<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1997
-------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
----------------------- ----------------------
Commission File Number: 1-8988
-------------------------------------------------------
ECC International Corp.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-1714658
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
175 Strafford Avenue, Suite 116, Wayne, PA 19087-3377
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(610) 687-2600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
As of December 31, 1997, there were 8,204,091 shares of the Registrant's
Common Stock, $.10 par value per share, issued and outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(In Thousands Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
12/31/97 12/31/96
-------- --------
<S> <C> <C>
Net Sales $24,676 $43,579
Cost of Sales 19,787 36,003
------- -------
Gross Profit 4,889 7,576
------- -------
Expenses:
Selling, General & Administrative 6,223 5,981
Systems Development 1,526 398
------- -------
Total Expenses 7,749 6,379
------- -------
Operating (Loss)/Income (2,860) 1,197
------- -------
Other Income (Expense):
Interest Income 88 103
Interest Expense (673) (906)
Other - Net (9) 20
------- -------
Total Other Expense (594) (783)
------- -------
(Loss)/Income from Continuing Operations
Before Income Taxes (3,454) 414
(Benefit)/Provision for Income Taxes (754) 727
------- -------
Loss from Continuing Operations (2,700) (313)
Discontinued Operations:
Loss from Operations (net of applicable income tax
benefit of $734 in 1996) -- (1,121)
Loss on Disposal (net of applicable income tax
benefit of $199 in 1997) (370) --
Net Loss $(3,070) $(1,434)
======= =======
Loss Per Common Share - Basic and
Assuming Dilution
Loss Per Common Share
from Continuing Operations $ (0.33) $ (0.04)
Loss Per Common Share
from Discontinued Operations $ (0.05) $ (0.14)
Net Loss Per Common Share $ (0.38) $ (0.18)
======= =======
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 3
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(In Thousands Except Share and Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
12/31/97 12/31/96
-------- --------
<S> <C> <C>
Net Sales $12,520 $21,153
Cost of Sales 10,313 18,477
------- -------
Gross Profit 2,207 2,676
------- -------
Expenses:
Selling, General & Administrative 3,311 2,950
Systems Development 843 247
------- -------
Total Expenses 4,154 3,197
------- -------
Operating Loss (1,947) (521)
------- -------
Other Income (Expense):
Interest Income 5 56
Interest Expense (283) (466)
Other - Net 58 33
------- -------
Total Other Expense (220) (377)
------- -------
Loss from Continuing Operations
Before Income Taxes (2,167) (898)
(Benefit)/Provision for Income Taxes (460) 155
------- -------
Loss from Continuing Operations (1,707) (1,053)
Discontinued Operations:
Loss from Operations (net of applicable income tax
benefit of $391 in 1996) -- (595)
Loss on Disposal (net of applicable income tax
benefit of $199 in 1997) (370) --
Net Loss $(2,077) $(1,648)
======= =======
Loss Per Common Share - Basic and
Assuming Dilution
Loss Per Common Share
from Continuing Operations $ (0.21) $ (0.13)
Loss Per Common Share
from Discontinued Operations $ (0.05) $ (0.08)
Net Loss Per Common Share $ (0.26) $ (0.21)
======= =======
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 4
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
12/31/97 6/30/97
-------- -------
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 2,076 $ 3,888
Accounts Receivable, Net 6,920 9,189
Costs and Estimated Earnings in Excess
of Billings on Uncompleted Contracts 22,613 25,497
Inventories
Raw Material 3,894 5,062
Work in Process 2,623 2,326
Finished Goods 1,290 2,278
Prepaid Expenses and Other 5,914 5,406
------- -------
Total Current Assets 45,330 53,646
Property, Plant and Equipment - Net 22,722 26,119
Other Assets 2,310 2,269
------- -------
Total Assets $70,362 $82,034
======= =======
</TABLE>
Continued...
