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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report -- February 7, 1996
UNC INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 1-7795 54-1078297
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
175 Admiral Cochrane Drive Annapolis, Maryland 21401-7394
(Address of principal executive offices) (Zip Code)
(410) 266-7333 (Registrant's telephone number, including area code)
Not Applicable
(Former Address)
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ITEM 5. OTHER EVENTS
On February 5, 1996, UNC Incorporated announced that it had
commenced a solicitation of consents with respect to certain
amendments it proposes to make to the Indenture governing its
9 1/8% Senior Notes due 2003. The Company is soliciting the
consents to the proposed amendments to, among other things, enable
the Company to finance its previously announced acquisition of
Garrett Aviation Services. A copy of the Consent Solicitation
Statement, which includes information about the proposed amendments
to the Indenture, Garrett Aviation Services and the Garrett
Aviation Services acquisition, is included as an Exhibit to this
Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
Exhibit No. Description of Exhibit
1 Consent Solicitation Statement dated
February 2, 1996.
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UNC INCORPORATED
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
UNC INCORPORATED
By:/s/ Robert L. Pevenstein
Robert L. Pevenstein
Senior Vice President and
Chief Financial Officer
Date: February 7, 1996
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February 2, 1996
To: Holders of UNC Incorporated 9 1/8% Senior Notes due 2003
Dear Noteholders:
UNC Incorporated (the "Company") requests your consent to certain
amendments (collectively, the "Proposed Amendments") to the Indenture
governing its 9 1/8% Senior Notes due 2003 (the "Senior Notes"). The
Proposed Amendments are needed to permit the Company to finance the
consummation of its proposed acquisition of Garrett Aviation Services
("Garrett") and to provide working capital flexibility for the growth of the
combined businesses following the consummation of the acquisition. The
Company believes that the acquisition of Garrett will enhance the
profitability of the Company, and that it will immediately increase the cash
flow coverage of your Senior Notes. The Proposed Amendments, their purpose
and effect are more fully described in the attached Consent Solicitation
Statement.
If the Proposed Amendments are approved and become effective, the
Company will pay consenting holders a cash fee of $10.00 for each $1,000 of
principal amount of Senior Notes in respect of which a consent has been duly
given. To ensure that you will be eligible to receive the consent fee,
please follow the instructions set forth in the Consent Solicitation
Statement and the attached Letter of Consent.
The Senior Notes will remain outstanding in accordance with all other
terms of the Senior Notes and the Indenture. The changes sought to be
effected by the Proposed Amendments will not alter the Company's obligation
to pay the principal of or interest on the Notes or alter the interest rate
or redemption or maturity date of the Senior Notes.
The Company urges you to grant your consent to the Proposed Amendments.
If you have any questions, please call MacKenzie Partners, Inc., the
Information Agent the Company has engaged for purposes of this Consent
Solicitation, at (800) 322-2885 (toll free) or (212) 929-5500 (call collect).
CS First Boston Corporation has been engaged as Solicitation Agent for
purposes of this Consent Solicitation.
Very truly yours,
Dan A. Colussy
Chairman, President and
Chief Executive Officer
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CONSENT SOLICITATION STATEMENT
February 2, 1996
UNC INCORPORATED
Solicitation of Consents Relating to
$100,000,000 Aggregate Principal Amount
of its
9 1/8% Senior Notes Due 2003
UNC Incorporated (the "Company") hereby solicits consents (the
"Consents"), upon the terms and subject to the conditions set forth in this
Consent Solicitation Statement and in the accompanying Letter of Consent (the
"Consent Letter"), to certain amendments (collectively, the "Proposed
Amendments") to the Indenture dated July 15, 1993 and as amended to date (the
"Indenture") pursuant to which the Company's 9 1/8% Senior Notes due 2003
(the "Senior Notes") were issued (such solicitation, the "Consent
Solicitation").
As previously announced, the Company has entered into a definitive
agreement to acquire substantially all of the assets and business of Garrett
Aviation Services ("Garrett") for approximately $145 million in cash and the
assumption of certain liabilities (the "Acquisition"). The Proposed
Amendments would, among other things, enable the Company to incur up to $125
million in additional senior indebtedness for the purpose of consummating the
Acquisition and to increase the size of its revolving credit facility to
accommodate expected growth after the Acquisition. The Company believes that
the Acquisition is in the best interests of the Company, the holders of
Senior Notes and the Company's shareholders. See "The Garrett Acquisition"
and "Proposed Amendments" set forth herein.
Holders are requested to read and consider carefully the information
contained herein and to give their consent to the Proposed Amendments by
properly completing and executing the accompanying Consent Letter and
delivering the executed Consent Letter to Chemical Bank (the "Trustee") as
promptly as possible and no later than the close of business on the
Expiration Date (as defined herein). If Requisite Consents (as defined
herein) are received (and not revoked) prior to the Expiration Date and the
other conditions set forth herein are satisfied or waived, the Company will,
promptly after entering into a supplemental indenture giving effect to the
Proposed Amendments (the "Supplemental Indenture"), pay to each Holder (as
defined herein) who has delivered (and not revoked) a valid Consent prior to
such Expiration Date a consent fee in the amount of $10.00 for each $1,000 in
principal amount of Senior Notes in respect of which such Consent has been
delivered (the "Consent Fee").
The Supplemental Indenture will not be executed and no Consent Fee will
be paid if the Acquisition is not consummated.
THE CONSENT SOLICITATION WILL BE OPEN UNTIL 5:00 P.M. NEW YORK CITY TIME, ON
FEBRUARY 20, 1996, UNLESS EXTENDED BY THE COMPANY. THE TIME AND DATE OF
EXPIRATION OF THE CONSENT SOLICITATION IS HEREIN REFERRED TO AS THE
"EXPIRATION DATE." CONSENTS MAY BE REVOKED AT ANY TIME UP TO THE LATER OF
(A) 5:00 P.M., NEW YORK CITY TIME ON FEBRUARY 20, 1996 AND (B) THE TIME AND
DATE ON WHICH THE COMPANY RECEIVES REQUISITE CONSENTS FOR THE SENIOR NOTES.
SEE "THE CONSENT SOLICITATION--REVOCATION OF CONSENTS."
The Solicitation Agent for the Consent Solicitation is
CS FIRST BOSTON
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Questions and requests for assistance or additional copies of this
Consent Solicitation Statement and the Consent Letter may be directed to the
Information Agent as set forth on the back cover of this Consent Solicitation
Statement.
No person has been authorized to give any information or make any
representations other than those contained or incorporated by reference in
this Consent Solicitation Statement and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Consent Solicitation Statement is not being made to, and no
Consents are being solicited from, Holders of Senior Notes in any
jurisdiction in which it is unlawful to make such solicitation or grant such
Consent. The delivery of this Consent Solicitation Statement at any time
does not imply that the information herein is correct as of any time
subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
31, 1994 and its Quarterly Reports on Form 10-Q for the quarters ended March
31; June 30 and September 30, 1995, each as filed by the Company with the
Securities and Exchange Commission (the "Commission") are hereby incorporated
by reference. All documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), subsequent to the date of this Consent
Solicitation Statement prior to the Expiration Date shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of
filing such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Consent Solicitation
Statement to the extent that a statement contained herein or in any
subsequently filed document which is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Consent Solicitation Statement. The
Company will provide, without charge, to each person, including any
beneficial owner, to whom this Consent Solicitation Statement is delivered,
upon the written or oral request of any such person, additional copies of any
or all of the documents that are incorporated herein by reference (other than
certain exhibits to such documents). Such requests should be directed to the
Company at its principal executive offices, 175 Admiral Cochrane Drive,
Annapolis, Maryland 21401-7394, Attention: Gregory M. Bubb, Vice President
and Treasurer (telephone number (410) 266-7333).
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the 1934
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Section of
the Commission located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at regional public reference facilities maintained
by the Commission located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and Seven World Trade Center, New York, New
York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at prescribed rates. The Company's
securities (including the Senior Notes) are listed on the New York Stock
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Exchange, and such reports, proxy statements and other information can also
be inspected at the offices of such exchange.
THE COMPANY
UNC Incorporated (the "Company") is a diversified supplier of products
and services to the aviation industry. The Company's primary business is the
aviation aftermarket, which accounts for approximately 90% of its revenues.
These operations include the overhaul and repair of aircraft engines and
accessories, the repair and remanufacturing of engine components, and the
provision of training and maintenance services to the U.S. and foreign
military. Approximately 10% of the Company's revenues in 1995 were derived
from manufacturing engine and airframe parts for original equipment
manufacturers.
The Company has over 8,000 customers including: business aircraft
operators; major, national, regional, foreign, charter and package/cargo
airlines; engine and airframe OEMs; and the United States and foreign
military. The Company operates sixteen facilities and performs services at
approximately 80 government sites. The Company currently has 5,900
employees. The Company's acquisition of Garrett will expand the Company's
range of services, will increase the aggregate customer base to over 10,000
customers, and will add a total of eight operating locations and
approximately 1,000 employees.
THE GARRETT ACQUISITION
General
On January 16, 1996, the Company entered into a definitive agreement
(the "Purchase Agreement") to acquire Garrett Aviation Services ("Garrett"),
a leading provider of aviation services to the $2.5 billion business aviation
aftermarket (the "Acquisition"). Garrett had been sold by AlliedSignal Inc.
