income (loss) of
subsidiaries (55,838) $ 55,838
--------- --------- --------- ---------
(72,673) (3,564) 55,838 (20,399)
--------- --------- --------- ---------
Earnings (loss) before income taxes (70,283) (66,970) 55,838 (81,415)
Income tax benefit 2,351 11,132 13,483
--------- --------- --------- ---------
Net earnings (loss) $ (67,932) $ (55,838) $ 55,838 $ (67,932)
========= ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 61
UNC INCORPORATED
Condensed Consolidating Statement of Earnings
Year Ended December 31, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales and operating revenues $ 1,263 $ 437,030 $ 438,293
Costs and expenses
Costs and operating expenses 360,869 360,869
Selling, general and administrative
expenses 12,385 41,131 53,516
Allocated expenses (15,481) 15,481
--------- --------- ---------
(3,096) 417,481 414,385
--------- --------- ---------
Operating income 4,359 19,549 23,908
Other income (expense)
Interest income 374 22 396
Interest expense (12,834) (1,968) (14,802)
Other (1,777) 26 (1,751)
Equity in income of subsidiaries 17,658 $ (17,658)
--------- --------- --------- ---------
3,421 (1,920) (17,658) (16,157)
--------- --------- --------- ---------
Earnings before income taxes and
extraordinary items 7,780 17,629 (17,658) 7,751
Income tax benefit 3,814 29 3,843
--------- --------- --------- ---------
Earnings before extraordinary items 11,594 17,658 (17,658) 11,594
Extraordinary item-early retirement of
debt, net of income taxes (532) (532)
--------- --------- --------- ---------
Net earnings $ 11,062 $ 17,658 $ (17,658) $ 11,062
========= ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 62
UNC INCORPORATED
Condensed Consolidating Statement of Earnings
Year Ended December 31, 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Eliminations Consolidated
------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Sales and operating revenues $ 365,152 $ 365,152
Costs and expenses
Costs and operating expenses 294,489 294,489
Selling, general and administrative
expenses $ 10,709 34,192 44,901
Allocated expenses (7,236) 7,236
--------- --------- ---------
3,473 335,917 339,390
--------- --------- ---------
Operating income (loss) (3,473) 29,235 25,762
Other income (expense)
Interest income 299 32 331
Interest expense (9,882) (2,322) (12,204)
Other (1,405) 367 (1,038)
Equity in income of subsidiaries 20,590 $ (20,590)
--------- --------- --------- ---------
9,602 (1,923) (20,590) (12,911)
--------- --------- --------- ---------
Earnings before income taxes 6,129 27,312 (20,590) 12,851
Income tax provision 5,240 (6,722) (1,482)
--------- --------- --------- ---------
Net earnings $ 11,369 $ 20,590 $ (20,590) $ 11,369
========= ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 63
UNC INCORPORATED
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
------- ---------- ------------
<S> <C> <C> <C>
Net cash flow from (used by) operations $ (14,137) $ (5,358) $ (19,495)
Cash flows from investing activities:
Net proceeds from sale of assets 11,713 11,713
Additions to property, plant and
equipment (381) (9,918) (10,299)
Acquisition of subsidiaries, net of
cash acquired (4,911) (4,911)
Proceeds from sale of leveraged lease 6,758 6,758
Other transactions, net 39 39
--------- ---------- ---------
Net cash and short-term investments
provided (used) by investing
activities 6,377 (3,077) 3,300
--------- ---------- ---------
Cash flows from financing activities:
Additions to debt 161,085 40,000 201,085
Reductions in debt (159,185) (24,860) (184,045)
Other transactions 280 280
Net cash transfers to (from) parent 6,375 (6,375)
--------- ---------- ---------
Net cash provided (used) by financing
activities 8,555 8,765 17,320
--------- ---------- ---------
Net increase in cash 795 330 1,125
Cash at beginning of year 857 637 1,494
--------- ---------- ---------
Cash at end of year $ 1,652 $ 967 $ 2,619
========= ========== =========
</TABLE>
<PAGE>
<PAGE> 64
UNC INCORPORATED
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
------- ---------- ------------
<S> <C> <C> <C>
Net cash flow from (used by) operations $ (384) $ (11,253) $ (11,637)
Cash flows from investing activities:
Net proceeds from sale of assets 10,843 10,843
Additions to property, plant and
equipment (331) (10,919) (11,250)
Acquisition of subsidiaries, net of
cash acquired (48,477) (48,477)
Investment in leveraged lease (2,697) (2,697)
Naval Products phase out 68 68
Other transactions, net (67) (67)
--------- --------- ---------
Net cash and short-term investments
provided (used) by investing
activities (2,960) (48,620) (51,580)
--------- --------- ---------
Cash flows from financing activities:
Additions to debt 193,132 35,500 228,632
Reductions in debt (210,632) (55,334) (265,966)
Issuance of 9 1/8% Senior Notes 100,000 100,000
Other transactions, net 77 77
Net cash transfers to (from) parent (80,022) 80,022
--------- --------- ---------
Net cash and short-term investments
provided (used) by financing
activities 2,555 60,188 62,743
--------- --------- ---------
Net decrease in cash and
short-term investments (789) 315 (474)
Cash and short-term investments at
beginning of year 1,646 322 1,968
--------- --------- ---------
Cash at end of year $ 857 $ 637 $ 1,494
========= ========= =========
</TABLE>
<PAGE>
<PAGE> 65
UNC INCORPORATED
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
Parent Combined
Company Guarantors Consolidated
------- ---------- ------------
<S> <C> <C> <C>
Net cash flow from operations $ (17,133) $ 68,382 $ 51,249
Cash flows from investing activities:
Net proceeds from sale of assets 4,738 4,738
Additions to property, plant and
equipment (417) (6,185) (6,602)
Acquisition of subsidiaries, net of
cash acquired (7,741) (7,741)
Proceeds received from sale of
subsidiaries 1,000 1,000
Naval Products phase out 9,979 9,979
Other transactions, net 93 93
--------- --------- ---------
Net cash and short-term investments
provided (used) by investing
activities 9,562 (8,095) 1,467
--------- --------- ---------
Cash flows from financing activities:
Additions to debt 147,500 57,000 204,500
Reductions in debt (197,887) (58,832) (256,719)
Other transactions, net 231 231
Net cash transfers to (from) parent 58,198 (58,198)
--------- --------- ---------
Net cash and short-term investments
provided (used) by financing
activities 8,042 (60,030) (51,988)
--------- --------- ---------
Net increase in cash and
short-term investments 471 257 728
Cash and short-term investments at
beginning of year 1,175 65 1,240
--------- --------- ---------
Cash and short-term investments at
end of year $ 1,646 $ 322 $ 1,968
========= ========= =========
</TABLE>
<PAGE>
<PAGE> 66
Report of Independent Accountants
The Board of Directors and Shareholders
UNC Incorporated:
We have audited the consolidated financial statements and the
financial statement schedule of UNC Incorporated and
subsidiaries listed in Item 14(a) 1 and Item 14(a) 2 of this
Form 10-K as of December 31, 1994 and for the year then ended.
These financial statements and financial statement schedule are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of UNC Incorporated and
subsidiaries as of December 31, 1994 and the consolidated
results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in
relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the
information required to be included therein.
Coopers & Lybrand L.L.P.
Washington, D.C.
February 28, 1995
<PAGE>
<PAGE> 67
Independent Auditors' Report
The Board of Directors and Shareholders
UNC Incorporated:
We have audited the accompanying consolidated balance sheet
of UNC Incorporated and subsidiaries as of December 31, 1993,
and the related consolidated statements of earnings, changes in
shareholders' equity and cash flows for each of the years in the
two-year period ended December 31, 1993. In connection with our
audits of the aforementioned consolidated financial statements,
we also have audited the related financial statement schedule
for the years ended December 31, 1993 and 1992, as listed in the
accompanying index under Item 14. These consolidated financial
statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements and the financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of UNC Incorporated and subsidiaries as of December 31,
1993, and the results of their operations and their cash flows
for each of the years in the two-year period ended December 31,
1993, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial
statement schedule for the years ended December 31, 1993 and
1992, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in Note 11 to the consolidated financial
statements, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, in 1993.
KPMG Peat Marwick LLP
Washington, D.C.
February 9, 1994
<PAGE>
<PAGE> 68
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
KPMG Peat Marwick were previously the principal certifying
accountants for the Company. Following discussions between KPMG
Peat Marwick and representatives of the Company, the parties
determined that KPMG Peat Marwick would cease to serve as the
Company's auditors effective February 22, 1994. The Company's
Audit Committee was advised of these discussions and approved of
this action.