<PAGE> 5
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
12/31/97 6/30/97
-------- -------
LIABILITIES & STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Current Portion of Long-Term Debt $11,098 $ 2,250
Accounts Payable 3,748 4,846
Advances on Long-Term Contracts 6,035 4,551
Accrued Expenses 4,903 6,642
------- -------
Total Current Liabilities 25,784 18,289
------- -------
Deferred Income Taxes 1,559 1,559
------- -------
Long-Term Debt -- 16,640
------- -------
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.10 par; authorized
20,000,000 shares at 12/31/97 and
6/30/97; issued and outstanding,
8,204,091 shares at 12/31/97 and
8,046,707 at 6/30/97 822 805
Preferred stock, $.10 par; authorized
1,000,000 shares at 12/31/97 and at
6/30/97; none issued and outstanding
at 12/31/97 and 6/30/97 -- --
Capital in Excess of Par 24,437 23,935
Retained Earnings 17,679 20,749
Cumulative Translation Adjustment 81 57
------- -------
Total Stockholders' Equity 43,019 45,546
------- -------
Total Liabilities & Stockholders' Equity 70,362 $82,034
======= =======
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 6
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1996
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
12/31/97 12/31/96
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $(3,070) $(1,434)
Items Not Requiring Cash:
Depreciation 2,284 2,250
Provision for Discontinued Operations 569 --
Changes in Certain Assets and Liabilities:
Accounts Receivable 432 4,088
Cost and Estimated Earnings in Excess
of Billings on Uncompleted Contracts 2,884 (3,786)
Inventories (1,879) (1,088)
Prepaid Expenses and Other (508) (263)
Accounts Payable (1,098) (1,941)
Advances on Long-Term Contracts 1,484 4,208
Accrued Expenses (1,615) (1,085)
------- -------
Net Cash (Used In)/Provided By Operating Activities (517) 949
------- -------
Cash Flows From Investing Activities:
Proceeds from Sale of Discontinued Operations 7,881 --
Additions to Property, Plant and Equipment (1,886) (2,485)
Other (17) 381
------- -------
Net Cash Provided By/(Used In) Investing Activities 5,978 (2,104)
------- -------
Cash Flows From Financing Activities:
Proceeds From Issuance of Common Stock, Options
Exercised and Warrants, Including Related Tax Benefit 519 501
Repayments under Term Loan (2,250) (1,500)
Borrowings under Revolving Credit Facility, Net (5,542) 2,946
------- -------
Net Cash (Used In)/Provided By Financing Activities (7,273) 1,947
------- -------
Net (Decrease)/Increase in Cash (1,812) 792
Cash at Beginning of the Period 3,888 5,057
------- -------
Cash at End of the Period $ 2,076 $ 5,849
======= =======
</TABLE>
Continued...
<PAGE> 7
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND 1996 (Continued)
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
12/31/97 12/31/96
-------- --------
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year For:
Interest $707 $883
Income Taxes $ -- $922
Supplemental Schedule of
Non Cash Financing Activities:
Issuance of Employee Stock Incentives $421 $ --
Issuance of Director Equity Compensation $ 41 $ --
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying statements are unaudited and have been prepared by ECC
pursuant to the rules and regulations of the Securities and Exchange
Commission. The June 30, 1997 consolidated balance sheet was derived from
audited financial statements but does not include all disclosures required
by generally accepted accounting principles. In the opinion of management
the accompanying unaudited consolidated financial statements contain all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the consolidated financial position, results of operations
and cash flows for the interim period presented. These unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1997.
2. Basic loss per common share is computed by dividing net loss available to
common shareholders by the weighted-average number of common shares
outstanding during the period. Diluted loss per share is computed by
dividing net loss available to common shareholders by the weighted-average
number of common shares outstanding during the period adjusted for the
number of shares that would have been outstanding if the dilutive potential
common shares had been issued. The diluted loss per share does not assume
the exercise of options that would have an antidilutive effect on earnings
per share.
The weighted-average number of common shares outstanding for the basic and
diluted per share calculations are identical since the assumed exercise of
options would be antidilutive.