("AlliedSignal") to a group of investors in June 1994, and they have agreed
to sell Garrett to the Company. As a result of the Acquisition, the Company
believes it will be the largest independent aviation services company in the
world, with service capabilities for almost all business aircraft and
engines, combined with the Company's existing broad range of repair, overhaul
and remanufacturing capabilities for the business, commercial and military
markets. For the nine months ended September 30, 1995, on a pro forma basis,
the Company and Garrett would have generated approximately $645 million in
combined revenues and in excess of $48 million of combined operating cash
flow (EBITDA), which includes only a portion of the incremental operating
benefits anticipated by the Company over the next three years. The Company
has formed a subsidiary to acquire Garrett and that subsidiary will join the
other Company subsidiaries who presently guarantee the Senior Notes and
become a guarantor of the Senior Notes in accordance with the Indenture (the
Company's subsidiary guarantors, collectively, the "Guarantors").
The purchase price for the Acquisition is approximately $145 million in
cash and the assumption of certain Garrett liabilities, including capitalized
lease obligations recorded at approximately $5 million. The Company intends
to finance the Acquisition by (a) issuing $125 million aggregate principal
amount of new ten-year senior notes (the "Acquisition Senior Notes") and (b)
issuing 8.5% convertible preferred stock (the "Preferred Stock") with an
issue price of $25 million. The Company may pay fees and expenses incurred
in connection with the Acquisition from borrowings under the Revolving Credit
Facility. See "Acquisition Financing."
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Garrett
Garrett provides a full range of overhaul services to over 2,000
business aviation customers, including complete engine and airframe repair
and overhaul capabilities, full interior and exterior refurbishments, new
aircraft completions, avionics installation and spare parts distribution.
Garrett provides its aircraft and engine maintenance and support through six
"fly-in" fixed based operator ("FBO") locations across the United States.
For the nine months ended September 30, 1995, Garrett recorded approximately
$250.9 million in total revenues and approximately $15.9 million of operating
cash flow (EBITDA). Garrett enjoys a 50 year reputation for quality and
market leadership in its industry segment.
Garrett currently specializes in providing aircraft, engine and
avionics aftermarket services to aircraft powered by AlliedSignal turbofan
engines, which are the leading engine type for the business jet aviation
market. Based on industry data, AlliedSignal engines represent approximately
40% of the turbofan engines in the worldwide market. The leading engine type
is the TFE731 turbofan, used to power a variety of business jet aircraft,
including aircraft under the Lear, Falcon, Astra, Citation, Westwind and
Jetstar tradenames. Garrett management estimates that it services
approximately 70% of the TFE731 powered aircraft in North America. Garrett
also services the AlliedSignal turboprop engines used on business aircraft
and certain regional airlines.
Garrett benefits from a 15 year services agreement with AlliedSignal
(the "AlliedSignal Operating Agreement"), which appoints Garrett as the
"Exclusive Factory-Sponsored Service and Support Center" for certain
AlliedSignal engines in specified markets. The current AlliedSignal
Operating Agreement extends through July 1, 2009. The AlliedSignal Operating
Agreement is being assigned to the Company as part of the Acquisition.
This agreement: (a) specifies the terms on which Garrett purchases
engine parts from AlliedSignal; (b) commits Garrett to purchase its engine
parts requirements from AlliedSignal or certain approved vendors; (c) commits
Garrett to provide aftermarket support to AlliedSignal products in the market
place; and (d) defines the working relationship between the two companies in
a number of areas, including technical training, quality systems and other
support, exchange of customer and marketing information, and future programs.
A major advantage to Garrett under the AlliedSignal Operating Agreement
is that AlliedSignal provides Garrett with engine parts inventory on a
consignment basis. Garrett's customers are also able to access AlliedSignal
engines from the AlliedSignal engine rental pool during the period of engine
overhauls. The consignment inventory and the engine pool availability have
allowed Garrett to reduce significantly the level of its inventory and fixed
asset investment than otherwise would be required.
As a result of the agreement, AlliedSignal is the single largest
billing customer of Garrett, due to warranty and other prepaid maintenance
programs. AlliedSignal is also the largest single vendor of Garrett, due to
the purchase of parts both for engine repair and overhaul, and for the
redistribution of spare parts. The AlliedSignal operating agreement may be
terminated by AlliedSignal, among other reasons, following a material
disruption in AlliedSignal's business resulting from the provision of
Garrett's services or following a material downturn in certain of Garrett's
businesses. A significant change in, or loss of, the Operating Agreement
could have a material adverse effect on Garrett's results of operations.
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Benefits of the Acquisition
The Company's long term strategy has been to build a leadership
position in the aviation aftermarket with a focus on business and military
aviation. Additionally, the Company's product focus has been the development
of high value services for its customers such as high technology repair and
accessory overhaul processes for aircraft engines and accessories. Garrett
provides services in both engine and aircraft maintenance with an emphasis on
the use of new parts for these services and therefore has not developed
extensive capability in parts repair and accessory overhaul. Garrett's
strategy is to expand its aircraft maintenance business which historically
has not been emphasized and to develop more extensive high value repair and
accessory overhaul processes. The Company believes that the acquisition of
Garrett is attractive in part because the strategies of each business are
complementary and there is no significant overlap in the services provided by
each business. The Company also expects that the Acquisition will result in
substantial other benefits to the Company, including the following:
Aviation Parts and Component Repair. Garrett currently has limited in-
house capability for the repair of aircraft parts and accessories, and
outsources approximately $50 million per year in parts repair and overhaul
services to other aviation companies. The Company has substantial capability
in this area which should permit increases in consolidated profitability,
based on existing levels of revenues.
Added Retail Dimension. The Acquisition combines Garrett's front-line
"retail" FBO operations with the overhaul and remanufacturing "wholesale"
aspects of the Company's operations. As a result, Garrett's direct customer
relations should help promote a number of other Company products and
services, including engine overhaul for non-AlliedSignal engines, accessory
overhaul and parts remanufacturing. The Company believes that the
availability of these services also should permit Garrett to expand its
business with non-AlliedSignal powered aircraft owners and operators.
Expanded Airframe and Avionics Services. Garrett has been expanding
its airframe and avionics maintenance revenues, building on its established
engine repair and overhaul customer base. This market segment is growing
faster than the overall business aviation market, due primarily to the large
number of business aircraft added to the global fleet between 1977 and 1982.
Federal Aviation Administration and Original Equipment Manufacturer mandated
service intervals and advances in avionics technology are causing increased
demand for retrofits of these older airframes as well as major retrofits of
avionics packages. The Company believes this is a major growth opportunity
for Garrett. The Company also believes that its current customer base should
provide further expansion opportunities in this area.
Stable Base of Warranty Service. Garrett is the largest provider of
warranty repair services on AlliedSignal engines. Over 55% of AlliedSignal
engines are on long-term maintenance service programs and this provides a
stable base level of business for Garrett. Garrett also benefits from access
to AlliedSignal's detailed market data, which tracks projected maintenance
events for the entire engine fleet.
Increased Global Presence. At present, more than 95% of Garrett's
revenues are to North American customers. The Company's expanding
international presence, including its four overseas sales offices, should
permit further development of Garrett services for overseas customers or in
overseas locations.
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Military Revenues. Over the past two years, the Company's Aviation
Services Division has generated approximately $240 million in annual military
related revenues providing contract maintenance and other services to all of
the U.S. armed services and a variety of foreign military customers. The
Company expects Garrett's service capabilities will allow the Company to
pursue a wider range of military contracts that require these additional
repair and overhaul services.
Increased Critical Mass in the Aviation Aftermarket. The acquisition
of Garrett will substantially increase the revenue base of the Company,
approximately 95% of which will be in the aviation aftermarket. The Company
believes there are numerous economies of scale that can be achieved in
services, marketing, purchasing, administration and other areas. The
aviation aftermarket has tended to be more stable than the OEM segment,
because it is not as dependent on the level of annual new aircraft
deliveries.
While the Company believes that it can improve the profitability of the
operations of Garrett and the Company on a combined basis given the operating
synergies the Company expects to achieve, there can be no assurance that the
Company will be able to realize all expected operating and economic
efficiencies following the Acquisition.
Acquisition Terms
As noted above, under the terms of the Purchase Agreement, the Company
has agreed to pay Garrett approximately $145 million in cash at the closing
and to assume all of the obligations, liabilities and commitments of Garrett
arising out of the Garrett business with respect to the operation of the
Garrett business prior to the date on which the closing of the Acquisition
occurs. Obligations and liabilities in respect of borrowed money and current
portions of long-term bank financing and liabilities relating to or arising
from the Acquisition are not being assumed by the Company. The cash portion
of the purchase price is to be adjusted following closing based on the net
asset value of the assets and liabilities the Company acquires and assumes on
the closing date. The Company expects to consummate the Acquisition by
March 31, 1996. The consummation of the Acquisition is subject to the
satisfaction of various conditions and the closing of the transaction could
be delayed in certain circumstances through June 30, 1996 and beyond by the
mutual agreement of Garrett and the Company if those conditions are not
satisfied in a timely fashion.
In the Purchase Agreement the Garrett sellers agreed to indemnify the
Company for breaches of representations and warranties and other matters
subject to important limitations, including a $3 million aggregate limitation
on the sellers' indemnification obligations thereunder. In connection with
the purchase of the Garrett engine overhaul division from AlliedSignal in
1994, Garrett entered into a purchase agreement with AlliedSignal which
contained representations and warranties and indemnities from AlliedSignal
(the "AlliedSignal Purchase Agreement"), including indemnification for
certain environmental matters relating to the conduct of the business prior
to the sale of the business by AlliedSignal to Garrett. Under the terms of
the Purchase Agreement, at the closing of the Acquisition the Company will be
assigned and succeed to all of Garrett's rights and obligations under the
AlliedSignal Purchase Agreement, including the right to seek indemnification
for breaches of the representations and warranties made by AlliedSignal
relating to the conduct of the business prior to its acquisition by Garrett
and related environmental matters.