In connection with the audits of the Company's consolidated
financial statements for the fiscal years ended December 31,
1993 and 1992, and in the subsequent interim period through
February 22, 1994, there were no disagreements between the
Company and KPMG Peat Marwick on any matter of accounting
principles or practices, financial statement disclosures or
auditing scope or procedures, which disagreements, if not
resolved to KPMG Peat Marwick's satisfaction, would have caused
them to make reference in connection with their opinion to the
subject of the disagreement.
The audit report of KPMG Peat Marwick on the consolidated
financial statements of the Company and its subsidiaries as of
and for the years ended December 31, 1993 and 1992, did not
contain any adverse opinion or disclaimer of opinion, nor was it
qualified or modified as to uncertainty, audit scope, or
accounting principles, except that, as required with respect to
changes in accounting principles, the 1993 audit report made
reference to the Company's adoption in 1993 of the provisions of
the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes.
Members of the management of the Company interviewed four of
the "Big 6" public accounting firms and requested that two of
these firms present proposals to the Audit Committee. On
March 17, 1994, the two firms presented their proposals to the
Audit Committee, which, after due consideration, recommended to
the Company's Board of Directors that the firm of Coopers &
Lybrand be appointed as the Company's independent accountants
for the year ending December 31, 1994. The Board of Directors
approved of the appointment of the firm of Coopers & Lybrand on
March 21, 1994, subject to ratification by the Company's Annual
Meeting of Shareholders to be held on April 29, 1994.
<PAGE>
<PAGE> 69
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
(a) Directors of the Company. The information regarding
directors in response to Item 401 of Regulation S-K which will
appear in the definitive Proxy Statement of the Company in
connection with the solicitation of proxies for its 1995 Annual
Meeting of Shareholders is incorporated herein by reference.
(b) Executive Officers of the Company. The following table
sets forth the names and ages of all executive officers of the
Company, their positions and office with the Company, and the
period during which each person has served as such.
<TABLE>
<CAPTION>
Positions and Served as
Office Currently Held Officer
Name Age with the Company Since (1)
---- --- --------------------- ---------
<S> <C> <C> <C>
Dan A. Colussy 63 Chairman of the Board, President 1984
and Chief Executive Officer
and Director
Gerald M. Czarnecki 54 President and Chief Operating 1994
Officer
Robert L. Pevenstein 48 Senior Vice President and 1987
Chief Financial Officer
John H. Moellering 56 Executive Vice President, 1993
Aviation Services Division
John J. Bonasia 61 Senior Vice President, 1990
Engine Overhaul Division
Robert A. Gustafson 48 Senior Vice President, 1994
Component Services Division
Gerald J. Knapp 52 Senior Vice President, 1991
Human Resources
Richard H. Lange 61 Senior Vice President, General 1987
Counsel and Secretary
Gregory M. Bubb 43 Vice President and Treasurer 1988
William R. Capel 46 Vice President and Controller 1992
Paul X. McLain 54 Vice President, Financial Controls 1982
______________________
</TABLE>
(1) The dates indicated include service in offices other than
current office, but do not include any previous service as a
Director.
<PAGE>
<PAGE> 70
There is no family relationship between any director,
executive officer, or person nominated or chosen by the Company
to become a director or executive officer and any other such
person, director or executive officer.
The following information relates to the business experience
during the past five years of each Executive Officer named
above:
Mr. Colussy has served as Chairman and Chief Executive Officer
of the Company since October 1994. Previously he was Chairman
of the Board, President and Chief Executive Officer since April
1989 and prior thereto he was President and Chief Executive
Officer since December 1984.
Mr. Czarnecki joined the Company as President and Chief
Operating Officer in October 1994. Previously he was Senior
Vice President, Human Resources and Administration for IBM
Corporation from 1993 to 1994, Chairman of the Board and Chief
Executive Officer of Bank of America, FSB from 1992 to 1993, and
Chairman of the Board, President and Chief Executive Officer of
Honfed Bank from 1987 to 1992.
Mr. Pevenstein has served as Senior Vice President and Chief
Financial Officer of the Company since February 1992 and
previously as Vice President Finance and Chief Financial Officer
since October 1987. He joined the Company as Controller in
September 1987.
Mr. Moellering joined the Company as Executive Vice President
and Chief Operating Officer, UNC Aviation Services in October
1993. Previously he was President and Chief Executive Officer
of Lear Siegler Management Services Corporation from 1990 to
1993 and prior to that he was Corporate Vice President with
Automatic Data Processing, Inc. from 1987 to 1990.
Mr. Bonasia has served as Senior Vice President, Engine
Overhaul Division since October 1994. Prior to such time he
served in various senior management positions with the Company
for more than five years.
Mr. Gustafson joined the Company as Senior Vice President,
Component Services Division in October 1994. Previously he was
Group Vice President - Aviation Division and President Page
Avjet Corporation for the BBA Group PLC from 1991 to 1994 and
Group Vice President - AAR Service Companies of AAR Corporate
from 1990 to 1991.
Mr. Knapp has served as Senior Vice President, Human Resources
since May 1994, he joined the Company as Vice President, Human
Resources in April 1991. Prior to such time he was Manager,
Human Resources Management, for Thomason Consumer Electronics,
Inc. for more than five years.
<PAGE>
<PAGE> 71
Mr. Lange has served as Senior Vice President, General Counsel
and Secretary since May 1994, he was elected Vice President,
General Counsel and Secretary of the Company in July 1987.
Mr. Bubb has served as Vice President and Treasurer since May
1992. He joined the Company as Treasurer in March 1988.
Mr. Capel joined the Company as Vice President and Controller
in May 1992. Prior to such time he was Director - Business
Management and Contracts for Textron Lycoming for more than five
years.
Mr. McLain joined the Company as Vice President, Financial
Controls in August 1982.
ITEM 11. EXECUTIVE COMPENSATION.
The information regarding executive compensation in response
to Item 402 of Regulation S-K which will appear in the
definitive Proxy Statement of the Company in connection with the
solicitation of proxies for its 1995 Annual Meeting of
Shareholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information regarding security ownership of certain
beneficial owners and management in response to Item 403 of
Regulation S-K which will appear in the definitive Proxy
Statement of the Company in connection with the solicitation of
proxies for its 1995 Annual Meeting of Shareholders is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information regarding certain relationships and related
transactions in response to Item 404 of Regulation S-K which
will appear in the definitive Proxy Statement of the Company in
connection with the solicitation of proxies for its 1995 Annual
Meeting of Shareholders is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) The following documents are filed as part of this Report:
(1) and (2) Financial Statements and Financial Statement
Schedules.
<PAGE>
<PAGE> 72
Financial Statements:
Consolidated statements of earnings - years ended December 31,
1994, 1993 and 1992
Consolidated balance sheets - as of December 31, 1994 and 1993
Consolidated statements of cash flows - years ended December 31,
1994, 1993 and 1992
Consolidated statements of changes in shareholders' equity -
years ended December 31, 1994, 1993 and 1992
Notes to consolidated financial statements
Report of Independent Accountants
Independent Auditors' Report
Page Number
Index to Consolidated Financial Statement Schedules: in this Rpt
--------------------------------------------------- -----------
Schedule VIII Valuation and qualifying
accounts - for the three
years ended December 31, 1994 S-1
Schedules other than those listed above have been omitted
since they are either not required, are not applicable, or the
required information is shown in the consolidated financial
statements or related notes.
(3) Exhibits:
3.1 Certificate of Incorporation, as amended by Certificate
of Designations of Series A Preferred Stock, of the
Company (filed as Exhibit 4-H to Company's Registration
Statement No. 33-13762 and incorporated herein by
reference).
3.2 Form of Certificate of Designations of Series A Junior
Participating Preferred Stock of Company (filed as
Exhibit A to the Company's Form 8.A dated October 9,
1987, and incorporated herein by reference).
3.3 Amended and Restated By-Laws of the Company (including
resolutions of the Board of Directors of the Company on
February 5, 1992 amending the By-Laws of the Company)
(filed as Exhibit 3-C to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991 -- File
No. 1-7795 and incorporated herein by reference).
4.1 Rights Agreement, dated as of September 25, 1987, between
the Company and Manufacturers Hanover Trust Company
(filed as Exhibit No. 1 to the Company's Form 8-A dated
October 9, 1987 and incorporated herein by reference).
<PAGE>
<PAGE> 73
4.2 Indenture, dated as of May 1, 1986, between the Company
and Maryland National Bank, Trustee, relating to the
Company's 7 1/2% Convertible Subordinated Debentures due
2006 (filed as Exhibit 4-A to the Company's Registration
Statement No. 33-5136 and incorporated herein by
reference).
