SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19703
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FARREL CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 22-2689245
- -------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 MAIN STREET, ANSONIA, CONNECTICUT, 06401
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(Address of principal executive offices) (Zip Code)
(203) 736-5500
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
-------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MAY 7, 1997
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Common Stock (Voting), $.01 par value 5,941,835
Page 1 of 12
<PAGE>
FARREL CORPORATION
INDEX
PAGE
Part I. FINANCIAL INFORMATION
Consolidated Balance Sheets -
March 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations -
Three Months Ended March 30, 1997
and March 31, 1996 4
Consolidated Statements of Cash Flows -
Three Months ended March 30, 1997
and March 31, 1996 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
Exhibit 11 - Computation of Earnings Per Share 10
Part II. OTHER INFORMATION 11
Page 2 of 12
<PAGE>
<TABLE>
Part I - Financial Information
FARREL CORPORATION
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CONSOLIDATED BALANCE SHEETS
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(In thousands, except share data)
<CAPTION>
March 30, December 31,
--------- ------------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,363 $ 3,832
Accounts receivable, net of allowance
for doubtful accounts of $326 and
$464, respectively 14,080 19,189
Inventory 20,664 14,187
Other current assets 3,143 2,979
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Total current assets $42,250 $40,187
Property, plant and equipment - net
of accumulated depreciation of
$8,931 and $8,357, respectively 8,889 9,555
Other Assets 911 989
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Total Assets $52,050 $50,731
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $11,471 $11,058
Accrued expenses & taxes payable 2,270 2,344
Advances from customers 6,513 4,865
Accrued installation & warranty costs 1,103 1,360
Short - term debt 204 214
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Total current liabilities 21,561 19,841
Long-term debt 204 214
Postretirement benefit obligation 1,257 1,277
Long-term pension obligation 522 522
Deferred income taxes 550 324
Commitments and contingencies - -
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Total Liabilities 24,094 22,178
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Stockholders' Equity:
Preferred stock, par value $100,
1,000,000 shares authorized, no
shares issued - -
Common stock, par value $.01,
10,000,000 shares authorized,
6,142,806 shares issued 61 61
Paid in capital 19,295 19,295
Cumulative translation adjustment (259) 232
Treasury stock, 200,261 shares at
March 30, 1997 and December 31,
1996, respectively (987) (987)
Retained earnings 10,122 10,228
Minimum pension liability (276) (276)
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Total Stockholders' Equity $27,956 $28,553
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Total Liabilities and Stockholders' Equity $52,050 $50,731
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</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page 3 of 12
<PAGE>
<TABLE>
FARREL CORPORATION
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(In thousands, except per share and share data)
<CAPTION>
Three Months Ended
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March 30, March 31,
1997 1996
---- ----
(unaudited) (unaudited)
<S> <C> <C>
Net Sales $16,123 $17,865
Cost of Sales 12,785 13,506
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Gross margin 3,338 4,359
Operating expenses:
Selling 1,657 1,537
General & administrative 1,763 1,911
Research & development 390 523
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Total operating expenses 3,810 3,971
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Operating (loss)/income (472) 388
Interest income, net 44 43
Other income/(expense), net 256 (91)
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(Loss)/income before income taxes (172) 340
(Benefit)/provision for income taxes (66) 159
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Net (loss)/income ($106) $181
=========== ===========
Per share data:
Net (loss)/income per common share ($0.02) $0.03
=========== ===========
Average shares outstanding 5,943,654 5,985,177
=========== ===========
Dividends per share $0.00 $0.06
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page 4 of 12
<PAGE>
<TABLE>
FARREL CORPORATION
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(In thousands)
<CAPTION>
Three Months Ended
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March 30, March 31,
1997 1996
---- ----
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net Income/(loss) ($106) $181
Adjustments to reconcile net (loss)/income to net
cash provided/(used in) by operating activities:
Gain on disposal of fixed assets (299) -
Depreciation and amortization 413 414
Decrease in accounts receivable 4,751 9,423
(Increase) in inventory (6,725) (2,312)
Increase/(decrease) in accounts payable 663 (5,120)
Increase/(decrease) in customer advances 1,736 (317)
(Decrease) in accrued expenses & taxes (303) (1,864)
(Decrease) in accrued installation and warranty costs (219) (122)
Increase/(decrease) in deferred income taxes 133 (100)
Other 191 (213)
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Total adjustments 341 (211)
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Net cash provided by/(used in) operating activities 235 (30)
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Cash flows from investing activities:
Proceeds from disposal of fixed assets 444 -
Purchases of property, plant and equipment (67) (430)
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Net cash provided by/(used in) investing activities 377 (430)
Cash flows from financing activities:
Used for repurchase of common stock - (59)
Used for dividends paid - (360)
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Net cash (used in) financing activities 0 (419)
Effect of foreign currency exchange rate changes on cash (81) (10)
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Net increase/(decrease) in cash and cash equivalents 531 (889)
Cash and cash equivalents - Beginning of period 3,832 4,066
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Cash and cash equivalents - End of period $4,363 $3,177
=========== ===========
Income taxes paid $45 $481
=========== ===========
Interest paid $1 $15
=========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
Page 5 of 12
<PAGE>
Farrel Corporation
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly, in accordance with
generally accepted accounting principles, the consolidated financial position
of Farrel Corporation ("Farrel" or "the Company") as of March 30, 1997, and the
consolidated results of its operations and cash flows for the three months
ended March 30, 1997 and March 31, 1996. These results are not necessarily
indicative of results to be expected for the full fiscal year. These
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report and Form 10-K for the
year ended December 31, 1996.