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PROPOSED AMENDMENTS
As noted above, the Company intends to finance the Acquisition by
issuing $125 million of Acquisition Senior Notes and $25 million of Preferred
Stock. Certain covenants in the Indenture impose restrictions on the
Company's ability to issue the Acquisition Senior Notes and to pay dividends
on the Preferred Stock. Also, although the Company does not expect to use
its revolving bank credit facility (the "Revolving Credit Facility") to
finance the Acquisition (other than to pay certain transaction expenses) and
as of the date hereof has only approximately $49 million in principal amount
outstanding thereunder, it believes it is in the Company's best interest to
amend the Indenture to permit the Company to increase the Revolving Credit
Facility from its current maximum principal amount of $90 million to a
revised maximum principal amount of $110 million, to provide for long-term
working capital needs as the business grows following the Acquisition.
Accordingly, the purpose of the Proposed Amendments is to permit the Company
to finance the Acquisition and to provide the Company with sufficient
flexibility to meet its future working capital needs.
The Proposed Amendments are described below. The text of the existing
relevant covenants of the Indenture and as they are proposed to be amended by
the Proposed Amendments is attached to this Consent Solicitation Statement as
Appendix I. Unless otherwise defined in this Consent Solicitation Statement,
capitalized terms used in the following descriptions of the existing
Indenture provisions and the Proposed Amendments are used as defined in the
Indenture.
Increased Revolving Credit Facility. The covenant limiting the ability
of the Company and its Subsidiaries to incur additional Indebtedness (the
"Debt Covenant"), currently in effect, permits the Company to have
outstanding under its Revolving Credit Facility an aggregate principal amount
of not more than $90 million. The Proposed Amendments would permit the
Company to seek to increase the permitted principal amount of the Revolving
Credit Facility to $110 million if the Company determines it is appropriate
to do so.
Acquisition Senior Notes. The Proposed Amendments would modify the
Debt Covenant to permit expressly the incurrence by the Company (guaranteed
by its subsidiaries on the same basis as the Senior Notes) of additional
Indebtedness in an aggregate principal amount not to exceed $125 million
provided it is incurred contemporaneously with the consummation of the
Acquisition and provided that the proceeds are employed to finance the
Acquisition.
Permitted Additional Indebtedness. The Debt Covenant currently permits
the Company and its Subsidiaries to incur other additional Indebtedness if
the Company's Consolidated EBITDA Coverage Ratio for the preceding four
fiscal quarters as of the time the additional debt would be incurred,
determined on a pro forma basis (including a pro forma application of the
proceeds of such debt) would have been at least 2.25 to 1.00. The Proposed
Amendments would reduce the required pro forma Consolidated EBITDA Coverage
Ratio to 2.00 to 1.00 for the period beginning on the date the Proposed
Amendments are effective and ending June 30, 1998. Thereafter, the pro forma
Consolidated EBITDA Coverage Ratio required to incur additional debt would
again be 2.25 to 1.00.
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Restricted Payments. The Indenture currently prohibits the Company
from paying cash dividends, prepaying certain debt and making other types of
restricted payments (the "Restricted Payment Covenant") unless (a) there is
no default under the Indenture, (b) the Company is then permitted to incur at
least $1.00 of additional debt pursuant to the limitation described under
"Permitted Additional Indebtedness" above and (c) the amount of a proposed
restricted payment (aggregated with all other restricted payments made after
the date of the Indenture) exceeds 50% of the cumulative consolidated net
income of the Company from October 1, 1993 to the date of the proposed
payment plus 100% of the proceeds received by the Company from the issuance
of certain equity securities after the date of the Indenture (the "Earned
Amount"). The proposed amendment of the Debt Covenant described under
"Permitted Additional Indebtedness" above would ease the restrictiveness of
that provision. In addition, the Proposed Amendments would amend the
Restricted Payment Covenant in order that the calculation of the Earned
Amount would be based on cumulative consolidated net income of the Company
from January 1, 1996 instead of from October 1, 1993, and on proceeds from
the issuance of certain equity securities after January 1, 1996 instead of
after the date of the Indenture. The adjustment to the restricted payment
calculation is being proposed in light of substantial non-cash restructuring
and multiemployer pension plan withdrawal charges made by the Company in
1994, which the Company believes are not indicative of the Company's
underlying earnings performance. If the Proposed Amendment is adopted, the
Company would not have to generate future earnings in excess of the
cumulative losses the Company has incurred from October 1, 1993 through
September 30, 1995 (which relate principally to the 1994 non-cash charges)
before earnings would be eligible to be included for purposes of determining
the permissibility of making a restricted payment. This will also enable the
Company to include the proceeds from the sale of the Preferred Stock to make
restricted payments if the Company satisfies the other conditions to making
such payments set forth in the Indenture.
SELECTED PRO FORMA FINANCIAL INFORMATION
The following selected pro forma financial information is based upon
the consolidated financial statements of each of the Company and Garrett at
and for the nine months ended September 30, 1995, adjusted to give effect to
the Acquisition. The financial statements of the Company and Garrett have
been prepared in the ordinary course of business for the purpose of providing
information with respect to the interim periods, and are subject to audit at
the close of the year. It is the opinion of the management of the Company
and Garrett that all adjustments (none of which were other than normal
recurring accruals) necessary for a fair presentation of such periods have
been included. Results of interim periods are not necessarily indicative of
results to be expected for the full year. The pro forma Income Statement
Data and Other Data is presented for the nine months ended September 30, 1995
and gives effect to the Acquisition as if it had occurred on January 1, 1995.
The pro forma information is provided to assist in understanding the
Acquisition and does not necessarily reflect the actual results of operations
that would have occurred if the operations of the Company and Garrett had
been combined during the nine months ended September 30, 1995 or the results
of operations that will be achieved by the combined companies after the
Acquisition. All information contained in the following tables should be
read in conjunction with "The Garrett Acquisition," "Acquisition Financing"
and the consolidated financial statements and related notes of the Company
and Garrett included or incorporated by reference herein.
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<TABLE>
<CAPTION>
Combined
UNC Garrett Adjustments ProForma
(dollars in thousands)
<S> <C> <C> <C> <C>
Income Statement Data
Net Sales $394,482 $250,937 $645,419
Cost of Sales 334,009 219,426 (3,580)(a) 549,855
-------- -------- --------
Gross Profit 60,473 31,511 95,564
Selling, General and (1,500)(a)
Administrative Expenses 42,474 20,151 1,890 (b) 63,015
-------- -------- --------
Operating Income 17,999 11,360 32,549
Net Interest Expenses (15,412) (2,183) (7,692)(c) (25,287)
Other Income 254 -- 254
-------- -------- --------
Earnings Before Income
Taxes $ 2,841 $ 9,177 $ 7,516
======== ======== ========
Other Data
Depreciation &
Amortization $ 9,426 $ 4,552 1,890 (b) $ 15,868
Operating Cash Flow
(EBITDA)(d) (27,679) 15,912 5,080 (d) 48,671
Ratio of EBITDA to Interest
Expense(d) 1.80x 1.92x
Capital Expenditures 5,161 4,820 9,981
Balance Sheet Data
(at September 30, 1995)
Total Assets 439,445 120,040 102,769 (e) 657,885
(1,503)(f)
(2,866)(g)
Capitalized Leases -- 5,320 5,320
Senior Debt 125,902 38,790 93,930 (h) 258,622
Total Debt 197,661 38,570 93,930 (h) 330,161
Shareholders' Equity 101,243 17,300 5,054 (i) 123,597
</TABLE>
(a) The Company has specifically identified cost reductions and other
operating income enhancements resulting from a business integration
plan which is expected to be followed subsequent to the Acquisition.
The business integration plan contemplates: (i) redirecting a portion
of Garrett's outsourced repairs on engine, aircraft and accessory parts
to Company facilities, in lieu of other vendors; and (ii) eliminating
certain management fees and consulting fees and reducing certain other
administrative costs such as insurance and professional fees previously
paid by Garrett.
The Company's business integration plan provides for the events
generating these reductions to occur in phases, beginning in the
initial year. Therefore, the pro forma expected cost savings for the
above nine month period ended September 30, 1995 reflect only a portion
of expected ongoing savings and operating income enhancements.
Assuming the Acquisition occurred on January 1, 1995 and the phase-in
of the business integration plan commenced as of such date, the
<PAGE>
<PAGE> 14
expected cost reductions, on a pro forma basis, for the nine months ending
September 30, 1995 are as follows:
<TABLE>
<S> <C>
Cost of Sales $3,580,000
Selling, general and administrative 1,500,000
Total Cost Reductions for Nine Months $5,080,000
</TABLE>
(b) Represents $3,052,000 of cost associated with the amortization of the
cost in excess of net assets acquired from Garrett, assuming the
acquisition had been consummated on January 1, 1995, offset by the
elimination of $1,162,000 of cost applicable to Garrett's amortization
of intangible assets for the nine months ended September 30, 1995.
(c) Reflects the additional interest expense of $9,875,000 for the nine
months ending September 30, 1995 that would have been incurred had the
Acquisition and the Offering taken place on January 1, 1995, offset by
elimination of interest of $2,183,000 of Garrett on senior bank debt
which is not being assumed by the Company.
(d) EBITDA reflects earnings before interest, taxes, depreciation and
amortization. This amount would be equal to the Operating Income plus
the Depreciation and Amortization. EBITDA and the ratio of EBITDA to
interest expense do not take into account certain expenses that are
reflected in the calculation of net income in accordance with generally
accepted accounting principles ("GAAP"), are not intended to represent
any measure of performance in accordance with GAAP, and should not be
considered in isolation or as a substitute for cash provided by
operating activities, net income or any other consolidated income
statement data prepared in accordance with GAAP.