4.3 First Supplemental Indenture, dated as of April 26, 1987,
between Maryland National Bank, Trustee (supplementing
the Indenture, dated May 1, 1986, between the Company and
Maryland National Bank, Trustee, relating to the
Company's 7 1/2% Convertible Subordinated Debentures due
2006) (filed as Exhibit 4-J to Registrant's Registration
Statement No. 33-13762 and incorporated herein by
reference).
4.4 Indenture, dated as of July 15, 1993, between the Company
and Continental Bank, National Association, Trustee,
relating to the Company's 9 1/8% Senior Notes due 2003
(filed as Exhibit 4-B to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993 -- File
No. 1-7795 and incorporated herein by reference).
4.5 First Supplemental Indenture, dated as of August 14,
1993, between the Company and Continental Bank, National
Association, Trustee (supplementing the Indenture, dated
July 15, 1993, between the Company and Continental Bank,
National Association, Trustee, relating to the
Registrant's 9 1/8% Senior Notes due 2003)
4.6 Second Supplemental Indenture, dated as of November 5,
1993, between the Company and Continental Bank, National
Association, Trustee (supplementing the Indenture, dated
July 15, 1993, between the Company and Continental Bank,
National Association, Trustee, relating to the
Registrant's 9 1/8% Senior Notes due 2003)
10.1 1977 Stock Plan for Key Employees of United Nuclear
Corporation and Its Subsidiaries, as amended on
June 25, 1982 (filed as Exhibit 10-F(i) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1982 -- File No. 1-7795 and
incorporated herein by reference).
10.2 1985 Stock Plans for Key Employees of UNC Resources,
Inc. and Its Subsidiaries (filed as Exhibit 28-C to
the Company's Registration Statement No. 2-99656, and
incorporated herein by reference).
<PAGE>
<PAGE> 74
10.3 Resolutions adopted by the Board of Directors of the
Company on February 27, 1987, amending the 1985 Stock
Plans for Key Employees of UNC Resources, Inc. and Its
Subsidiaries (filed as Exhibit 10-A(ii) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1986 -- File No. 1-7795 and
incorporated herein by reference).
10.4 Extract from September 20, 1984 minutes of the Board
of Directors of the Company interpreting various
general provisions of all stock plans (filed as
Exhibit 10-C(iv) to the Company's Annual Report on
Form 10-K, as amended by Form 8 dated April 7, 1986
for the year ended December 31, 1985 -- File
No. 1-7795 and incorporated herein by reference).
10.5 Resolutions adopted by the Board of Directors of the
Company on December 17, 1987, minutes of the Board of
Directors of UNC Incorporated, ratifying and
confirming action of the Management Development and
Compensation Committee on December 16, 1987 amending
the outstanding stock options issued pursuant to the
Company's stock option plans (filed as
Exhibit 10-A(vi) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1987 -- File
No. 1-7795 and incorporated herein by reference).
10.6 UNC Incorporated Share Purchase/Incentive Plan (filed
as Exhibit 4 to the Company's S-8 Registration
Statement No. 33-37586 dated November 2, 1990 and
incorporated herein by reference).
10.7 UNC Incorporated 1990 Stock Option Plan for Key
Employees (filed as Exhibit 4 to the Company's S-8
Registration Statement No. 33-37585 dated November 2,
1990 and incorporated herein by reference).
10.8 Resolutions adopted by the Board of Directors of the
Company on March 22, 1991, amending the 1990 Stock
Option Plan for Key Employees referred to in Exhibit
10-7 hereof to (1) permit qualifying shares purchases
to be made either from the Company or on the open
market and (2) comply with Rule 16b-3 (filed as
Exhibit 19-A to the Company's Annual Report on Form
10-K for the year ended December 31, 1992 -- File No.
1-7795 and incorporated herein by reference).
10.9 UNC Resources, Inc. Outside Directors Compensation
Plan (filed as Exhibit 10-F to the Company's Annual
Report on Form 10-K, as amended by Form 8 dated
April 7, 1986, of the year ended December 31, 1985 --
File No. 1-7795 and incorporated herein by reference).
<PAGE>
<PAGE> 75
10.10 Outside Directors Separation from Service Plan of
Company effective July 31, 1987 (filed as Exhibit 19-B
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1987 -- File No. 1-7795 and
incorporated herein by reference).
10.11 UNC Resources, Inc. Incentive Compensation Plan (filed
as Exhibit 10-H to the Company's Annual Report on
Form 10-K, as amended by Form 8 dated April 7, 1986,
for the year ended December 31, 1985 -- File
No. 1-7795 and incorporated herein by reference).
10.12 Resolutions adopted by the Board of Directors of the
Company on March 22, 1991, amending Section 6.1 of the
UNC Resources, Inc. Incentive Compensation Plan
referred to in Exhibit 10.11 hereof to permit the
committee to base incentive awards for employees of a
specific unit on the performance of other units and
the Company as a whole (filed as Exhibit 19-B to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1992 -- File No. 1-7795 and
incorporated herein by reference).
10.13 Amended and Restated Supplemental Executive Retirement
Plan for Key Employees of Company and its Subsidiaries
effective July 31, 1987 (filed as Exhibit 19-A to the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1987 -- File No. 1-7795 and
incorporated herein by reference).
10.14 Resolutions adopted by the Board of Directors of the
Company on October 30, 1987, amending the change in
control language contained in the Amended and Restated
Supplemental Executive Retirement Plan for Key
Employees of the Company referred to in Exhibit 10.13
hereof and in the Outside Directors Separation from
Service Plan of the Company referred to in
Exhibit 10-9 hereof (filed as Exhibit 10-H to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990 -- File No. 1-7795 and
incorporated herein by reference).
10.15 Resolutions adopted by the Board of Directors of the
Company on October 23, 1992, amending Sections 8(a)
and 8(b) of the Amended and Restated Supplemental
Executive Retirement Plan for Key Employees of the
Company referred to in Exhibit 10.13 hereof to require
two years of service before a participant is entitled
to benefits under the plan and a participant's years
of service to commence on the date such employee
becomes a participant under the plan, respectively.
<PAGE>
<PAGE> 76
10.16 Resolutions adopted by the Board of Directors of the
Company on March 22, 1991, deleting Section 2(o)(i) of
the Amended and Restated Supplemental Executive
Retirement Plan for Key Employees of the Company
referred to in Exhibit 10.13 hereof relating to the
offset from Plan benefits of the actuarial equivalent
of the Company's annual contributions to the
Participants' Retirement Income Savings Plan account
(filed as Exhibit 19-C to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992 --
File No. 1-7795 and incorporated herein by reference).
10.17 Form of Agreement relating to a change in control
executed by the Company with certain key employees
(filed as Exhibit 10-Q to the Company's Annual Report
on Form 10-K for the year ended December 31, 1987 --
File No. 1-7795 and incorporated herein by reference).
10.18 Form of Agreement relating to severance pay and
benefits executed by the Company with certain key
employees (filed as Exhibit 10-O to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1986 -- File No. 1-7795 and incorporated
herein by reference).
10.19 Employment Agreement, dated as of November 1, 1984,
between UNC Resources, Inc. and Dan A. Colussy (filed
as Exhibit 10-T to the Company's Annual Report on
Form 10-K for the year ended December 31, 1984 -- File
No. 1-7795 and incorporated herein by reference).
10.20 Agreement, dated as of October 20, 1987, between the
Company and Dan A. Colussy amending the Employment
Agreement referred to in Exhibit 10.19 hereof (filed
as Exhibit 10-U to the Company's Annual Report on Form
10-K for the year ended December 31, 1987 -- File
No. 1-7795 and incorporated herein by reference).
10.21 Agreement, dated as of December 18, 1989, between the
Company and Dan A. Colussy amending the employment
agreement referred to in Exhibit 10.19 hereof, (filed
as Exhibit 10-EE to Company's Annual Report on
Form 10-K for the year ended December 31, 1989 -- File
No. 1-7795 and incorporated herein by reference).
<PAGE>
<PAGE> 77
10.22 Second Amended and Restated Credit Agreement, dated as
of July 24, 1992, among the Company, the Company's
wholly-owned subsidiary Airwork Corporation, the
several banks and other financial institutions from
time to time parties to this Agreement and Chemical
Bank, a New York banking corporation, as agent for the
Banks hereunder (filed as Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992 -- File No. 1-7795 and incorporated
herein by reference).
10.23 Waiver and Amendment, dated as of December 7, 1992, to
the Second Amended and Restated Credit Agreement dated
as of July 24, 1992, among UNC Incorporated, a
Delaware corporation, Airwork Corporation, a Delaware
corporation, the several banks and other financial
institutions from time to time parties thereto and
Chemical Bank, a New York banking corporation, as
agent for the Banks, referred to in Exhibit 10.22
hereof (filed as Exhibit 10-C to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992 -- File No. 1-7795 and incorporated herein by
reference).