NOTE 2 - INVENTORY
Inventory is comprised of the following:
MARCH 30, DECEMBER 31,
1997 1996
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(In thousands)
Stock and raw materials.............. $11,689 $5,905
Work-in process...................... 8,975 8,282
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Total................................ $20,664 $14,187
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Page 6 of 12
<PAGE>
PART I - ITEM 2 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED MARCH 30, 1997 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1996
Net sales for the first quarter of 1997 were $16.1 million compared to
$17.9 million during the first quarter of 1996. The relative sales volumes in
the two periods is largely attributed to the timing of when customer orders
shipped in each respective period were received from customers. Management
believes the Company operates in markets which are extremely competitive, and
to some extent, affected by continuing uncertainty in Eastern Europe and the
Middle East. Far Eastern markets remain particularly competitive and difficult
to penetrate. Many rubber and plastic manufacturers also continue to operate
at less than full capacity. Management is encouraged by the relative
improvement in the level of order intake and backlog compared to earlier
periods It does, however, anticipate that the markets served by the Company's
products will remain extremely competitive and that those markets characterized
by economic and political uncertainty will likely continue to be affected by
such conditions.
During the first quarter of 1997 the Company received $15.4 million in
orders compared to $17.6 million during the first quarter of fiscal 1996. In
the case of major equipment orders, up to 12 months are required to complete
the manufacturing process. Accordingly, revenues reported in the statement of
operations may be recognized in a later accounting period than the one in which
the order was received. In addition, the cyclical nature of industry demand
and, therefore, order intake, may effect the Company's quarterly results of
operations. The Company's ability to maintain and increase net sales depends
upon a strengthening and stability in the Company's traditional markets. There
can be no assurance that any such improvement will lead to increased orders for
the Company's products. Firm backlog at the end of the first quarter of 1997
was $49.6 million compared to $50.2 million at December 31, 1996 and $29.4
million at the end of the first quarter of 1996. Firm backlog as of May 9,
1997 and 1996 was $43.0 million and $50.0 million, respectively.
Gross margin in the first quarter of 1997 was $3.3 million compared to
$4.4 million reported for the first quarter of 1996, while the margin
percentage declined to 21.1 percent from 24.4%. The comparative gross margin
results are largely attributed to the extremely competitive conditions
previously discussed. It is also due to management's decision to pursue
certain rebuild markets more aggressively to maintain and increase market
share, and has accepted lower margins in the near term to do so. Market
conditions continue to exert significant pressure on margins achieved, a trend
which is expected to continue in the foreseeable future.
In an effort to compensate for the significant pressure on margins,
management has taken several measures to aggressively control costs in recent
years including the consolidation of component manufacturing into the Company's
U.K. plant during 1996. The Company has also reduced its worldwide workforce
by roughly one third since becoming a public company in 1992. The Company is
progressing with the consolidation of its domestic assembly, repair and spare
parts operations, currently in two facilities in Connecticut, to available
space in one facility. The cost of this project is expected to be between $1.0
million and $1.5 million, which includes expenditures to be capitalized and
expensed as incurred. Company employees are being utilized in this project to
the fullest extent possible to minimize the cost of the consolidation. Work is
planned to be performed during periods which minimizes interference with
production. Whether cost savings actually result from this consolidation, and
the size of such savings, cannot be predicted with any certainty.
This consolidation will make the Company's Derby facility available for
sale or lease. Whether this facility can be sold or leased, when it might be
sold or leased, and the proceeds which might be realized cannot be predicted
with any certainty. The Company transferred the remaining
Page 7 of 12
<PAGE>
book value of this facility and any remaining assets no longer anticipated to
be used from Property, Plant, and Equipment to Other Assets at the end of
1996. No loss on the disposal of the assets is anticipated at this time, and,
as a result, no provision for loss has been made. It is possible that
proceeds actually received from the disposal of these assets may be less
than the remaining book value in the near term, at which point in time a
loss will be recorded.
Other income, net of other expense, in the first quarter of 1997,
includes approximately $.3 million of gains on the disposal of the excess
machinery and equipment referred to above.