The adjustment to arrive at pro forma EBITDA reflects the cumulative
effect of the previously described adjustments in note (a) above.
(e) The Acquisition will be accounted for as a purchase pursuant to APB
Opinion No. 16 "Business Combinations." The purchase cost will be
allocated to the assets and liabilities of Garrett based on their
relative fair values. Such allocations are subject to final
determination based on valuations and other studies to be performed
prior to the Closing. The final values may differ from those set
forth.
The primary increase in Total Assets is expected to be allocated to
Intangible Assets, including Goodwill.
(f) Reflects the elimination of capitalized Garrett financing costs from a
financing in July, 1994.
(g) Reflects principally the elimination of cash balances of Garrett, which
are not a part of the assets being purchased, offset by a reduction in
the historic accumulated depreciation of the Garrett assets. The pro
forma financial information assumes that the Garrett assets are valued
at a level approximately equal to their historic cost.
<PAGE>
<PAGE> 15
(h) Reflects the addition of $125,000,000 in long term senior notes and
$2,180,000 of the Revolving Credit Facility to fund the acquisition and
related cost, less the elimination of $33,250,000 of Garrett debt which
is not being assumed.
(i) Reflects the $25,000,000 of the Preferred Stock which is being issued
as a part of the Acquisition and the cumulative effect of pro forma
adjustments for the nine months of operations ended September 30, 1995
offset by the accrual of cumulative dividends on the Preferred Stock
and the elimination of Garrett's equity.
ACQUISITION FINANCING
Acquisition Senior Notes
The Company proposes to issue privately $125 million aggregate principal
amount of the Acquisition Senior Notes. It is anticipated that the
Acquisition Senior Notes will be unsecured senior obligations of the Company
ranking pari passu with existing Senior Notes. The Company expects that the
Acquisition Senior Notes will be issued pursuant to an indenture providing
covenants and limitations relating to the Acquisition Senior Notes that are
similar to those that will be contained in the Indenture relating to the
Senior Notes after giving effect to the Proposed Amendments. The Company
expects that all of the Company's subsidiaries, including the subsidiary
formed to acquire Garrett, will be guarantors of the Acquisition Senior Notes
and the Senior Notes. The Acquisition Senior Notes are expected to mature
following the time that the Senior Notes mature.
Preferred Stock
Pursuant to a Stock Purchase Agreement, dated as of October 4, 1995, the
Company has the option to sell to the purchasers named therein convertible
preferred stock of the Company with an aggregate purchase price of $25
million. The Company will be entitled at its discretion to exercise its
option in connection with consummating the Acquisition. Holders of the
Preferred Stock will be entitled to receive cumulative dividends at a rate of
8.5% per annum. The Company will be entitled, in its discretion to pay
dividends in cash or by issuing additional shares of the Company's preferred
stock (a "PIK Dividend"), or any combination thereof. If the Company pays a
PIK Dividend at any time after the third anniversary of the date of issuance
of the Preferred Stock, the annual rate of PIK Dividends payable thereafter
is subject to upward adjustment from time to time.
THE CONSENT SOLICITATION
The Company is soliciting Consents from Holders of Senior Notes as of
the close of business on February 13, 1996 (the "Record Date"), upon the
terms and subject to the conditions set forth in this Consent Solicitation
Statement, in the accompanying Consent Letter, and, except as expressly set
forth herein and therein, the Indenture.
Consents may not be revoked at any time after the later of (i) 5:00
p.m., New York City time, on February 20, 1996, and (ii) the time and date on
which the Company receives Requisite Consents (as defined herein) for the
Senior Notes (such later time and date, the "Consent Date") even if the
Consent Solicitation is extended beyond that time. If Requisite Consents for
the Senior Notes are received (and not revoked) prior to the Expiration Date
and the other conditions set forth herein are satisfied or waived, the
<PAGE>
<PAGE> 16
Company will, substantially contemporaneously with and subject to the
consummation of the Acquisition (a) with the Guarantors and the Trustee,
execute the Supplemental Indenture documenting and giving effect to the
Proposed Amendments and (b) pay to each Holder of Senior Notes as of the
Record Date who has delivered (and not revoked) a valid Consent prior to the
Expiration Date $10.00 for each $1,000 in principal amount of the Senior
Notes in respect of which the Consent has been delivered (the "Consent Fee").
Thereafter, all current Holders of the Senior Notes, including non-consenting
Holders, and all subsequent Holders of the Senior Notes will be bound by the
Proposed Amendments. No accrued interest will be paid on the Consent Fee.
If the Consent Solicitation is terminated for any reason before the
Expiration Date or the Proposed Amendments do not become effective, any
Consents received by the Trustee will be voided, the Supplemental Indenture
will not be executed and the Consent Fee will not be paid.
Notwithstanding any subsequent transfer of its Senior Notes, any Holder
of Senior Notes as of the Record Date whose properly executed Consents have
been received (and not revoked) prior to the Expiration Date will be eligible
to receive any Consent Fee payable in respect of Senior Notes. Holders, as
of the Record Date, who do not deliver Consents or deliver Consents after the
Expiration Date will not be entitled to receive the Consent Fee, even though
the Supplemental Indenture, if it is executed, will be binding on them.
Requisite Consents
Holders of Senior Notes as of the Record Date must grant (and not
revoke) valid Consents in respect of a majority in aggregate principal amount
(excluding Senior Notes held by the Company or its affiliates) of the
outstanding Senior Notes in order to approve the Proposed Amendments (the
"Requisite Consents"). At the date of this Consent Solicitation,
$100,000,000 in principal amount of the Senior Notes were issued and
outstanding.
Expiration Date; Extensions; Amendment
The Consent Solicitation will be open until 5:00 p.m., New York City
time, on February 20, 1996 unless extended by the Company. The time and date
of expiration of the Consent Solicitation is herein referred to as the
"Expiration Date." Consents may be revoked at any time up to the Consent
Date, but may not be revoked thereafter. See "--Revocation of Consents."
The Company reserves the right to extend the Consent Solicitation at any
time and from time to time by giving oral or written notice to the
Solicitation Agent. For purposes of the Consent Solicitation, a notice given
before 9:00 a.m., New York City time, on any day shall be deemed to have been
made on the preceding day. Any such extension will be followed as promptly
as practicable by notice thereof by press release or other public
announcement (or by written notice to the registered Holder as of the Record
Date). Such announcement or notice may state that the Company is extending
the Consent Solicitation for a specified period of time or on a daily basis.
The Company expressly reserves the right for any reason (a) to abandon,
terminate or amend the Consent Solicitation at any time prior to the
Expiration Date therefor by giving oral or written notice of such termination
to the Solicitation Agent, and (b) not to proceed with the Acquisition. If
the Company does not proceed with the Acquisition or if the other conditions
<PAGE>
<PAGE> 17
to the execution of the Supplemental Indenture and the payment of the Consent
Fee are not satisfied or waived, the Supplemental Indenture will not be
executed, the Proposed Amendments will not become effective and no Consent
Fee will be paid. Any such action by the Company will be followed as
promptly as practicable by notice thereof by press release or other public
announcement (or by written notice to the Holders as of the Record Date).
Consent Procedures
Only those persons who are Holders as of the Record Date may execute and
deliver a Consent. A beneficial owner of Senior Notes who is not the Holder
as of the Record Date (e.g., a beneficial holder whose Senior Notes are
registered in the name of a nominee such as a bank or a brokerage firm) must
arrange for the registered Holder either (a) to execute a Consent Letter and
deliver it either to the Trustee on such beneficial owner's behalf or to such
beneficial owner for forwarding to the Trustee by such beneficial owner or
(b) to forward a duly executed proxy from the registered Holder authorizing
the beneficial holder to execute and deliver a Consent Letter with respect to
the Senior Notes on behalf of such registered Holder. A form of proxy that
may be used for such purpose is included along with the form of Consent
Letter. For purposes of this Consent Solicitation Statement (a) the term
"record holder" or "registered owner" shall be deemed to include DTC
participants and (b) DTC has authorized DTC participants to execute Consents
as if they were registered Holders.
Giving a Consent will not affect a Holder's right to sell or transfer
the Senior Notes. All Consents received (and not revoked) prior to the
Expiration Date will be effective notwithstanding a record transfer of such
Senior Notes subsequent to the Record Date, unless the registered Holder of
such Senior Notes as of the Record Date revokes such Consent prior to the
Consent Date by following the procedures set forth under "Revocation of
Consents" below.
HOLDERS OF SENIOR NOTES AS OF THE RECORD DATE WHO WISH TO CONSENT SHOULD
MAIL, HAND DELIVER, SEND BY OVERNIGHT COURIER OR FACSIMILE (CONFIRMED BY
PHYSICAL DELIVERY) THEIR PROPERLY COMPLETED AND EXECUTED CONSENTS TO THE
TRUSTEE AT THE ADDRESS SET FORTH ON THE BACK COVER PAGE HEREOF AND ON THE
CONSENT LETTER IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH HEREIN AND
THEREIN. CONSENTS SHOULD BE DELIVERED TO THE TRUSTEE, AND NOT THE COMPANY OR
THE SOLICITATION AGENT. HOWEVER, THE COMPANY RESERVES THE RIGHT TO ACCEPT
ANY CONSENT RECEIVED BY THE COMPANY OR THE SOLICITATION AGENT. HOLDERS
SHOULD NOT TENDER OR DELIVER SENIOR NOTES AT ANY TIME.