10.24 Waiver and Amendment, dated as of December 28, 1992,
to the Second Amended and Restated Credit Agreement
dated as of July 24, 1992, among UNC Incorporated, a
Delaware corporation, Airwork Corporation, a Delaware
corporation, the several banks and other financial
institutions from time to time parties thereto and
Chemical Bank, a New York banking corporation, as
agent for the Banks, referred to in Exhibit 10.22
hereof (filed as Exhibit 10-D to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992 -- File No. 1-7795 and incorporated herein by
reference).
10.25 Amendment, dated as of May 27, 1993, to the Second
Amended and Restated Credit Agreement dated as of July
24, 1992, among UNC Incorporated, a Delaware
corporation, Airwork Corporation, a Delaware
corporation, the several banks and other financial
institutions from time to time parties thereto and
Chemical Bank, a New York banking corporation, as
agent for the Banks, referred to in Exhibit 10.22
hereof.
<PAGE>
<PAGE> 78
10.26 Waiver and Amendment, dated as of July 20, 1993, to
the Second Amended and Restated Credit Agreement dated
as of July 24, 1992, among UNC Incorporated, a
Delaware corporation, Airwork Corporation, a Delaware
corporation, the several banks and other financial
institutions from time to time parties thereto and
Chemical Bank, a New York banking corporation, as
agent for the Banks, referred to in Exhibit 10.22
hereof (filed as Exhibit 10 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1993 -- File No. 1-7795 and incorporated herein by
reference).
10.27 Waiver and Amendment, dated as of October 22, 1993, to
the Second Amended and Restated Credit Agreement dated
as of July 24, 1992, among UNC Incorporated, a
Delaware corporation, Airwork Corporation, a Delaware
corporation, the several banks and other financial
institutions from time to time parties thereto and
Chemical Bank, a New York banking corporation, as
agent for the Banks, referred to in Exhibit 10.22
hereof.
10.28 Operating Agreement of Aviation Alliance & Capital
Group, L.C., dated as of the 10th day of November,
1992, by and among Integrated Aircraft Services Corp.,
Transcapital Air Alliance Corporation and UNC Air
Capital Incorporated (filed as Exhibit 10-E to the
Company's Annual Report on Form 10-K/A for the year
ended December 31, 1992 -- File No. 1-7795 and
incorporated herein by reference).
10.29 Sale and Purchase Agreement dated July 30, 1993
between UNC Johnson Technology, Inc. and Freedom Forge
Corporation (filed as Exhibit 1 to the Company's
Annual Report on Form 8-K dated July 30, 1993 -- File
No. 1-7795 and incorporated herein by reference).
10.30 Amendment, dated as of February 7, 1994, to the Second
Amended and Restated Credit Agreement, dated as of
July 24, 1992, among UNC Incorporated, UNC Airwork
Corporation; the several banks and other financial
institutions from time to time parties to the Credit
Agreement and Chemical Bank, a New York banking
corporation; as agent for the Banks, referred to in
Exhibit 10.22 hereof (filed as Exhibit 10.30 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 -- File No. 1-7795 and
incorporated herein by reference).
<PAGE>
<PAGE> 79
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,
referred to in Exhibit 10.22 hereof (filed as Exhibit
10.31 to the Company's Form 10-Q for the quarter ended
September 30, 1994 -- File No. 1-7795 and incorporated
herein by reference.)
10.32 Employment Agreement, dated as of November 22, 1994,
between Gerald M. Czarnecki and UNC Incorporated.
10.33 Amendment, dated as of December 29, 1994, to the
Second Amended and Restated Credit Agreement, dated as
of July 24, 1992, among UNC Incorporated, UNC Airwork
Corporation; the several banks and other financial
institutions from time to time parties thereto and
Chemical Bank as agent for the Banks.
10.34 Amendment, dated as of March 29, 1995, to the Second
Amended and Restated Credit Agreement, dated as of
July 24, 1992, among UNC Incorporated, UNC Airwork
Corporation; the several banks and other financial
institutions from time to time parties thereto and
Chemical Bank as agent for the Banks.
11 Statement re: Computation of Earnings per Share.
16 Letter dated March 1, 1994 of KPMG Peat Marwick (filed as
Exhibit 16 to the Company's Report on Form 8-K dated
March 1, 1994 -- File No. 1-7795 and incorporated herein
by reference).
21 Subsidiaries of the Company.
23.1 Independent Auditors' Consent - KPMG Peat Marwick LLP
23.2 Independent Auditors' Consent - Coopers & Lybrand LLP
24 Powers of Attorney.
27 Financial Data Schedule (electronically filed).
____________________
(B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1994.
<PAGE>
<PAGE> 80
(C) EXHIBITS FILED:
A listing of exhibits required to be filed is given in the
Sequential Exhibit Index.
(D) FINANCIAL SCHEDULES:
The information regarding Financial Statement Schedules in
this item is provided in Item 14(a) 1 and 2.
<PAGE>
<PAGE> 81
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 28, 1995
By: /s/ Robert L. Pevenstein
---------------------------
Robert L. Pevenstein
Senior Vice President
and Chief Financial Officer
(principal financial and
accounting officer)
<PAGE>
<PAGE> 82
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Company and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Dan A. Colussy Chairman of the Board, March 28, 1995
------------------------ Chief Executive Officer
(Dan A. Colussy) and Director
/s/ Robert L. Pevenstein Senior Vice President and March 28, 1995
------------------------ Chief Financial Officer
(Robert L. Pevenstein) (principal financial and
accounting officer)
Berl Bernhard* Director March 22, 1995
------------------------
(Berl Bernhard)
John K. Castle* Director March 17, 1995
------------------------
(John K. Castle)
Director March __, 1995
------------------------
(William C. Hittinger)
J. L. Holloway III* Director March 24, 1995
------------------------
(J. L. Holloway III)
George V. McGowan* Director March 20, 1995
------------------------
(George V. McGowan)
Jack Moseley* Director March 20, 1995
------------------------
(Jack Moseley)
Lawrence A. Skantze* Director March 24, 1995
------------------------
(Lawrence A. Skantze)
Beverly B. Byron* Director March 20, 1995
------------------------
(Beverly B. Byron)
</TABLE>
* By /s/ Richard H. Lange
---------------------
(Richard H. Lange) Attorney-in-Fact
<PAGE>
<PAGE> 83
UNC INCORPORATED AND SUBSIDIARIES
Schedule VIII - Valuation and Qualifying Accounts
For the Three Years Ended December 31, 1994
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs & at End
Description of Year Expenses Deductions (1) of Year
----------- --------- ---------- -------------- ---------
Allowance for Doubtful Accounts Receivable:
<C> <S> <S> <S> <S>
Year ended December 31, 1994 $6,366,000 $4,296,000 $6,956,000 $3,706,000
========== ========== ========== ==========
Year ended December 31, 1993 $5,041,000 $1,602,000 $ 277,000 $6,366,000
========== ========== ========== ==========
Year ended December 31, 1992 $6,949,000 $2,450,000 $4,358,000 $5,041,000
========== ========== ========== ==========
</TABLE>
(1) Uncollected receivables written off, net of recoveries.
S-1
<PAGE>
<PAGE> 84
SEQUENTIAL EXHIBIT INDEX
The following exhibits are being filed herewith:
Exhibit
Number Description
------ -----------
10.32 Employment Agreement, dated as of November 22, 1994,
between Gerald M. Czarnecki and UNC Incorporated.
10.33 Amendment, dated as of December 29, 1994, to the
Second Amended and Restated Credit Agreement, dated
as of July 24, 1992, among UNC Incorporated, UNC
Airwork Corporation; the several banks and other
financial institutions from time to time parties
thereto and Chemical Bank as agent for the Banks.
10.34 Amendment, dated as of March 29, 1995, to the Second
Amended and Restated Credit Agreement, dated as of
July 24, 1992, among UNC Incorporated, UNC Airwork
Corporation; the several banks and other financial
institutions from time to time parties thereto and
Chemical Bank as agent for the Banks.
11 Statement re: Computation of Earnings per Share.
21 Subsidiaries of the Company.
23.1 Independent Auditors' Consent - KPMG Peat Marwick
LLP
23.2 Independent Accountants' Consent - Coopers & Lybrand
L.L.P.
24 Powers of Attorney.
27 Financial Data Schedule (electronically filed).
____________________
<PAGE>
<PAGE> 1
EXHIBIT 10.32
AGREEMENT BETWEEN
GERALD M. CZARNECKI AND UNC INCORPORATED
AGREEMENT dated as of November 22, 1994 between Gerald M.
Czarnecki and UNC Incorporated ("UNC").
UNC hereby employs Gerald M. Czarnecki, and Gerald M.