The weighted-average number of common shares outstanding for each period
presented are as follows:
<TABLE>
<CAPTION>
12/31/97 12/31/96
-------- --------
<S> <C> <C>
Three-months ended 8,157,716 7,872,223
Six-months ended 8,138,517 7,853,740
</TABLE>
3. The Company did not comply with the minimum fixed charge coverage ratio at
September 30, 1997 or December 31, 1997 under its Term Loan and Revolving
Credit Agreement and, accordingly, has received irrevocable waivers with
respect to such covenant from its bank lender. The Company made the two
final required payments on its term loan totaling $2,250,000 during the
first quarter of fiscal year 1998.
On November 25, 1997, the Company executed an amendment to its Revolving
Credit Agreement whereby the maximum aggregate principal amount of
advances, including the face amount of Letters of Credit, was reduced from
$25 million to $15 million. In addition, the Company was required to pay $6
million on the Revolving Credit Agreement with proceeds from the sale of
certain assets of the vending operation.
<PAGE> 9
The Company's bank lenders also extended the Revolving Credit Agreement's
expiration date to October 1, 1998. Pending re-negotiation of the Revolving
Credit Agreement, outstanding amounts due under the Agreement are
classified as current liabilities in the consolidated balance sheet at
December 31, 1997.
4. In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"). SFAS 128 specifies new standards designed to improve the
earnings per share ("EPS") information provided in financial statements by
simplifying the existing computational guidelines, revising the disclosure
requirements, and increasing the comparability of EPS data on an
international basis. Changes made to simplify the EPS computation include:
eliminating the presentation of primary EPS and replacing it with basic
EPS, with the principal difference being that common stock equivalents are
not considered in computing basic EPS. The Company adopted this standard
during the second quarter of fiscal year 1998. There was no significant
change in loss per share as a result of the adoption of this standard. Loss
per share amounts for all periods presented were restated to conform to the
SFAS 128 requirements.
5. On November 25,1997, the Company completed the sale of the fixed assets,
inventory and trade receivables of the Company's vending operation.
Proceeds from the sale of the vending operation were used to reduce the
Company's debt.
Operating results have been segregated in the accompanying consolidated
statements of operations. Net losses for the six and three-month periods
ended December 31, 1997 were included as a component of discontinued
operations in the Company's June 30, 1997 consolidated financial
statements. Discontinued operations at June 30, 1997 included management's
best estimates of the amounts expected to be realized on the sale of the
vending operation, the costs directly associated with the disposal of the
operation, as well as the operating losses expected to be incurred during
the phase-out period.
During the second quarter of fiscal year 1998, the Company recorded an
additional provision for the estimated loss on disposal of discontinued
operations of $370,000, after-tax. This change in the estimated loss
resulted primarily from additional costs associated with the consummation
of the sale of the fixed assets, inventory and trade receivables of the
vending operation.
<PAGE> 10
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. For this purpose, any statements contained herein
that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes," "anticipates," "plans," "expects," and similar expressions
are intended to identify forward-looking statements. There are a
number of factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking
statements. These factors include, without limitation, those set forth
below under the caption "Certain Factors that May Affect Future
Operating Results."
a) MATERIAL CHANGES IN FINANCIAL CONDITION.
During the six-month period ended December 31, 1997, the Company's
principal sources of cash were proceeds from the sale of certain
assets of the vending operation, billings and receipts on costs and
estimated earnings in excess of billings on uncompleted contracts and
advances on contracts in the UK subsidiary. The principal uses of
these funds were to make the final payments on the term loan, pay down
the revolving credit agreement, reduce accounts payable and accrued
expenses, finance the increase in inventories and to fund improvements
to the Orlando facility.
Accounts receivable, raw material, and property, plant and equipment
decreased as a result of the sale of these items in connection with
the disposal of the vending operation. (See Note 5 to the Consolidated
Financial Statements.)
Costs and estimated earnings in excess of billings on uncompleted
contracts decreased due to the completion or near completion of
several contracts in the domestic training division.
Work in process inventory increased primarily due to unabsorbed
overhead. Overhead is absorbed on an annualized projected rate.
Management expects that volume during the remaining fiscal 1998
quarters will support the currently budgeted overhead rate.