All Consents that are properly completed, signed and delivered to the
Trustee, and not revoked, prior to the applicable Expiration Date, will be
given effect in accordance with the specifications thereof. Holders who
desire to consent to the Proposed Amendments should mark the "For" box on,
and complete, sign and date the Consent Letter included herewith and mail,
deliver or send by overnight courier or facsimile (confirmed by physical
delivery) the signed Consent Letter to the Trustee at the address listed on
the back cover page of this Consent Solicitation statement and on the Consent
Letter. If none of the boxes on the Consent Letter are marked, but the
Consent Letter is otherwise properly completed and signed, the Holder will be
deemed to have consented to the Proposed Amendments.
<PAGE>
<PAGE> 18
Consents by the Holder(s) of Senior Notes as of the Record Date must be
executed in exactly the same manner as such registered Holder(s) name(s)
appear on the Senior Notes. If Senior Notes to which a Consent relates are
held of record by two or more joint holders, all such Holders must sign the
Consent. If a Consent is signed by a trustee, partner, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person must so
indicate when signing and must submit with the Consent appropriate evidence
of authority to execute the Consent. In addition, if a Consent relates to
less than the total principal amount of Senior Notes registered in the name
of such Holder, the Holder must list the serial numbers and principal amount
of Senior Notes registered in the name of such Holder to which the Consent
relates. If Senior Notes are registered in different names, separate
Consents must be executed covering each form of registration. If a Consent
is executed by a person other than the registered Holder on the Record Date,
it must be accompanied by the proxy set forth on the form of Consent duly
executed by such registered Holder.
The registered ownership of a Senior Note as of the Record Date shall
be proven by the Trustee as registrar of the Senior Notes. All questions as
to the validity, form and eligibility (including time of receipt) regarding
the Consent procedures will be determined by the Company in its sole
discretion, which determination will be conclusive and binding subject only
to such final review as may be prescribed by the Trustee concerning proof of
execution and of ownership. The Company reserves the right to reject any or
all Consents that are not in proper form or the acceptance of which could, in
the opinion of the Company or its counsel, be unlawful. The Company also
reserves the right, subject to such final review as the Trustee prescribes
for proof of execution and ownership, to waive any defects or irregularities
in connection with deliveries of particular Consents. Unless waived, any
defects or irregularities in connection with deliveries of Consents must be
cured within such time as the Company determines. None of the Company nor
any of its affiliates, the Solicitation Agent, the Trustee or any other
person shall be under any duty to give any notification of any such defects
or irregularities or waiver, nor shall any of them incur any liability for
failure to give such notification. Deliveries of Consents will not be deemed
to have been made until any irregularities or defects therein have been cured
or waived. The Company's interpretations of the terms and conditions of the
Consent Solicitation shall be conclusive and binding.
Revocation of Consents
Each properly completed and executed Consent will be counted,
notwithstanding any transfer of the Senior Notes to which such consent
relates, unless the procedure for revocation of Consents described below has
been followed.
The Indenture provides that, at any time prior to (but not after) the
date the Proposed Amendments become effective, a Holder may revoke its
consent by so notifying the Trustee. Notwithstanding such Indenture
provision, each Holder who delivers a Consent pursuant to the Consent
Solicitation will agree in the Consent Letter that it will not revoke its
Consent after the Consent Date and that until such time it will not revoke
its Consent except in accordance with the conditions and procedures for
revocation of Consents provided below.
<PAGE>
<PAGE> 19
Prior to the Consent Date, any Holder may revoke any Consent given as
to its Senior Notes or any portion of such Senior Notes (in multiples of
$1,000). A Holder of Senior Notes desiring to revoke a Consent must, prior
to that time, deliver to the Trustee at the address set forth on the back
cover page of this Consent Solicitation Statement and on the Consent Letter
a written revocation of such Consent (which may be in the form of a
subsequent Consent marked "Against" the Proposed Amendments) containing the
name of such registered Holder, the serial numbers of the Senior Notes to
which such revocation relates, the principal amount of Senior Notes to which
such revocation relates and the signature of such registered Holder. No
holder may revoke a Consent after the Consent Date.
The revocation must be executed by such Holder in the same manner as the
Holder's name appears on the Consent to which the revocation relates. If a
revocation is signed by a trustee, partner, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting
in a fiduciary or representative capacity, such person must so indicate when
signing and must submit with the revocation appropriate evidence of authority
to execute the revocation. A Holder may revoke a Consent only if such
revocation complies with the provisions of this Consent Solicitation
Statement. Only a Holder of Senior Notes as of the Record Date as reflected
in the register of the Trustee is entitled to revoke a Consent previously
given. A beneficial owner of Senior Notes who is not the Holder as of the
Record Date of such Senior Notes must arrange with the registered Holder to
execute and deliver to the Trustee on such beneficial owner's behalf, or to
such beneficial owner for forwarding to the Trustee by such beneficial owner,
either (a) a revocation of any Consent already given with respect to such
Senior Notes or (b) a duly executed proxy from the registered Holder
authorizing such beneficial owner to act on behalf of the registered Holder
as to such Consent. A revocation of a Consent may only be rescinded by the
execution and delivery of a new Consent, in accordance with the procedures
herein described by the Holder who delivered such revocation.
The Company reserves the right to contest the validity of any revocation
and all questions as to validity (including the time of receipt) of any
revocation will be determined by the Company in its sole discretion, which
determination will be conclusive and binding subject only to such final
review as may be prescribed by the Trustee concerning proof of execution and
ownership. None of the Company, any of its affiliates, the Solicitation
Agent, the Trustee or any other person will be under any duty to give
notification of any defects or irregularities with respect to any revocation
nor shall any of them incur any liability for failure to give such
notification.
Conditions of Execution of Supplemental Indenture
and Payment of Consent Fee
The execution of the Supplemental Indenture and the payment of the
Consent Fee are conditioned on (a) there being received (and not revoked),
prior to the Expiration Date, the Requisite Consents, (b) the absence of any
law or regulation which would, and the absence of any injunction or action or
other proceeding (pending or threatened) which (in the case of any action or
proceeding, if adversely determined) would, make unlawful or invalid or
enjoin the implementation of any Proposed Amendment, the Acquisition, the
<PAGE>
<PAGE> 20
entering into of the Supplemental Indenture or the payment of any Consent Fee
or question the legality or validity thereof, (c) the concurrent consummation
of the Acquisition and the Acquisition Financing, and (d) the Company's
receipt of the consent of the lenders who are parties to the Revolving Credit
Facility to the Acquisition and the Company's issuance of the Acquisition
Senior Notes.
The Consent Solicitation may be abandoned or terminated by the Company
at any time prior to the Expiration Date, for any reason, in which case
Consents with respect to the Senior Notes will be voided and no Consent Fee
will be paid, whether or not the Acquisition is consummated. Each of the
conditions to the Consent Solicitation, the execution of the Supplemental
Indenture and the payment of the Consent Fee set forth in this Consent
Solicitation Statement are for the sole benefit of the Company and may be
waived by the Company at any time.
Backup Income Tax Withholding
For federal income tax purposes, the Company will be required to backup
withhold in an amount equal to 31 percent of the Consent Fee payable to a
Holder of a Senior Note unless (a) the Holder is a corporation or comes
within certain other exempt categories and, when required, demonstrates that
fact, or (b) provides a taxpayer identification number, certifies as to no
loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. Information
concerning backup withholding and appropriate forms are included in the
Consent Letter.
THERE ARE CERTAIN OTHER TAX CONSEQUENCES IN CONNECTION WITH THE CONSENT
SOLICITATION, INCLUDING THE RECEIPT OF THE CONSENT FEE. HOLDERS ARE
ENCOURAGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE AND
FOREIGN TAX CONSEQUENCES TO THEM OF THE RECEIPT OF THE CONSENT FEE AND
CONSENT SOLICITATION.
Solicitation Agent and Information Agent
The Company has retained CS First Boston as Solicitation Agent in
connection with the Consent Solicitation. The Solicitation Agent will
solicit Consents and will receive a customary fee for such services and
reimbursement for reasonable out-of-pocket expenses. The Company has agreed
to indemnify the Solicitation Agent against certain liabilities and expenses,
including liabilities under the securities laws in connection with the
Consent Solicitation.
The Company has retained MacKenzie Partners, Inc. to act as Information
Agent (the "Information Agent"). Requests for assistance in completing and
delivering Consents or for additional copies of this Consent Solicitation
Statement or the form of Consent Letter may be directed to the Information
Agent at its address and telephone numbers set forth on the back cover of
this Consent Solicitation Statement.
<PAGE>
<PAGE> 21
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements of Garrett Aviation
Services as of and for the six-month period ended
December 31, 1994 ........................................F-1
Unaudited Consolidated Financial Statements of Garrett Aviation
Servicesas of and for the nine-month period ended
September 30, 1995 ..................................... F-15
<PAGE>
<PAGE> 22
Report of Independent Auditors
The Partners of
CFC Aviation Services, L.P. (dba Garrett Aviation Services)
We have audited the accompanying consolidated balance sheet of
CFC Aviation Services, L.P. (dba Garrett Aviation Services) as
of December 31, 1994, and the related consolidated statements of
income, partners' capital and cash flows for the period from
July 1, 1994 (date of inception) to December 31, 1994. These
financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on
these financial statements 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 financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Garrett Aviation Services at December 31,
1994, and the consolidated results of its operations and its
cash flows for the period from July 1, 1994 to December 31,
1994, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
March 27, 1995
<PAGE>
<PAGE> 23
Garrett Aviation Services
Consolidated Balance Sheet
December 31, 1994
(in thousands)
<TABLE>
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 8,753
Accounts receivable, net of allowance for
doubtful accounts of $500,000 at
December 31, 1994 38,680
Inventories, net 14,482
Prepaid expenses and other current assets 956
-------
Total current assets 62,871
Property and equipment, net 27,226
Excess of purchase price over net assets, net 6,297
-------
Total assets $96,394
=======
Liabilities and partners' capital
Current liabilities:
Accounts payable $32,023
Accrued expenses 9,940
Current maturities of long-term debt 5,000
Distributions payable 1,008
-------
Total current liabilities 47,971
Revolving credit agreement 8,000
Long-term debt 27,209
-------
Total liabilities 83,180
Partners' capital 13,214
-------
Total liabilities and partners' capital $96,394
=======
See accompanying notes.