Czarnecki ("Employee") hereby accepts employment and agrees to
serve as President and Chief Operating Officer of UNC. Employee
and UNC hereby agree as follows with respect to such employment.
1. Employee will report to the Chairman and Chief
Executive Officer of UNC, and will be responsible for
the operations, profitability and growth of UNC's
operating units now owned or subsequently formed or
acquired. Employee will be recommended to the
Nominating Committee of the Board of Directors (the
"Board") of UNC for election as a member of the Board
not later than the annual meeting of the stockholders
of UNC in 1995.
2. The period of Employee's employment under this
Agreement shall be three years. Following the second
anniversary of this Agreement the period of employment
under this Agreement shall be extended by successive
additional one year terms unless terminated effective
on any next following anniversary of this Agreement by
written notice by either party to the other no less
than thirty days prior to the end of any such one year
period.
3. (a) For all services rendered by Employee during the
period of employment, UNC shall pay Employee a base
salary at the rate of not less than $375,000 per year,
subject to such periodic increases as the Management
Development and Compensation Committee of the Board
may approve.
(b) Employee will be eligible to receive an award
under UNC's Incentive Compensation Plan (the
"Incentive Plan") beginning with the year ending
December 31, 1995. Notwithstanding the provisions of
the Incentive Plan, Employee's award for such year
will be $225,000, and will be paid at the time that
awards under the Incentive Plan are normally made. On
and after January 1, 1996, employee will be subject to
the provisions of the Incentive Plan regarding awards,
if any, under the Incentive Plan, including
eligibility to receive a discretionary award, which,
if any, will be in the sole discretion of the Chairman
<PAGE>
<PAGE> 2
and Chief Executive Officer of UNC in the application
of standards he applies generally in the
recommendation of discretionary awards under the
Incentive Plan to the Management Development and
Compensation Committee of the Board.
4. (a) Employee will be granted an option to purchase
300,000 shares of common stock of UNC at 100% of the
fair market value of a share of common stock of UNC on
the New York Stock Exchange on the date of Employee's
execution of this Agreement, pursuant to the 1985 and
1990 Stock Option Plans of UNC (the "Option Plans"),
including the requirement that the exercise of options
granted under the Option Plans is conditioned upon the
option holder's purchase on the open market, within
ninety days of the date of grant, of such number of
shares equal to 25% of the number of shares for which
the option is granted, and the holding of such shares
throughout the period during which such option may be
exercised. Such option will vest 20% on January 1,
1995 and on each January 1 thereafter until fully
vested.
(b) UNC will use its best efforts to ensure that the
number of shares of common stock reserved for issuance
under the Option Plans is sufficient to enable the
exercise of the option granted to Employee under this
Agreement. If, however, the number of shares
available for issuance upon any attempted exercise of
such option is insufficient, UNC will pay Employee in
cash, in the form of stock appreciation rights as
provided in the Option Plans, an amount equal to the
difference between the option price per share and the
fair market value per share on the date of attempted
exercise, to the extent of such insufficiency.
5. UNC will enter into a Participation Agreement with
Employee under the Supplemental Employee Retirement
Plan of UNC effective as of October 1, 1994.
6. UNC shall pay or reimburse Employee for all reasonable
travel or other expenses incurred in connection with
the performance of Employee's duties under this
Agreement in accordance with such procedures as UNC
may from time to time establish.
7. Employee shall have any additional benefits for which
Employee, without action by the Board of Directors of
UNC or any committee thereof, may be or become
eligible under any group health, life insurance,
disability, stock purchase, retirement income or other
form of employee benefit plan or program of UNC now
existing or that may hereafter be adopted by UNC.
<PAGE>
<PAGE> 3
8. UNC will pay Employee $10,000 each year, payable in
equal amounts in January and July (payable pro rata
for the October 1 through December 31, 1994 period),
in lieu of an automobile and other perquisites, and
will provide Employee, at UNC's expense exclusive of
any related tax liability of Employee, with a family
membership, owned by UNC, at Old South Country Club,
Lothian, Maryland.
9. UNC will provide Employee with employee relocation
benefits in accordance with UNC's policies currently
in effect. Relocation reimbursements to Employee will
include (a) temporary living expenses (initially hotel
charges and meals, subsequently apartment rental and
utilities) until the earlier of Employee's move into
a new home in the Annapolis, Maryland area or June 1,
1995; (b) the move of Employee's office furnishings
and equipment to UNC's offices; and (c) UNC's
reimbursement to Employee of the monthly mortgage
payments and real estate taxes on his present home,
net of federal and state tax effect, until the earlier
of the date that Employee's present home is sold or
June 30, 1996.
10. Employee agrees to comply with UNC's policies
regarding the conduct of the businesses of UNC and its
affiliates, as long as such policies do not violate
federal or state laws. Employee acknowledges receipt
of a copy of UNC's Standards of Ethical Business
Conduct.
11. (a) This Agreement may be terminated by UNC for cause
by written notice to Employee, specifying the event
relied upon for such termination within thirty days of
such event. The term "cause" shall mean activity
involving willful misconduct, gross negligence,
failure of Employee to devote his full business time
and attention to his duties hereunder, or breach of
one or more express obligations under this Agreement,
including any non-compliance by Employee with
paragraph 10 of this Agreement. The termination by
UNC of Employee's employment for any reason other than
those specified in the preceding sentence shall be
deemed to be a termination of his employment without
cause, following which UNC will pay Employee the cash
amounts that would otherwise become payable to
Employee through the then remaining term of this
Agreement.
<PAGE>
<PAGE> 4
(b) Employee may terminate this Agreement in the
event of, without Employee's prior written consent,
any material adverse change or reduction by UNC of
Employee's functions, duties or responsibilities,
assignment by UNC of Employee to another place of
employment more than fifty miles from UNC's current
place of business, or other material breach of this
Agreement by UNC, by written notice to UNC specifying
the event relied upon for such termination within
thirty days after such event. Such termination will
have the same effect as a termination without cause by
UNC as set forth in the last sentence of paragraph
11(a).
12. (a) Employee may terminate this Agreement within
sixty days of May 1, 1996 if Employee is not elected
President and Chief Executive Officer of UNC prior to
such date. Such termination will have the same effect
as a termination of this Agreement without cause by
UNC, provided that, for the purposes of determining
the cash amounts that would otherwise become payable
to Employee, five months will be deemed to have been
added to the then remaining term of this Agreement.
In lieu of any incentive compensation award or portion
thereof to which Employee might otherwise become
entitled in respect of such termination, UNC will pay
to Employee an amount equal to the award paid to
Employee in respect of 1995, including any
discretionary award.
(b) Employee may terminate this Agreement within
sixty days of May 1, 1996 if Employee has not entered
into an agreement with UNC relating to the terms and
conditions of his employment as President and Chief
Executive Officer of UNC prior to such date.
Following such termination, Employee shall continue to
receive payments at the time and in the amount of the
payments of salary he had received immediately prior
to such termination, except that UNC will not effect
any withholding in respect of such payments. Such
payments shall continue until Employee has accepted
employment by another employer, or until the end of
the balance of the term of his employment under this
Agreement on the date of termination under this
paragraph (b), whichever comes first. In addition to
such payments, payment will be made to Employee of a
non-discretionary bonus award under the Incentive Plan
for 1996, if Employee would have been eligible to
receive such award under the Incentive Plan had his
employment not been terminated. The amount of such
award will be pro rated for the portion of the year
between January 1, 1996 and the date on which such
termination occurs, and will be payable when awards
under the Incentive Plan are paid generally.
<PAGE>
<PAGE> 5
13. Employee's employment shall terminate immediately upon
his death and his base salary shall be paid to his
estate or legally appointed representative through the
end of the month in which it occurs. If Employee
becomes physically or mentally disabled so as to
become unable, for a period of more than six
consecutive months or for shorter periods aggregating
at least six months during any twelve month period, to
perform his duties hereunder on a substantially full-
time basis, Employee's employment shall terminate,
with no further payments of base salary or incentive
compensation, as of the end of such six month or
twelve month period. Such termination shall not affect
Employee's benefits under UNC's disability insurance
program then in effect.
14. (a) For purposes of this Agreement, "Proprietary
Information" means any and all discoveries,
inventions, formulas, processes, techniques, methods,
products, devices, ideas, trade secrets, copyrights,
patents, trademarks, knowledge, information and
materials (including business plans and financial
information), and any improvements and modifications
thereof, which (i) relate to or are capable of being
applied to or used in connection with any business or
activity carried on (or planned to be carried on) by
UNC or any of its affiliates, (ii) may reasonably be
of value to competitors of UNC or any of its
affiliates, or to potential acquirors of UNC, or (iii)
may be material to actual or potential holders of the
equity securities of UNC.