Finished goods inventory decreased as a result of the sale of vending
units inventoried at June 30, 1997.
Prepaid expenses and other increased primarily due to the federal tax
benefit recorded for the federal net operating loss realized during
the six-month period ended December 31, 1997.
Advances on long-term contracts increased as a result of payments
received in advance of work performed on contracts in the U.K.
division.
<PAGE> 11
Accrued expenses decreased primarily as a result of the realization of
accrued losses associated with the sale of certain assets of the
vending operation on November 25, 1997. (See Note 5 to the
Consolidated Financial Statements.)
The increase in capital in excess of par was primarily the result of
employee stock bonuses and director equity compensation during the
six-month period ended December 31, 1997.
The Company did not comply with the minimum fixed charge coverage
ratio at September 30, 1997 or December 31, 1997 under its Term Loan
and Revolving Credit Agreement and, accordingly, has received
irrevocable waivers with respect to such covenant from its bank
lender. The Company made the two final required payments on its term
loan totaling $2,250,000 during the first quarter of fiscal year 1998.
On November 25, 1997, the Company executed an amendment to its
Revolving Credit Agreement whereby the maximum aggregate principal
amount of advances, including the face amount of Letters of Credit,
was reduced from $25 million to $15 million. In addition, the Company
was required to pay $6 million on the Revolving Credit Agreement with
proceeds from the sale of certain assets of the vending operation.
The Company's bank lenders also extended the Revolving Credit
Agreement's expiration date to October 1, 1998. Pending re-negotiation
of the Revolving Credit Agreement, outstanding amounts due under the
Loan Facility are classified as current liabilities in the
consolidated balance sheet at December 31, 1997.
During the remainder of fiscal year 1998, the Company anticipates
spending approximately $1 million for new machinery and equipment and
to continue to refurbish the Orlando facility.
Other than as stated above, the Company currently has no other
material commitments for capital expenditures. Management believes
that with funds available under its loan facility and its projected
cash flows, the Company will have sufficient resources to meet current
and future operating commitments.
b) MATERIAL CHANGES IN RESULTS OF OPERATIONS.
Continuing Operations
Net sales decreased for the six and three-month periods ended December
31, 1997 as compared to the same periods ended December 31, 1996. The
decrease in net sales is primarily the result of several domestic
training division contracts with reduced activity as they are complete
or near completion. This decrease in net sales was only partially
offset by sales generated from the award of a large Javelin multi-year
contract and several additions to other ongoing contracts during the
first quarter of fiscal year 1998.
<PAGE> 12
Net sales volume in the UK subsidiary also decreased for the six and
three-month periods ended December 31, 1997 as compared to the same
periods ended December 31, 1996. The decrease in net sales in the UK
is a result of reduced activity on its two major contracts as they are
expected to be completed during fiscal year 1998. In addition, there
have been no significant contract awards in the UK over the past
fiscal year.
Overall gross margin as a percentage of net sales increased marginally
for the six and three-month periods ended December 31, 1997 versus the
same periods ended December 31, 1996. While cost reduction initiatives
continue, overhead levels have not decreased proportionate to the
decrease in sales volume. Management anticipates that the award of the
large Javelin multi-year contract, additions to several ongoing
contracts, combined with further cost reduction initiatives, will
result in improved results for the remainder of fiscal year 1998.
Selling, general and administrative expense increased primarily as a
result of fees paid to international marketing representatives.
Systems development expense increased for the six and three-month
periods ended December 31, 1997 versus the corresponding periods in
the prior fiscal year. The increase is the result of efforts in the
domestic training division to develop and/or enhance technologies and
processes in order to remain competitive in the industry.
Interest expense decreased for the six and three-month periods ended
December 31, 1997 versus the corresponding period in the previous
fiscal year. The decrease is a result of the final payments totaling
$2,250,000 on the Company's term loan during the first quarter of
fiscal year 1998. In addition, proceeds from the sale of certain
assets of the vending operation were used to pay down the revolving
credit facility during the second quarter of fiscal year 1998. (See
Note 5 to the Consolidated Financial Statements.)