</TABLE>
<PAGE>
<PAGE> 24
Garrett Aviation Services
Consolidated Statement of Income
Period from July 1, 1994 (date of inception)
to December 31, 1994
(in thousands)
<TABLE>
<S> <C>
Net sales $144,200
Cost of sales 130,224
--------
Gross profit 13,976
Selling, general and administrative 9,990
--------
Operating profit 3,986
Interest expense 1,810
Other income (68)
--------
Net income $ 2,244
========
See accompanying notes.
</TABLE>
<PAGE>
<PAGE 25>
Garrett Aviation Services
Consolidated Statement of Partners' Capital
Period from July 1, 1994 (date of inception)
to December 31, 1994
(in thousands)
<TABLE>
<CAPTION>
General Limited Total
Partner Partner
<S> <C> <C> <C>
Initial contributions
of cash $ 120 $11,880 $12,000
Net income 22 2,222 2,244
Distributions provided (10) (1,020) (1,030)
------- ------- -------
Partners' capital at
December 31, 1994 $ 132 $13,082 $13,214
======= ======= =======
See accompanying notes.
</TABLE>
<PAGE>
<PAGE> 26
Garrett Aviation Services
Consolidated Statement of Cash Flows
Period from July 1, 1994 (date of inception)
to December 31, 1994
(in thousands)
<TABLE>
<S> <C>
Operating activities
Net income $ 2,244
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciations and amortization 2,984
Provision for doubtful accounts 500
Provision for obsolete inventory 395
Accretion of lease obligation 77
Changes in operating assets
and liabilities:
Accounts receivable (8,413)
Inventories (359)
Prepaid expenses and other
current assets (744)
Accounts payable 27,478
Accrued expenses 4,392
--------
Net cash provided by
operating activities 28,554
Investing activities
Acquisitions, net of cash received (64,603)
Purchases of property and equipment (2,176)
--------
Net cash used by investing activities (66,779)
Financing activities
Proceeds from revolving
credit agreement 18,000
Repayment of revolving
credit agreement (10,000)
Proceeds from issuance of debt 52,277
Payments of debt (25,277)
Cash contributions from partners 12,000
Cash distributions to partners (22)
--------
Net cash provided by
financing activities 46,978
--------
Net increase in cash and equivalents 8,753
Cash and cash equivalents at
beginning of period -
--------
Cash and cash equivalents
at end of period $ 8,753
========
See accompanying notes.
</TABLE>
<PAGE>
<PAGE> 27
Garrett Aviation Services
Notes to Consolidated Financial Statements
Period from July 1, 1994 (date of inception)
to December 31, 1994
Summary of Significant Accounting Policies
Formation and Description of Operations
Garrett Aviation Services (Garrett) is the d.b.a. of a limited
partnership with the legal name of CFC Aviation Services, L.P.
The partnership was formed as of June 30, 1994 and began
operations July 1, 1994 upon the acquisition of certain assets
and the assumption of certain liabilities of AlliedSignal
discussed in the "Acquisitions" footnote herein. Garrett is
owned 99 percent by CFC Aviation Holding, L.P. as the limited
partner and 1 percent by CFC Aviation, Inc. as the general
partner.
Garrett provides turbine-powered airframe maintenance and
related services, technical support and turbine engine repair,
overhaul and related services on turbine engine products to
general aviation operators and regional commercial airlines.
The services are provided at airport hangar locations throughout
the United States.
Basis of Presentation
The financial statements include all accounts of Garrett and its
99 percent owned subsidiary (see "Acquisitions" below) after
elimination of all significant intercompany transactions and
balances.
Cash and Equivalents
Garrett maintains zero-balance accounts to maximize its cash
flows through its disbursement arrangements. At December 31,
1994, there was $9,598,000 of checks which had been drawn and
not yet been presented for payment against Garrett's cash
accounts. Such amounts are included in accounts payable. Cash
and equivalents include instruments with remaining maturities of
three months or less at the time of acquisition and at December
31, 1994 included $7,264,000 that was invested in money market
mutual funds consisting of bank certificates of deposit, time
deposits, bankers acceptances, commercial paper and other short-
term obligations. These investments are stated at cost which
approximates market.
Inventories
Materials inventory consists of purchased parts and is stated at
the lower of cost or market, with cost being determined on the
average cost basis. Work-in-process consists principally of
<PAGE>
<PAGE> 28
Garrett Aviation Services
Notes to Consolidated Financial Statements (continued)
Summary of Significant Accounting Policies (continued)
maintenance and repair projects in process and includes
material, labor and related overhead. Consigned inventory of
engine parts is not reflected in the inventory balance of
Garrett and is purchased and immediately charged to cost of
sales upon sale of the related parts to the customer.
Property and Equipment
Property and equipment is recorded at cost, and depreciation is
computed over the estimated useful lives of the assets using the
straight-line method. Assets recorded under capital leases and
leasehold improvements are amortized over the shorter of their
useful lives or the term of the related leases by use of the
straight-line method.
Excess of Purchase Price Over Net Assets
The excess of purchase price over net assets consists of the
excess over fair value on the purchase transactions which is
amortized over fifteen years based upon the life of the
operating agreement between Garrett and AlliedSignal (see
Operating Agreements footnote) and direct acquisition costs
which are amortized over one to five years based on the nature
of the cost. Accumulated amortization at December 31, 1994 was
$976,000.
Concentration of Credit Risk
Substantially all of the revenues are derived from customers in
the general aviation market by direct sales and through repairs
and overhaul operations. Garrett also derives revenues from
AlliedSignal for prepaid maintenance service and warranty
programs sponsored by AlliedSignal, who also is a major supplier
of virtually all of the related engine parts.
Revenue Recognition
Revenue from engine and airframe maintenance services is
recognized upon completion of the repair. Revenue from parts
sales is recognized upon shipment of the part to customers.
Income Taxes
Under the Internal Revenue Code, a partnership is not a taxable
entity, and accordingly, no provision for income taxes has been
included in the accompanying financial statements.
<PAGE>
<PAGE> 29
Garrett Aviation Services
Notes to Consolidated Financial Statements (continued)
Acquisitions
Garrett entered into an agreement effective June 30, 1994 to
acquire the "Hangar Facilities" of AlliedSignal. The final
price was $62,490,000 and was financed through $12,000,000 of
partners' capital with the balance being funded with debt. The
acquisition was accounted for as a purchase. The purchase price
was allocated to assets acquired based upon their fair market
values at the date of acquisition, as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Accounts receivable $ 29,236
Inventories 13,194
Prepaid expenses and
other current assets 148
Property and equipment 24,434
Excess of purchase price
over net assets 6,762
Accounts payable (2,218)
Accrued expenses (3,934)
Capital lease obligations (5,132)
--------
$ 62,490
========
</TABLE>
On October 26, 1994, Garrett purchased 99 percent of certain
assets and assumed certain liabilities relating to an airframe
maintenance, support and fueling business known as "The Jet
Center" for $2,420,000. The results of operations of the
acquired business have been included in the Garrett financial
statements from the date of acquisition. The one percent of The
Jet Center not owned by the Partnership is owned by CFC
Aviation, Inc.
The acquisition of The Jet Center was accounted for by the
purchase method of accounting. The purchase price was allocated
to assets acquired based upon their fair market values at the
date of acquisition, as follows:
<PAGE>
<PAGE> 30
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Cash $ 307
Accounts receivable 1,531
Inventories 1,324
Prepaid expenses
and other current assets 64
Property and equipment 2,624
Excess of purchase price
over net assets 511
Accounts payable (2,327)
Accrued expenses (1,614)
--------
$ 2,420
========
</TABLE>
Operating Agreements
In conjunction with the purchase of the Hangar Facilities, the
Partnership entered into an Operating Agreement with
AlliedSignal for a minimum term of 15 years covering certain
critical aspects of the business. As a result of the agreement,
Garrett conducts a significant amount of business with the
seller. Some of the key provisions of the agreement include:
Consigned Inventory. Garrett is permitted to hold on
consignment certain new spares, repair parts and
exchange parts supplied by the seller. Such inventory
is held under the control of Garrett but is not
purchased by Garrett until the part is sold to the
ultimate customer. Included in cost of sales during
the six months ended December 31, 1994, were purchases
of approximately $68,000,000 under this arrangement.
Prepaid Maintenance Service Plans. Garrett performs
certain maintenance services for eligible customers
under the provisions of prepaid maintenance service
plans offered by AlliedSignal. Garrett is reimbursed
for its costs adjusted for performance incentives and
disincentives as defined in the Operating Agreement.
Total revenue from these plans was approximately
$43,000,000 for the six months ended December 31,
1994.
Warranty. Garrett also performs certain warranty
services for the benefit of the seller which is
recorded as revenue based upon the agreed upon repair
schedule in the Operating Agreement. Revenue
recognized on these services for the six months ended
December 31, 1994, was approximately $10,000,000.