(b) Employee will disclose to UNC any such
Proprietary Information which he develops (alone or
with others) during his employment or which he learns
during his employment, and will cooperate fully in the
establishment and maintenance of all rights of UNC and
its affiliates in such Proprietary Information.
(c) Employee will hold all Proprietary Information in
strict confidence and will not unless specifically
authorized in advance in writing by UNC, directly or
indirectly, convey, transfer, lease, sell, assign,
distribute, give, loan, license, publish, use,
disclose or otherwise employ any Proprietary
Information.
<PAGE>
<PAGE> 6
15. (a) Employee (i) during the period of his employment
with UNC, will not, directly or indirectly, on his own
behalf or as a partner, officer, director, trustee,
employee, agent, consultant or member of any person,
firm, or corporation, or otherwise, enter into the
employ of, render any service to or engage in any
business or activity which is the same as or
competitive with any business or activity conducted by
UNC or any of its affiliates; and (ii) during the two-
year period following the termination of such
employment, will not directly or indirectly, in any
such manner, enter into the employ of, render any
service to or engage in a business or activity which
is the same as, similar to or competitive with any
business or activity conducted by UNC or any of its
affiliates.
(b) During the period of his employment and until two
years after termination of his employment, Employee
will not, directly or indirectly, on his own behalf or
as a partner, shareholder, officer, employee,
director, trustee, agent, consultant, or member of any
person, firm or corporation, or otherwise, employ,
seek to employ or otherwise obtain or seek the
services of any employee of UNC or of any of its
affiliates.
If any covenant or agreement contained in this
paragraph 15 is found by a court having jurisdiction
to be unreasonable in duration, geographical scope or
character of restriction, the covenant or agreement
shall not be rendered unenforceable thereby but rather
the duration, geographical scope, or character of
restriction of such covenant or agreement shall be
reduced or modified with retroactive effect to make
such covenant or agreement reasonable, and such
covenant or agreement shall be enforced as so
modified.
16. (a) In the event of any litigation or other
proceeding between UNC and Employee with respect to
this Agreement, UNC will reimburse Employee for all
reasonable costs and expenses relating to such
litigation or other proceeding, including reasonable
attorneys' fees and expenses if such litigation or
proceeding results in a judgment or order in favor of
Employee from which no appeal is or may be taken.
<PAGE>
<PAGE> 7
(b) In the event of any dispute between UNC and
Employee with respect to this Agreement, Employee or
UNC may, in his or its sole discretion by notice to
the other, require such dispute to be submitted to
arbitration. The arbitrator shall be selected by
agreement of the parties or, if they cannot agree on
an arbitrator or arbitrators within thirty days after
the giving of such notice, the arbitrator shall be
selected by the American Arbitration Association. The
determination reached in such arbitration shall be
final and binding on both parties without any right of
appeal. Execution of the determination by such
arbitrator may be sought in any court having
jurisdiction. Unless otherwise agreed by the parties,
any such arbitration shall take place in Anne Arundel
County, Maryland and shall be conducted in accordance
with the rules of the American Arbitration
Association.
17. (a) Employee may not assign, transfer, convey,
mortgage, hypothecate, pledge, or in any way encumber
the compensation or other benefits payable to him or
any rights which he may have under this Agreement.
Neither Employee nor his beneficiary or beneficiaries
shall have any right to receive any compensation or
other benefits under this Agreement except at the
time, in the amounts and in the manner provided in
this Agreement.
(b) This Agreement will inure to the benefit of and
will be binding upon any successor to UNC. As used
in this Agreement, the term "successor" means any
person, firm, corporation or other business entity
which at any time, whether by merger, purchase or
otherwise, acquires all or substantially all of the
capital stock or assets of UNC. This Agreement may
not be otherwise assigned by UNC.
18. This Agreement and the Agreement dated as of October
1, 1994, relating to a change in control of UNC, are
the only agreements between UNC and Employee regarding
Employee's employment by UNC. This Agreement and the
Agreement dated as of October 1, 1994 supersede any
and all other agreements and understandings, written
or oral, between UNC and Employee. In the event there
is a change in control of UNC, as defined in the
Agreement dated as of October 1, 1994, and a conflict
exists between this Agreement and such Agreement, then
the agreement provisions more favorable to Employee
will control.
<PAGE>
<PAGE> 8
19. A waiver by either party of any provision of this
Agreement or of any breach of such provision in any
instance shall not be deemed or construed to be a
waiver of such provision for the future, or of any
subsequent breach of such provision.
20. This Agreement may be amended, modified or changed
only by further written agreement between UNC and
Employee duly executed by both parties, referring
specifically to the provision(s) of this Agreement
amended thereby, and effective no earlier than the
date of such written agreement unless by its express
terms such written agreement is to be effective on or
as of some earlier or later date set forth in such
written agreement.
21. Any and all notices required or permitted to be given
hereunder shall be in writing and shall be deemed to
have been given when deposited in the United States
mail, certified or registered mail, postage prepaid.
Any notice to be given by Employee hereunder shall be
addressed to UNC to the attention of its Chairman and
Chief Executive Officer at its main offices, 175
Admiral Cochrane Drive, Annapolis, MD 21401, with a
copy to the Senior Vice President, General Counsel and
Secretary of UNC. Any notice to be given Employee
shall be addressed to Employee at his residence
address last provided by Employee to UNC. Either
party may change the address to which notices are to
be addressed by notice in writing given to the other
in accordance with the terms of this paragraph.
IN WITNESS WHEREOF, and intending to be legally bound, the
parties have caused this Agreement to be duly executed as of the
day and year first above written.
UNC INCORPORATED
By: /s/ Dan A. Colussy
----------------------------
Dan A. Colussy
Chairman and Chief Executive Officer
/s/ Gerald M. Czarnecki
---------------------------------------------------
Gerald M. Czarnecki
<PAGE>
<PAGE> 1
EXHIBIT 10.33
EXECUTION COPY
AMENDMENT
AMENDMENT, dated as of December 29, 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
Mandatory Reduction Date under the Credit Agreement be extended;
and
WHEREAS, subject to the terms and conditions set forth
herein, the Banks are willing to extend the Mandatory Reduction
Date 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 by deleting the
definitions of "Mandatory Reduction Date" and "Operating Profit
Ratio" appearing therein and inserting in lieu thereof,
respectively, the following new definitions:
"'Mandatory Reduction Date': the earlier to
occur of (i) the date of receipt by the Company or any
of its Subsidiaries of any proceeds from the sale of
real estate and related improvements constituting a
portion of the Company's Naval Products Division and
(ii) March 31, 1995.
<PAGE>
<PAGE> 2
'Operating Profit Ratio': for any period of four
consecutive fiscal quarters, 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, in each case for such period, to (B)
Consolidated Interest Expense plus Restricted Payments
made or declared plus Consolidated Lease Expense, in
each case for such period."
3. Effectiveness; Consent to Amendment. This
Amendment shall become effective on the date on which the Agent
shall have received (i) a copy of this Amendment duly executed
by each of the Borrowers, each Bank and the Agent and (ii) a
copy of a consent to this Amendment, substantially in the form
of Exhibit A hereto, duly executed and delivered by each of the
Subsidiary Guarantors. By its execution of this Amendment, each
of the respective parties hereto signifies its consent to this
Amendment.
4. Continuing Effect; Amendment Limited. This
Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the
Credit Agreement or a waiver of any Default or Event of Default
thereunder (whether now existing or hereafter arising and
whether known or unknown to the Agent and the Banks). From and
after the date of this Amendment, all references in the Credit
Agreement and each of the other Loan Documents to the Credit
Agreement shall be deemed to be references to the Credit
Agreement after giving effect to this Amendment.
5. 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.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
7. 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
<PAGE>
<PAGE> 3
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 this 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: V.P. & Treasurer
UNC AIRWORK CORPORATION (formerly
known as Airwork Corporation)
By: /s/ Gregory M. Bubb
-----------------------------
Title: Treasurer
CHEMICAL BANK
as Agent and as a Bank
By: /s/ Robert M. Wood Jr.
-----------------------------
Title: Vice President
BANK OF AMERICA ILLINOIS (formerly
knowe as Continental Bank)
By: /s/ Steve Aronowitz
----------------------------
Title: Vice President
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Robert Gillison
----------------------------
Title: Vice President
<PAGE>
<PAGE> 4
EXHIBIT A
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 December 29, 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 and the Banks 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, Inc.
UNC Tri-Industries, Inc. (formerly known as
UNC Airwork Corporation Engine & Engine Parts, Inc.)
(formerly known as UNC Texas CAMCO Incorporated
Airwork Corporation) (formerly known as Texas
UNC Pacific Airmotive CAMCO Incorporated)
Corporation, Inc. UNC Chemical Dynamics
(formerly known as Incorporated
Pacific Airmotive UNC Artex, Inc.