Discontinued Operations
On November 25,1997 the Company completed the sale of the fixed
assets, inventory and trade receivables of the Company's vending
operation. Proceeds from the sale of the vending operation were used
to reduce the Company's debt.
Operating results have been segregated in the accompanying
consolidated statements of operations. Net losses for the six and
three-month periods ended December 31, 1997 were included as a
component of discontinued operations in the Company's June 30, 1997
consolidated financial statements. Discontinued operations at June 30,
1997 included management's best estimates of the amounts expected to
be realized on the sale of the vending operation, the costs directly
associated with the disposal of the operation, as well as the
operating losses expected to be incurred during the phase-out period.
During the second quarter of fiscal year 1998, the Company recorded an
additional provision for the estimated loss on disposal of
discontinued operations of $370,000, after-tax. This change in the
estimated loss resulted primarily from additional costs associated
with the consummation of the sale of the fixed assets, inventory and
trade receivables of the vending operation.
<PAGE> 13
c) CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS.
The following important factors, among others, could cause actual
results to differ materially from those indicated by forward-looking
statements made in this Quarterly Report on Form 10-Q and presented
elsewhere by management from time to time. All forward-looking
statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements.
A number of uncertainties exist that could affect the Company's future
operating results, including, without limitation, general economic
conditions, changes in government spending, cancellation of weapons
programs, delays in contract awards, delays in the acceptance process
of contract deliverables, the Company's continued ability to develop
and introduce products, the introduction of new products by
competitors, pricing practices of competitors, the cost and
availability of parts and the Company's ability to control costs.
To date, a substantial portion of the Company's revenues have been
attributable to long-term contracts with various government agencies.
As a result, any factor adversely affecting procurement of long-term
government contracts could have a material adverse effect on the
Company's financial condition and results of operations.
Because of these and other factors, past financial performance should
not be considered an indication of future performance. The Company's
future quarterly operating results may vary significantly, depending
on factors such as the timing of contract awards. Investors should not
use historical trends to anticipate future results and should be aware
that the trading price of the Company's Common Stock may be subject to
wide fluctuations in response to quarterly variations in operating
results and other factors, including those discussed above.
The Company recognizes that it must ensure that its products and
operations will not be adversely impacted by various so-called "Year
2000" systems and software failures which can arise in certain
date-sensitive functions. All of the Company's products are currently
Year 2000 compliant, and therefore, the Company does not expect to
undertake additional research and development efforts in this regard.
In addition, the Company is in the process of identifying anticipated
costs, problems and uncertainties associated with making its
internal-use operating systems Year 2000 compliant. In general, the
Company expects to resolve the Year 2000 issue with respect to its
computer systems and software applications through upgrade,
conversion, modification or replacement of non-compliant systems and
applications. There can be no assurance, however, that the systems of
other parties upon which the Company's business also relies will be
Year 2000 compliant. The costs of becoming Year 2000 compliant, or the
failure thereof by the Company or other parties, could have a material
adverse effect on the Company's business, financial condition or
results of operations.
<PAGE> 14
PART II. OTHER INFORMATION
ECC INTERNATIONAL CORP.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on December 4,
1997, the following proposals were adopted by the vote specified
below:
<TABLE>
<CAPTION>
Votes Votes Broker
Proposal For Against Abstain NonVotes
1) To elect the Board of Directors
<S> <C> <C> <C>
Bruce A. Beda 6,773,285 620,145 -- 6,502
Julian Demora 6,775,115 618,315 -- 4,672
Ajit W. Hirani 6,762,197 631,233 -- 17,590
Martin S. Kaplan 6,702,184 691,246 -- 77,603
Jesse Krasnow 6,702,495 690,935 -- 77,292
Thomas E. McGrath 6,702,365 691,065 -- 77,422
Merrill A. McPeak 6,768,182 625,248 -- 11,605
George W. Murphy 6,680,786 712,644 -- 99,001
<CAPTION>
2) To approve the Company's 1997 Director Equity Compensation Plan.
<S> <C> <C> <C> <C>
7,040,964 286,928 65,467 758,431
<CAPTION>
3) To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent public accountants for the fiscal year ending June 30,
1998.