<PAGE>
<PAGE> 31
The Operating Agreement is subject to termination subsequent to
the expiration of its 15-year term with one-year prior notice.
It is further subject to earlier termination under certain
circumstances which include, but are not limited to, mutual
agreement, certain breaches, bankruptcy, customer satisfaction
deficiencies and other criteria. At December 31, 1994, Garrett
had accounts receivable from AlliedSignal of $15,782,000, and
had accounts payable to AlliedSignal of $17,634,000.
Inventories
Inventories at December 31, 1994, consisted of:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Materials $ 8,319
Work-in-process 7,874
-------
16,193
Less: reserves 1,711
-------
$14,482
=======
</TABLE>
Property and Equipment
Property and equipment at December 31, 1994, consisted of:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Leasehold improvements $ 7,946
Machinery and equipment 19,007
Information systems and data
handling equipment 431
Construction in progress 1,850
-------
29,234
Less: accumulated depreciation
and amortization 2,008
-------
$27,226
=======
</TABLE>
Included in property and equipment are capitalized leases with
a cost of $3,319,000 and accumulated amortization of $72,000.
<PAGE>
<PAGE> 32
Revolving Credit Agreement
Garrett has a Revolving Credit Agreement as part of its primary
Bank Credit Agreement (the overall agreement collateralizes
substantially all of Garrett's assets), which matures December
31, 1999 unless it is in default, and provides for maximum
borrowings of up to $27,000,000 subject to reduction for
outstanding letters of credit of up to $5,000,000. Unused
borrowings available at December 31, 1994 are $19,000,000, which
is further reduced by outstanding letters of credit of $344,000
as of December 31, 1994. Interest rates are determined at the
time of borrowing and are based on the lender's base rate, plus
a margin of 0.75 percent to 0.0 percent based on operating
performance measures, or a Eurodollar rate, plus a margin of 2.0
percent to 1.0 percent based on operating performance measures.
Interest on outstanding balances under the Revolving Credit
Agreement is payable either monthly, quarterly or semiannually
dependent upon whether the borrowing is a base rate or
Eurodollar rate loan. At December 31, 1994, $8,000,000 was
outstanding under the Revolving Credit Agreement of which the
interest rate was 7.06 percent on $5,000,000 of the balance and
9.0 percent on the remaining $3,000,000. The Bank Credit
Agreement contains various restrictive covenants on financial
ratios, capital expenditures and distributions among other
restrictions.
Long-Term Debt
Long-term debt at December 31, 1994, consisted of:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Term loan $27,000
Lease obligations 5,209
-------
32,209
Less current maturities 5,000
-------
$27,209
=======
</TABLE>
The Term Loan had an initial principal amount of $27,000,000 and
annual principal payments of $5,000,000 in 1995 and $5,500,000
thereafter. Interest of the Term Loan is payable on the same
basis and at the same rates as set forth for the Revolving
Credit Agreement. The term loan is part of the Bank Credit
Agreement that also includes the Revolving Credit Agreement.
Significant terms, interest and collateral are the same as set
forth above in the Revolving Credit Agreement footnote. At
December 31, 1994, the interest rate on the term loan was 7.06
percent.
<PAGE>
<PAGE> 33
Garrett is required under the terms of its credit agreement to
maintain an interest rate swap to the extent of $20,000,000 from
August 5, 1994 through August 5, 1996, and has elected to enter
into a $10,000,000 swap from August 6, 1996 to August 5, 1997
which effectively adjusts the variable interest rate on this
portion of Garrett's debt to a fixed 6.67 percent plus the
margin as defined in the Bank Credit Agreement (the actual rate
as defined in the swap at December 31, 1994 was 5.73 percent
plus the margin). Garrett is required to make quarterly
settlements on the rate differentials and records a charge or
credit to interest expense at the end of each period for the
impact of the swap. At December 31, 1994 Garrett had accrued
$28,000 for the impact of the swap for the period from November
6, 1994 through December 31, 1994.
Lease obligations include two leases, the first of which relates
to amounts accrued in relation to a lease funded by a
municipality through a $4,254,000 issue of tax-exempt bonds to
finance certain hangar leasehold improvements which is accounted
for as a capital lease. These bonds were issued by the
respective city's airport authority prior to the acquisition and
were guaranteed by AlliedSignal. At the time of the
acquisition, Garrett assumed the $4,254,000 lease obligation and
related leasehold improvement asset, and under a sublease
agreement, Garrett reimburses a monthly lease payment to
AlliedSignal in the amount of the monthly rental due on the
lease which equals the municipality's interest costs on the tax
exempt bonds. This monthly payment is recorded as interest
expense. The second lease has a $4,400,000 balloon payment due
in September 2018 and Garrett records annual rent expense in an
amount which equals the lessor's interest costs on the debt
issued for the leasehold, and records an additional $151,000 of
expense annually to establish the liability necessary to satisfy
the final payment. At December 31, 1994, $955,000 has been
accrued toward the final obligation. Interest rates on both
obligations are guaranteed by AlliedSignal at four percent
through June 1997 and five percent through December 1999.
Thereafter, the interest rates will be variable based on the
rate attached to the bonds.
Principal maturities on long-term debt at December 31, 1994, in
the aggregate are as follows:
<PAGE>
<PAGE> 34
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995 $ 5,000
1996 5,500
1997 5,500
1998 5,500
1999 5,500
Thereafter 5,209
-------
$32,209
=======
</TABLE>
Total interest expense paid by Garrett during the six months
ended December 31, 1994 on all forms of borrowing was
approximately $650,000.
Lease Commitments
The Company has various noncancelable operating leases relating
principally to real property, which expire at various dates
through 2018.
Rental expense for the period from July 1, 1994 to December 31,
1994 was approximately $1,374,000. At December 31, 1994, future
minimum rental commitments under noncancelable operating leases
with a term in excess of one year are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995 $ 2,984
1996 2,525
1997 2,281
1998 2,100
1999 1,527
Thereafter 3,925
--------
$ 15,342
========
</TABLE>
Related Parties
Garrett paid approximately $150,000 during the six months ended
December 31, 1994 for management fees to entities that are
partners in Garrett. Such management fee arrangements call for
payment of $300,000 per year beginning July 1, 1994 to one of
the partner groups which is to continue as long as their
ownership interest equals or exceeds 20 percent of their initial
ownership interest, and an additional $120,000 per year to
another of the partner groups beginning July 1, 1995 which is to
continue as long as their ownership interest exceeds 20 percent
of their ownership interest.
<PAGE>
<PAGE> 35
Under the terms of the Bank Credit Agreement, Garrett is
permitted to distribute to its partners an amount equal to the
maximum federal and state tax rates applied to taxable income
from the partnership attributable to the partners. During the
six months ended December 31, 1994, Garrett accrued $1,030,000
toward such expected distribution of which $22,000 was paid
prior to December 31, 1994 and the balance is scheduled to be
paid by March 31, 1995. Garrett anticipates that taxable income
from the six months ended December 31, 1994 attributable to the
partners will exceed net income for financial reporting purposes
and that additional distributions will be required to be
provided for in 1995 with respect to 1994 results.
Benefit Plan
During 1994, Garrett established the Garrett Aviation Services
Savings Plan covering substantially all employees who have
completed 12 consecutive months of service with Garrett or its
predecessor acquiree businesses. Under the terms of the Plan,
employees may make voluntary contributions up to 15 percent of
their base compensation subject to Internal Revenue Service
limitations. The Company will match 50 percent of employee
contributions up to six percent of an employee's base
compensation. Contributions to the Plan during the six months
ended December 31, 1994 were approximately $316,000.
<PAGE>
<PAGE> 36
Garrett Aviation Services
Unaudited Consolidated Balance Sheet
September 30, 1995
(in thousands)
<TABLE>
<S> <C>
Assets
Current Assets:
Cash and cash equivalents $ 7,438
Accounts receivable,
net of allowance for doubtful
accounts of $512,000 at
September 30, 1995 66,129
Inventories, net 11,713
Prepaid expenses and other current assets 923
--------
Total current assets 86,203
Property and equipment, net 28,683
Excess of purchase price over
net assets, net 5,154
--------
$120,040
========
Liabilities and partners' capital
Current liabilities:
Accounts payable $ 46,523
Accrued expenses 9,793
Current maturities of long-term debt 5,500
Distributions 2,314
--------
Total current liabilities 64,130
Revolving credit agreement 14,000
Long-term debt 24,610
--------
Total liabilities 102,740
Partners' Capital 17,300
--------
Total liabilities and partners' capital $120,040
========
</TABLE>
<PAGE>
<PAGE> 37
Garrett Aviation Services
Unaudited Consolidated Statement of Income
Nine Months Ended September 30, 1995
(in thousands)
<TABLE>
<S> <C>
Net Sales $250,937
Cost of Sales 219,426
--------
Gross Profit 31,511
Selling, general and administrative 20,151
--------
Operating profit 11,360
Interest expense 2,183
--------
Net Income $ 9,177
========
</TABLE>
<PAGE>
<PAGE> 38
Garrett Aviation Services
Unaudited Consolidated Statement of Partners' Capital
Nine Months Ended September 30, 1995
(in thousands)
<TABLE>
<CAPTION> General Limited Total
Partner Partner
<S> <C> <C> <C>
Partners' capital at beginning
of period $ 132 $13,082 $13,214
Net income 92 9,085 9,177
Distributions provided (51) (5,040) (5,091)
------- ------- -------
$ 173 $17,127 $17,300
======= ======= =======
</TABLE>
<PAGE>
<PAGE> 39
Garrett Aviation Services
Unaudited Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1995
(in thousands)
<TABLE>
<S> <C>
Operating activities
- --------------------
Net Income $ 9,177
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,552
Provision for doubtful accounts 12
Provision for obsolete inventory 687
Accretion of lease obligation 111
Changes in operating assets and liabilities:
Accounts receivable (27,461)
Inventories 2,082
Prepaid expenses and other currenT
assets 33
Accounts payable 14,500
Accrued expenses (107)
Net cash provided by operating activities 3,586
Investing activities
Purchases of property and equipment (4,820)
Other (46)
--------
Net cash used by investing activities (4,866)
Financing activities
Proceeds from revolving credit agreement 25,000
Repayment of revolving credit agreement (19,000)
Payments of debt (2,250)
Cash distributions to partners (3,785)
--------
Net cash used by financing activities (35)
--------
Net decrease in cash and equivalents (1,315)
Cash and cash equivalents at
beginning of period 8,753
--------
Cash and cash equivalents
at end of period $ 7,438
========
</TABLE>
<PAGE>
<PAGE> 40
APPENDIX I
Amended Covenants
Set forth below is a description of the manner in which the Debt Covenant
and the Restricted Payments Covenant are proposed to be amended.