Corporation) UNC Manufacturing
UNC Burnside-Ott Aviation Technology, Inc.
Training Center, Inc. Reclamation Inc.
UNC Accessory Overhaul United Nuclear Corporation
Group, Inc. UNC Air Capital Incorporated
UNC Aviation Services, Inc. UNC Johnson Technology, Inc.
UNC Helicopter, Inc. UNC Lear Siegler, Inc.
UNC CAMCO Incorporated UNC All Fab, Inc.
(formerly known as UNC Metcalf Servicing, Inc.
CAMCO Incorporated)
UNC ARDCO Incorporated By:/s/ Gregory M. Bubb
(formerly known as ------------------------
ARDCO Incorporated) Treasurer of each of the above
Subsidiary Guarantors
<PAGE>
<PAGE> 5
UNC International Sales, Inc. UNC Cornucopia Mining
Company, Inc.
By:/s/ Gregory M. Bubb By:/s/ Richard H. Lange
_________________________ _________________________
Treasurer President
UNC Nuclear Industries, Inc. United Nuclear Corporation
UNC Recovery Corporation UNC Manufacturing Technology,
Inc.
By:/s/ Richard H. Lange
__________________________
Vice President of each of
the above Subsidiary
Guarantors
<PAGE>
<PAGE> 1
EXHIBIT 10.34
AMENDMENT
AMENDMENT, dated as of March 29, 1995 (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 certain
provisions of the Credit Agreement be amended; and
WHEREAS, subject to the terms and conditions set forth
herein, the Banks are willing to amend 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 6.1. Subsection 6.1 of the
Credit Agreement is hereby amended as follows:
(a) by deleting from subparagraph (b) thereof the ratio
"1.30 to 1.00" set forth opposite the phrase "October 1,
1994 through December 31, 1994" and inserting in lieu
thereof the following ratio: "0.25 to 1.00";
(b) by deleting from subparagraph (c) thereof the ratio
"1.40 to 1.00" set forth opposite the phrase "October 1,
1994 through December 31, 1994" and inserting in lieu
thereof the following ratio: "0.85 to 1.00";
(c) by deleting from subparagraph (d) thereof the ratio
"2.85 to 1.00" set forth opposite the phrase "October 1,
1994 through December 31, 1994" and inserting in lieu
thereof the following ratio: "3.75 to 1.00"; and
<PAGE>
<PAGE> 2
(d) by deleting from subparagraph (e) thereof the amount
"114,000,000 set forth opposite the date "December 31,
1994" and inserting in lieu thereof the following amount:
"97,500,000."
3. Reduction of Commitment; Prepayment of Loans. The
Company intends to sell its real property located in Montville,
Connecticut for a purchase price of $27 million, presently
expected to occur in April 1995. The Company hereby agrees that
$20,000,000 of the net cash proceeds of such sale will be paid
to the Agent within five Business Days of the closing of such
sale and applied to prepay outstanding Loans pursuant to
Subsection 2.6 and to permanently reduce the Commitments
pursuant to Subsection 2.5 by the amount so prepaid.
4. Representations and Warranties. After giving effect
to this Amendment, the Borrowers hereby confirm, reaffirm and
restate the representations and warranties set forth in Section
3 of the Credit Agreement as if made on and as of the date
hereof, except as they may specifically relate to an earlier
date.
5. Effectiveness; Consent to Amendment. This Amendment
shall become effective on the date on which the Agent shall have
received (I) a copy of this Amendment duly executed by each of
the Borrowers, each Bank and the Agent and (ii) a copy of a
consent to this Amendment, substantially in the form of Exhibit
A hereto, duly executed and delivered by each of the Subsidiary
Guarantors. By its execution of this Amendment, each of the
respective parties hereto signifies its consent to this
Amendment.
6. Continuing Effect; Amendment Limited. This Amendment
is limited as specified and shall not constitute a modification
, acceptance or waiver of any other provision of the Credit
Agreement or a waiver of any Default or Event of Default
thereunder (whether now existing or hereafter arising and
whether known or unknown to the Agent and the Banks). From and
after the date of this Amendment, all references in the Credit
Agreement and each of the other Loan Documents to the Credit
Agreement shall be deemed to be reference to the Credit
Agreement after giving effect to this Amendment.
7. 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.
8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
<PAGE>
<PAGE> 3
9. 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 this 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: Vice President, Treasurer
UNC AIRWORK CORPORATION (formerly
known as Airwork Corporation)
By: /s/ Gregory M. Bubb
--------------------------------
Title: Treasurer
CHEMICAL BANK as Agent and as a Bank
By: /s/ Robert M. Wood Jr.
--------------------------------
Title: Vice President
BANK OF AMERICA ILLINOIS (formerly
known as Continental Bank)
By: /s/ Steve Aronowitz
--------------------------------
Title: Vice President
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Robert Gillison
--------------------------------
Title: Vice President
<PAGE>
<PAGE> 4
EXHIBIT A
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 March 29, 1995 (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 know 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 and the Banks 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 know 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.
UNC Burnside-Ott Aviation Reclamation Inc.
Training Center, Inc. UNC Air Capital Incorporated
UNC Accessory Overhaul UNC Johnson Technology, Inc.
Group, Inc. UNC Lear Siegler, Inc.
UNC Aviation Services, Inc. UNC All Fab, Inc.
UNC CAMCO Incorporated UNC Metcalf Servicing, Inc.
(formerly known as
CAMCO Incorporated) By: /s/ Gregory M. Bubb
UNC ARDCO Incorporated -----------------------
(formerly known as Treasurer of each of the
ARDCO Incorporated) above Subsidiary
Guarantors
<PAGE>
<PAGE> 5
UNC International Sales, Inc. UNC Cornucopia Mining
Company, Inc.
By: /s/ Gregory M. Bubb By: /s/ Richard H. Lange
-------------------------- -------------------------
Treasurer President
UNC Nuclear Industries, Inc. United Nuclear Corporation
UNC Recovery Corporation UNC Manufacturing Technology,
Inc.
By: /s/ Richard H. Lange
-------------------------
Vice President of each
of the above Subsidiary
Guarantors
<PAGE>
<PAGE> 1
EXHIBIT 11
UNC INCORPORATED AND SUBSIDIARIES
Earnings Per Share
For the Three Years Ended December 31, 1994
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Earnings (loss) before extraordinary item $ (67,932) $ 11,594 $ 11,369
Extraordinary item (532)
--------- --------- ---------
Net earnings (loss) $ (67,932) $ 11,062 $ 11,369
========= ========= =========
Calculation of primary earnings
per share:
Average common shares outstanding
during the year-primary (1) 17,474 17,356 17,279
--------- --------- ---------
Earnings (loss) per share, primary:
Earnings (loss) before extraordinary item $ (3.89) $ .67 $ .66
Extraordinary item (.03)
--------- --------- ---------
Net earnings (loss) $ (3.89) $ .64 $ .66
========= ========= =========
Calculation of fully diluted
earnings per share:
Average common shares outstanding
during the year (1) 17,474 17,356 17,279
Increase in common stock equivalents:
Stock options under treasury stock method 416 503 390
--------- --------- ---------
Adjusted average shares outstanding for
the year-fully diluted 17,890 17,859 17,669
--------- --------- ---------
Earnings (loss) per share, fully diluted:
Earnings (loss) before extraordinary item $ (3.80) $ .65 $ .64
Extraordinary item (.03)
--------- --------- ---------
Net earnings (loss) $ (3.80) $ .62 $ .64
========= ========= =========
</TABLE>
(1) Exclusive of 700,000 treasury shares for all years presented.
<PAGE>
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Jurisdiction Percentage of
Name of Incorporation Voting Securities
---- ---------------- -----------------
<S> <C> <C>
UNC Holdings, Inc. Delaware 100
UNC Tri-Industries, Inc. Delaware 100
UNC Airwork Corporation Delaware 100
UNC Pacific Airmotive Corporation, Inc. Delaware 100
UNC Accessory Overhaul Group, Inc. Delaware 100
UNC ARDCO Incorporated Delaware 100
UNC CAMCO Incorporated Delaware 100
UNC Engine & Engine Parts, Incorporated Delaware 100
UNC Texas CAMCO Incorporated Delaware 100
UNC Aviation Services, Inc. Delaware 100
UNC Chemical Dynamics, Inc. Delaware 100
UNC Artex, Inc. Delaware 100
UNC Johnson Technology, Inc. Delaware 100
UNC Metcalf Servicing, Inc. Delaware 100
UNC Lear Siegler, Inc. Delaware 100
UNC All Fab, Inc. Delaware 100
</TABLE>
The subsidiaries omitted from the foregoing list do not,
considered in the aggregate, constitute a significant
subsidiary.