<S> <C> <C> <C> <C>
7,276,152 43,286 73,992 758,360
</TABLE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
Exhibit 10.1 - Amendment dated as of November 13, 1997, to
the Term and Revolving Credit Agreement dated as of
September 20, 1994 by and among the Company and First
Fidelity Bank, N.A.
Exhibit 10.2 - Amendment dated as of December 19, 1997, to
the Term and Revolving Credit Agreement dated as of
September 20, 1994 by and among the Company and First
Fidelity Bank, N.A.
Exhibit 10.3 - Asset Purchase Agreement, dated as of
November 25, 1997, by and among Dixie-Narco, Inc., ECC
International Corp. and ECC Vending Corp. is incorporated by
reference to Exhibit 2 to the Company's Current Report on
Form 8-K dated November 25, 1997. (Commission File No.
1-8988)
<PAGE> 15
Exhibit 10.4 - Director Equity Compensation Plan is
incorporated by reference to Annex A to the Company's
Definitive Schedule 14A filed with the SEC on October 27,
1997. (Commission File No. 1-8988)
Exhibit 27.1 - Financial Data Schedule
Exhibit 27.2 - Financial Data Schedule
b. REPORTS ON FORM 8-K
On December 10, 1997, the Company filed a Current Report on
Form 8-K, dated November 25, 1997, to report the completion
of the sale of certain assets and properties of ECC Vending
Corp. to Dixie-Narco, Inc.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECC INTERNATIONAL CORP.
Date February 13, 1998 /s/ George W. Murphy
------------------------ -----------------------------
George W. Murphy, President,
and Chief Executive Officer
Date February 13, 1998 /s/ Relland Winand
------------------------ -----------------------------
Relland Winand
Vice President, Finance and
Principal Financial and
Accounting Officer
<PAGE> 1
EXHIBIT 10.1
FIRST UNION NATIONAL BANK
Portfolio Management
123 South Broad Street, PA 1310
Philadelphia, Pennsylvania 19109-1199
Fax 215-985-3143
November 13, 1997
Relland Winand
Chief Financial Officer
ECC International Corp.
175 Strafford Ave.
Wayne, PA 19087-3377
Dear Rell:
Reference is made to that certain:
1. Term Loan and Revolving Credit Agreement, dated as of September 20, 1994
(together with all amendments and modifications thereto), by and between ECC
International Corp. ("ECC"), and First Fidelity Bank, National Association, (the
"Bank", now named First Union National Bank) and all of the documents,
instruments and agreements executed in connection therewith (collectively, the
"ECC Loan Documents").
2. Revolving Credit Agreement, dated as of September 20, 1994 (together with all
amendments and modifications thereto), by and between ECC Simulation Limited
("Simulation", and, together with ECC, the "Borrowers"), and the Bank and all of
the documents, instruments and agreements executed in connection therewith
(collectively, the "Simulation Loan Documents" and, together with the ECC Loan
Documents, the "Loan Documents").
Terms capitalized but not defined herein shall have the meanings ascribed
thereto in the Loan Documents.
The Borrowers have requested that the Bank agree to modify the Loan Documents to
define the Expiration Date as October 1, 1998 (the "Modification") and the Bank
has agreed to do so pursuant to the terms hereof, such Modification to be
effective as of 9/30/97.
<PAGE> 2
The Borrowers hereby affirm, as of the date hereof, the representations and
warranties set forth in the Loan Documents exactly as if they were made on and
as of the date hereof, except where disclosed to the Bank in writing prior to
the date hereof or where immaterial. The Borrowers represent and warrant that
there is no breach of any term, covenant or provision of the Loan Documents and
that no Event of Default or other event which, with the passage of time, the
giving of notice, or both, would become an Event of Default has occurred and is
continuing. The Borrowers agree that the Loan Documents are binding and
enforceable against the Borrowers pursuant to the terms thereof and the
Borrowers have no defenses, set-offs, or counterclaims to their obligations
thereunder.