Capitalized terms not otherwise defined below shall have the meanings
given to them in the Indenture. The Company will provide copies of the
Indenture to any Holder upon request.
Debt Covenant
The Debt Covenant is set forth in Section 4.05 of the Indenture
"Limitation on Additional Indebtedness." Section 4.05(a)(2), Section
4.05(a)(4), Section 4.05(a)(9) and Section 4.05(a)(10) of the Indenture
will be deleted and the following inserted in lieu thereof.
New Section 4.05(a)(2):
(2) Indebtedness of the Company at any time outstanding under the
Revolving Credit Facility not to exceed $110 million outstanding at any
one time;
New Section 4.05(a)(4):
(4) Indebtedness of the Company (and guaranteed by the Subsidiaries on
the same basis as the Securities) evidenced by senior debt securities in
an aggregate principal amount not to exceed $125 million issued
contemporaneously with and to finance the acquisition of assets of Garrett
Aviation Services ("Garrett") pursuant to an Asset Purchase Agreement,
dated January 15, 1996, as the same may from time to time be amended;
New Section 4.05(a)(9):
(9) additional Indebtedness of the Company and the Subsidiaries not
outstanding as of the date hereof if the Consolidated EBITDA Coverage
Ratio of the Company for its four full fiscal quarters immediately
preceding the date such additional Indebtedness is created, incurred,
assumed or guaranteed (the "Incurrence Date") determined on a pro forma
basis (including a pro forma application of the net proceeds of such
Indebtedness) as if such additional Indebtedness had been created,
incurred, assumed or guaranteed and any related transactions or
acquisitions had been consummated, at the beginning of such four quarter
period, for any Incurrence Date occurring during the period set forth
below, would have been at least the amount set forth below for such
period:
Period Ratio
Through June 30, 1998 2.00:1
July 1, 1998 and 2.25:1
thereafter
and
<PAGE>
<PAGE> 41
New Section 4.05(a)(10):
(10) Indebtedness of the Company and the subsidiaries, all of the net
proceeds, if any, of which (after reasonable fees, expenses and costs,
related to the incurrence of such Indebtedness) are applied entirely to
repay or to refund outstanding Indebtedness permitted under clauses (1),
(2), (3), (4) and (9) above and this clause (10) and any extensions or
renewals of outstanding Indebtedness under clauses (2), (3), (4) and (9)
and this clause (10) ("Refinancing Indebtedness"); provided, however, that
(A) the maximum principal amount of the Refinancing Indebtedness permitted
under this paragraph (10) shall not exceed the maximum principal amount
outstanding (or, in the case of clause (2) above, available) and accrued
interest of the Indebtedness to be repaid, refunded or refinanced plus the
amount of reasonable fees, expenses and costs related to the incurrence of
such Refinancing Indebtedness, (B) the maturity of the Refinancing
Indebtedness shall not be earlier than the maturity of the Indebtedness
being so extended, renewed, refunded or refinanced, and (C) with respect
to any Refinancing Indebtedness which refinances Indebtedness permitted
under clause (3) above, the Refinancing Indebtedness is subordinate in
right of payment to the Securities to the same extent as the Indebtedness
being so extended, renewed, refunded or refinanced. Notwithstanding
anything in the foregoing to the contrary, the Company will not permit any
Subsidiary to, directly or indirectly, create, incur, issue, assume or
guarantee directly or indirectly any Indebtedness except for Indebtedness
permitted by clauses (1), (2), (4), (5), (7) and (8), Indebtedness
permitted by paragraph (9) to the extent incurred in connection with an
acquisition and Refinancing Indebtedness of Indebtedness permitted by any
of such clauses subject to clauses (A) through (C) of the proviso of this
clause (10).
Restricted Payments Covenant
The Restricted Payments Covenant is set forth in Section 4.06 of the
Indenture "Limitation on Restricted Payments." Section 4.06(a) will be
deleted and the following inserted in lieu thereof:
New Section 4.06(a):
(a) The Company will not, and will not permit any of the Subsidiaries
to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on
account of the Company's or any of the Subsidiaries' capital stock
or other Equity Interests (other than dividends or distributions
payable in Equity Interests of the Company or the Subsidiaries and
dividends or distributions payable to the Company or another
Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Subsidiary or any other
Affiliate of the Company (other than any such Equity Interests owned
by the Company or any of the Subsidiaries), except as permitted in
clause (iv) of this paragraph (a) below; or
<PAGE>
<PAGE> 42
(iii) voluntarily prepay, purchase, redeem or otherwise acquire or
retire for value any Indebtedness of the Company or any Subsidiary
(other than Indebtedness of the Company or any Subsidiary to the
Company or another Subsidiary) that is subordinated to the
Securities prior to the scheduled maturity payments, scheduled
sinking fund payments or similar mandatory requirements provided for
pursuant to the terms of such Indebtedness other than as
specifically permitted by the terms hereof or in connection with any
refinancing thereof permitted by the terms hereof; or
(iv) make any Investment in any Affiliate of the Company other
than a Subsidiary or a person which will become a Subsidiary as a
result of such Investment;
(all of the foregoing dividends, distributions, purchases,
redemptions or other acquisitions, retirements, prepayments or
Investments set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), if at the
time of such Restricted Payment:
(1) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof; or
(2) the Company shall not be able to incur at least $1.00 of
additional Indebtedness pursuant to clause (9) of the Limitation on
Additional Indebtedness provisions set forth in Section 4.05 hereof;
or
(3) such Restricted Payment, together with the aggregate of
all other Restricted Payments made after the date hereof, exceeds
the sum of (x) 50% of the amount of the Consolidated Net Income of
the Company for the period (taken as one accounting period) from
January 1, 1996 to the end of the Company's most recently ended
quarter at the time of such Restricted Payment (or, if Consolidated
Net Income for such period is negative, 100% of such accumulated
amount) plus (y) 100% of the aggregate net cash proceeds received by
the Company from the issue or sale after January 1, 1996 of capital
stock of the Company (other than Redeemable Capital Stock or
Exchangeable Stock and other than capital stock issued or sold to a
Subsidiary of the Company) or any Indebtedness or other security
convertible into or exercisable for any such capital stock (other
than Redeemable Capital Stock or Exchangeable Stock) that has been
so converted or exercised (the sum of (x) and (y) hereinafter
referred to as the "Earned Amount"); provided, however, that if the
amount of Investments made pursuant to clause (v) in paragraph (b)
below exceeds $5 million, the Company may not, and may not permit
any Subsidiary to, make any Restricted Payment unless the Earned
Amount (less Restricted Payments made to such date) equals the
amount of Investments made pursuant to clause (v) in paragraph (b)
below in excess of $5 million.
<PAGE>
<PAGE> 43
Requests for assistance in filling out and delivering Consents or for
additional copies of this Consent Solicitation Statement or the Consent
Letter should be directed to the Information Agent at one of the telephone
numbers set forth below. Questions concerning the terms of the Consent
Solicitation should be directed to the Information Agent at one of the
telephone numbers set forth below. Deliveries of Consents should be made
to the Trustee at its addresses or facsimile number set forth below
(facsimiles should be confirmed by physical delivery).
TABLE OF CONTENTS
Page
Incorporation of Certain Documents
by Reference ..................................... 2
Available Information ............................. 2
The Company ....................................... 3
The Garrett Acquisition ........................... 3
Proposed Amendments................................ 6
Selected Pro Forma Financial Information .......... 8
Acquisition Financing............................. 10
The Consent Solicitation ......................... 10
Index to Financial Statements .................... 15
Appendix I ...................................... I-1
<PAGE>
<PAGE> 44
UNC INCORPORATED
Consent Solicitation Statement
The Trustee is:
Chemical Bank
By Hand/Overnight Courier:
Corporate Trust Department
55 Water Street - North Bldg.
2nd Floor - Room 234
New York, New York 10041
Attention: Carlos Esteves
By Mail:
Corporate Trust Department
55 Water Street - North Bldg.
2nd Floor - Room 234
New York, New York 10041
Attention: Carlos Estevez
By Facsimile:
(212) 638-7380
(212) 638-7381
Confirm by Telephone:
(212) 638-0828
The Solicitation Agent is:
CS First Boston
55 East 52nd Street
New York, New York 10055
The Information Agent is:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
Telephone Number:
(800) 322-2885 (Toll Free)
(212) 929-5500 (Call Collect)