<PAGE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Shareholders
UNC Incorporated:
We consent to incorporation by reference in the registration
statements (No. 33-37585, No. 33-37586, No. 33-41703, No. 33-
41704, No. 33-55193, No. 2-62043 and No. 2-99656) on Form S-8 of
UNC Incorporated of our report dated February 9, 1994, relating
to the consolidated balance sheet of UNC Incorporated and
subsidiaries as of December 31, 1993, and the related
consolidated statements of earnings, changes in shareholders'
equity and cash flows and the related consolidated financial
statement schedule for each of the years in the two-year period
ended December 31, 1993, which report appears in the December
31, 1994 annual report on Form 10-K of UNC Incorporated.
Our report refers to the Company's adoption of the provisions of
the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes, in 1993.
KPMG PEAT MARWICK LLP
Washington, D.C.
March 29, 1995
<PAGE>
<PAGE> 2
EXHIBIT 23.2
INDEPENDENT ACCOUNTANTS' CONSENT
--------------------------------
The Board of Directors and Shareholders
UNC Incorporated:
We consent to incorporation by reference in the registration
statements of UNC Incorporated on Form S-8 (File Nos. 33-37585,
No. 33-37586, No. 33-41703, No. 33-41704, No. 2-62043, No. 2-
99656, and No. 33-55193) of our report dated February 28, 1995,
on our audit of the consolidated financial statements and
financial statement schedule of UNC Incorporated as of
December 31, 1994 and for the year then ended, which report is
included in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Washington, D.C.
March 29, 1995
<PAGE>
<PAGE> 1
EXHIBIT 24
1 of 7
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the
"Company") hereby authorizes the proper officers of the Company
to file the Company's annual report on Form 10-K for the year
ended December 31, 1994 with the Securities and Exchange
Commission, in substantially the form presented to the members
of the Board of Directors on March 16, 1995, with such changes
as may be approved by the officers of the Company who sign such
Form 10-K, their signing to be conclusive evidence of such
approval.
The undersigned Director of the Company hereby appoints
Richard H. Lange, with full power of substitution, his true and
lawful attorney and agent, acting in the name and on behalf of
the undersigned, to execute and to file such annual report on
Form 10-K with the Securities and Exchange Commission.
/s/ Berl Bernhard
-------------------------
Director
Witness:
June Danley
----------------------
Date: March 22, 1995
<PAGE>
<PAGE> 2
EXHIBIT 24
2 of 7
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the
"Company") hereby authorizes the proper officers of the Company
to file the Company's annual report on Form 10-K for the year
ended December 31, 1994 with the Securities and Exchange
Commission, in substantially the form presented to the members
of the Board of Directors on March 16, 1995, with such changes
as may be approved by the officers of the Company who sign such
Form 10-K, their signing to be conclusive evidence of such
approval.
The undersigned Director of the Company hereby appoints
Richard H. Lange, with full power of substitution, his true and
lawful attorney and agent, acting in the name and on behalf of
the undersigned, to execute and to file such annual report on
Form 10-K with the Securities and Exchange Commission.
/s/ John K. Castle
-------------------------
Director
Witness:
Lac L. Ngo
----------------------
Date: March 17, 1995
<PAGE>
<PAGE> 3
EXHIBIT 24
3 of 7
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the
"Company") hereby authorizes the proper officers of the Company
to file the Company's annual report on Form 10-K for the year
ended December 31, 1994 with the Securities and Exchange
Commission, in substantially the form presented to the members
of the Board of Directors on March 16, 1995, with such changes
as may be approved by the officers of the Company who sign such
Form 10-K, their signing to be conclusive evidence of such
approval.
The undersigned Director of the Company hereby appoints
Richard H. Lange, with full power of substitution, his true and
lawful attorney and agent, acting in the name and on behalf of
the undersigned, to execute and to file such annual report on
Form 10-K with the Securities and Exchange Commission.
/s/ J. L. Holloway
-------------------------
Director
Witness:
R. Lange
----------------------
Date: March 24, 1995
<PAGE>
<PAGE> 4
EXHIBIT 24
4 of 7
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the
"Company") hereby authorizes the proper officers of the Company
to file the Company's annual report on Form 10-K for the year
ended December 31, 1994 with the Securities and Exchange
Commission, in substantially the form presented to the members
of the Board of Directors on March 16, 1995, with such changes
as may be approved by the officers of the Company who sign such
Form 10-K, their signing to be conclusive evidence of such
approval.
The undersigned Director of the Company hereby appoints
Richard H. Lange, with full power of substitution, his true and
lawful attorney and agent, acting in the name and on behalf of
the undersigned, to execute and to file such annual report on
Form 10-K with the Securities and Exchange Commission.
/s/ George V. McGowan
-------------------------
Director
Witness:
Judith C. Williams
----------------------
Date: March 20, 1995
<PAGE>
<PAGE> 5
EXHIBIT 24
5 of 7
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the
"Company") hereby authorizes the proper officers of the Company
to file the Company's annual report on Form 10-K for the year
ended December 31, 1994 with the Securities and Exchange
Commission, in substantially the form presented to the members
of the Board of Directors on March 16, 1995, with such changes
as may be approved by the officers of the Company who sign such
Form 10-K, their signing to be conclusive evidence of such
approval.
The undersigned Director of the Company hereby appoints
Richard H. Lange, with full power of substitution, his true and
lawful attorney and agent, acting in the name and on behalf of
the undersigned, to execute and to file such annual report on
Form 10-K with the Securities and Exchange Commission.
/s/ Jack Moseley
-------------------------
Director
Witness:
R. Lange
----------------------
Date: March 20, 1995
<PAGE>
<PAGE> 6
EXHIBIT 24
6 of 7
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the
"Company") hereby authorizes the proper officers of the Company
to file the Company's annual report on Form 10-K for the year
ended December 31, 1994 with the Securities and Exchange
Commission, in substantially the form presented to the members
of the Board of Directors on March 16, 1995, with such changes
as may be approved by the officers of the Company who sign such
Form 10-K, their signing to be conclusive evidence of such
approval.
The undersigned Director of the Company hereby appoints
Richard H. Lange, with full power of substitution, his true and
lawful attorney and agent, acting in the name and on behalf of
the undersigned, to execute and to file such annual report on
Form 10-K with the Securities and Exchange Commission.
/s/ Lawrence A. Skantze
-------------------------
Director
Witness:
R. Lange
----------------------
Date: March 24, 1995
<PAGE>
<PAGE> 7
EXHIBIT 24
7 of 7
POWER OF ATTORNEY
-----------------
The undersigned Director of UNC Incorporated (the
"Company") hereby authorizes the proper officers of the Company
to file the Company's annual report on Form 10-K for the year
ended December 31, 1994 with the Securities and Exchange
Commission, in substantially the form presented to the members
of the Board of Directors on March 16, 1995, with such changes
as may be approved by the officers of the Company who sign such
Form 10-K, their signing to be conclusive evidence of such
approval.
The undersigned Director of the Company hereby appoints
Richard H. Lange, with full power of substitution, his true and
lawful attorney and agent, acting in the name and on behalf of
the undersigned, to execute and to file such annual report on
Form 10-K with the Securities and Exchange Commission.
/s/ B. Byron
-------------------------
Director
Witness:
B. Kirkwood
----------------------
Date: March 20, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the consolidated balance sheet as of 12/31/94 and the
related consolidated statement of earnings, cash flows and
notes to consolidated financial statements for the year ended
12/31/94 and is qualified in its entirety by reference to such
financial statements and notes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,619
<SECURITIES> 0
<RECEIVABLES> 92,985
<ALLOWANCES> 3,706
<INVENTORY> 85,110
<CURRENT-ASSETS> 248,447
<PP&E> 73,478
<DEPRECIATION> 28,789
<TOTAL-ASSETS> 468,034
<CURRENT-LIABILITIES> 148,273
<BONDS> 171,352
<COMMON> 3,648
0
0
<OTHER-SE> 95,249
<TOTAL-LIABILITY-AND-EQUITY> 468,034
<SALES> 303,618<F1>
<TOTAL-REVENUES> 525,833
<CGS> 244,411<F1>
<TOTAL-COSTS> 444,375
<OTHER-EXPENSES> 72,706<F2>
<LOSS-PROVISION> 4,296<F3><F4>
<INTEREST-EXPENSE> 18,549
<INCOME-PRETAX> (81,415)
<INCOME-TAX> (13,483)
<INCOME-CONTINUING> (67,932)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,932)
<EPS-PRIMARY> (3.89)
<EPS-DILUTED> 0
<PAGE>
<FN>
<F1>See Note 18 of Notes to Consolidated Financial Statements
<F2>Includes $58,706 restructuring charge and $14,000 multi-employer pension
plan withdrawal charge.
<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>