In reliance upon the Borrowers' reaffirmation and representations and warranties
stated above, the Bank agrees to the Modification.
All other terms, covenants and conditions of the Loan Documents are hereby
reaffirmed, ratified and confirmed in all respects and shall remain in full
force and effect. Nothing contained herein is intended to be or shall be
construed as a waiver of any default, Event of Default, or any of the Bank's
rights and remedies under the Loan Documents and applicable law, all of which
are expressly reserved and preserved.
Please acknowledge your receipt and acceptance of this letter by signing below
(and having the guarantors identified below also sign where indicated) and
returning a copy to the Bank. Upon the Bank's receipt of an executed copy of
this letter, this letter will become effective.
Sincerely yours,
First Union National Bank
By: /S/ SUZANNE S. STORM
----------------------------------
Name: Suzanne S. Storm
Title: Senior Vice President
-2-
<PAGE> 3
THE UNDERSIGNED ACKNOWLEDGE, CONSENT AND AGREE TO THE FOREGOING TERMS, COVENANTS
AND CONDITIONS AND AGREE TO BE BOUND THEREBY.
Date: 11/13/97
BORROWER
Attest: ECC International Corp.
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
--------------------------------- ------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Vice President, Finance Title: President
GUARANTOR
Attest: ECC Simulation Limited
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
--------------------------------- ------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary Title: President
GUARANTOR
Attest: Educational Computer Corporation
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
--------------------------------- -----------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary/Treasurer Title: President
GUARANTOR
Attest: ECC International, Inc.
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
--------------------------------- ------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary/Treasurer Title: President
BORROWER
Attest: ECC Simulation Limited
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
---------------------------------- ------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary Title: President
-3-
<PAGE> 4
GUARANTOR
Attest: Educational Computer Corporation
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
----------------------------------- ------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary/Treasurer Title: President
GUARANTOR
Attest: ECC International, Inc.
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
----------------------------------- ------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary/Treasurer Title: President
GUARANTOR
Attest: ECC International Corp.
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
----------------------------------- ------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Vice President, Finance Title: President
-4-
<PAGE> 1
EXHIBIT 10.2
FIRST UNION NATIONAL BANK
Portfolio Management
PA 1310
123 South Broad Street
Philadelphia, Pennsylvania 19109-1199
Fax 215-985-3143
December 19, 1997
Relland Winand
Chief Financial Officer
ECC International Corp.
175 Strafford Ave.
Wayne, PA 19087-3377
Dear Rell:
Reference is made to that certain:
1. Term Loan and Revolving Credit Agreement, dated as of September 20, 1994
(together with all amendments and modifications thereto), by and between ECC
International Corp. ("ECC"), and First Fidelity Bank, National Association, (the
"Bank", now named First Union National Bank) and all of the documents,
instruments and agreements executed in connection therewith (collectively, the
"ECC Loan Documents").
2. Revolving Credit Agreement, dated as of September 20, 1994 (together with all
amendments and modifications thereto), by and between ECC Simulation Limited
("Simulation", and, together with ECC, the "Borrowers"), and the Bank and all of
the documents, instruments and agreements executed in connection therewith
(collectively, the "Simulation Loan Documents" and, together with the ECC Loan
Documents, the "Loan Documents").
Terms capitalized but not defined herein shall have the meanings ascribed
thereto in the Loan Documents.
The Borrowers have requested that the Bank agree to modify Section P.1 of the
Term Loan and Revolving Credit Agreement to substitute $3,000,000.00 for
$2,000,000.00 where it appears therein (representing the maximum amount ECC may
lend to Simulation) for the period from the date hereof through January 31, 1998
(the
<PAGE> 2
"Temporary Modification") and the Bank has agreed to do so pursuant to the
terms hereof.
The Borrowers hereby affirm, as of the date hereof, the representations and
warranties set forth in the Loan Documents exactly as if they were made on and
as of the date hereof, except where disclosed to the Bank in writing prior to
the date hereof or where immaterial. The Borrowers represent and warrant that
there is no breach of any term, covenant or provision of the Loan Documents and
that no Event of Default or other event which, with the passage of time, the
giving of notice, or both, would become an Event of Default has occurred and is
continuing. The Borrowers agree that the Loan Documents are binding and
enforceable against the Borrowers pursuant to the terms thereof and the
Borrowers have no defenses, set-offs, or counterclaims to their obligations
thereunder.
In reliance upon the Borrowers' reaffirmation and representations and warranties
stated above, the Bank agrees to the Temporary Modification.
All other terms, covenants and conditions of the Loan Documents are hereby
reaffirmed, ratified and confirmed in all respects and shall remain in full
force and effect. Nothing contained herein is intended to be or shall be
construed as a waiver of any default, Event of Default, or any of the Bank's
rights and remedies under the Loan Documents and applicable law, all of which
are expressly reserved and preserved.
Please acknowledge your receipt and acceptance of this letter by signing below
(and having the guarantors identified below also sign where indicated) and
returning a copy to the Bank. Upon the Bank's receipt of an executed copy of
this letter, this letter will become effective.
Sincerely yours,
First Union National Bank
By: /S/ SUZANNE S. STORM
-----------------------------------
Name: Suzanne S. Storm
Title: Senior Vice President
<PAGE> 3
THE UNDERSIGNED ACKNOWLEDGE, CONSENT AND AGREE TO THE FOREGOING TERMS, COVENANTS
AND CONDITIONS AND AGREE TO BE BOUND THEREBY.
DATE: 12/19/97
- ---------------------------------
BORROWER
Attest: ECC International Corp.
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
------------------------------ --------------------------------
Name: Relland Winand Name: George W. Murphy
Title: V.P., Finance Title: President
GUARANTOR
Attest: ECC Simulation Limited
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
------------------------------ --------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary Title: President
GUARANTOR
Attest: Educational Computer Corporation
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
------------------------------ --------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary/Treasurer Title: President
GUARANTOR
Attest: ECC International, Inc.
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
------------------------------ --------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary/Treasurer Title: President
BORROWER
Attest: ECC Simulation Limited
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
------------------------------ --------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary Title: President
<PAGE> 4
GUARANTOR
Attest: Educational Computer Corporation
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
------------------------------ --------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary/Treasurer Title: President
GUARANTOR
Attest: ECC International, Inc.
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
------------------------------ --------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Secretary/Treasurer Title: President
GUARANTOR
Attest: ECC International Corp.
By: /S/ RELLAND WINAND By: /S/ GEORGE W. MURPHY
------------------------------ --------------------------------
Name: Relland Winand Name: George W. Murphy
Title: Vice President, Finance Title: President
<TABLE> <S> <C>
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<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-START> JUL-01-1997 OCT-01-1998
<PERIOD-END> DEC-31-1997 DEC-31-1998
<EXCHANGE-RATE> 1 1
<CASH> 2,076 2,076
<SECURITIES> 0 0
<RECEIVABLES> 6,920 6,920
<ALLOWANCES> 0 0
<INVENTORY> 7,807 7,807
<CURRENT-ASSETS> 45,330 45,330
<PP&E> 58,826 58,826
<DEPRECIATION> 36,104 36,104
<TOTAL-ASSETS> 70,362 70,362
<CURRENT-LIABILITIES> 25,784 25,784
<BONDS> 0 0
0 0
0 0
<COMMON> 822 822
<OTHER-SE> 42,197 42,197
<TOTAL-LIABILITY-AND-EQUITY> 70,362 70,362
<SALES> 24,676 12,520
<TOTAL-REVENUES> 24,676 12,520
<CGS> 19,787 10,313
<TOTAL-COSTS> 19,787 10,313
<OTHER-EXPENSES> 1,535 785
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 673 283
<INCOME-PRETAX> (3,454) (2,167)
<INCOME-TAX> (754) (460)
<INCOME-CONTINUING> (2,700) (1,707)
<DISCONTINUED> (370) (370)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,070) (2,077)
<EPS-PRIMARY> (.33) (.21)
<EPS-DILUTED> (.33) (.21)
</TABLE>