Operating expenses in the first quarter of 1997 were $3.8 million
compared to $4.0 million during the same period of 1997. The reduction of
operating costs is largely attributed to elimination of selected executive
positions and to continuing efforts to strictly control expenses. Lower
administrative costs in the first quarter of 1997 is also attributed to reduced
investment banking and legal costs. The increase in sales and marketing costs
in the first quarter of 1997 is largely due to increased marketing programs.
The reduction in research and development expenses in the first quarter of 1997
is primarily attributed to reduced headcount.
The income tax rate in the first quarter of 1997 and 1996, as a
percentage of pre-tax results of operations, was 38.4% and 46.8%, respectively.
The unusually high 1996 rate is due to the consolidation of domestic income
with a foreign loss. The Company provides for income taxes in the
jurisdictions in which it pays for income taxes at the statutory rates in
effect in each jurisdiction adjusted for differences in providing for income
taxes between financial reporting and income tax purposes.
MATERIAL CONTINGENCIES
The Company and Black & Decker entered into a Settlement Agreement
pursuant to which Black & Decker agreed to assume full responsibility for
the investigation and remediation of any pre- May, 1986 environmental
contamination at the Company's Ansonia and Derby facilities as required by
the Connecticut Department of Environmental Protection (DEP). As part of
the settlement, the Company transferred by quit claim deed a vacant surfaced
parking lot to the City of Ansonia. As required by the Settlement Agreement,
a preliminary environmental assessment of the Company's properties in Ansonia
and Derby, Connecticut has been conducted by Black & Decker. On the basis of
the preliminary data now available there is no reason to believe that any
remediation activities which might be required as a result of the findings
of the assessment will have a material effect upon the capital expenditures,
earnings or the competitive position of the Company. This forward looking
statement could, however, be influenced by the results of any further
investigation which the DEP might require, by DEP's conclusions and
requirements based upon its review of complete information when such is
available, unanticipated discoveries, the possibility that new or different
environmental laws might be adopted and the possibility that further
regulatory review or litigation might become necessary or appropriate.
LIQUIDITY AND CAPITAL RESOURCES; CAPITAL EXPENDITURES
Working capital and the working capital ratio at March 30, 1997 were
$20.7 million and 2.0 to 1, respectively, compared to $ 20.3 million and 2.0 to
1 at December 31, 1996, respectively. Subsequent to the end of the first
quarter of 1997, the Company paid a dividend of $.16 per share. The Company's
ability to pay dividends in the future is generally limited under its credit
facility described below to the aggregate of (a) 25% of net income during the
most recently completed four fiscal quarters after deducting distributions
previously made and (b) purchases by the Company of its common stock during the
same period, without the consent of and/or waiver by the Company's bank.
Due to the nature of the Company's business, many sales are of a large
dollar amount. Consequently, the timing of recording such sales may cause the
balances in accounts receivable and/or inventory to fluctuate dramatically
between quarters and may result in significant fluctuations
Page 8 of 12
<PAGE>
in cash provided by operations. Historically, the Company has not experienced
significant problems regarding the collection of accounts receivable. The
Company has also generally financed its operations with cash generated by
operations, with progress payments from customers and with borrowings under
its bank credit facilities. Management anticipates that its cash balances,
operating cash flows and available credit line will be adequate to fund
anticipated capital commitments and working capital requirements for at
least the next twelve months including the completion of the Company's
consolidation of assembly, repair and spare parts operations into one
facility in Connecticut and the expansion of its Houston, Texas facility.
The Company made capital expenditures of $.1 and $.4 million during the first
quarter of fiscal 1997 and 1996, respectively.
The Company has a worldwide multi-currency credit facility with a major
U.S. bank in an amount of $20.0 million for direct borrowings and letters of
credit and up to <pound-sterling>3.0 million for foreign exchange contracts.
The facility contains limitations on direct borrowings and letters of credit
combined based upon stipulated levels of accounts receivable, inventory and
backlog. The facility also contains covenants specifying minimum and maximum
thresholds for operating results and selected financial ratios. There were
$7.5 million and $8.1 million of letters of credit outstanding at March 30,
1997 and December 31, 1996, respectively. The facility expires on December 31,
1999.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share (FAS 128), which is required to be
adopted on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for calculating primary earnings
per share, the dilutive effect of stock options will be excluded. The impact
of FAS 128 on the calculation of earnings per share is not expected to be
material.
SAFE HARBOR STATEMENTS UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements contained in the Company's public documents, including
in this report and in particular, in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" may be forward looking and
may be subject to a variety of risks and uncertainties. Various factors could
cause actual results to differ materially from these statements. These factors
include, but are not limited to, the following:
pricing pressures from competitors and/or customers
continued economic and political uncertainty in certain of the
Company's markets
the Company's ability to maintain and increase gross margin levels
the Company's ability to generate positive cash
other factors which might be described from time to time in the Company's
filings with the Securities and Exchange Commission
changes in business conditions, in general, and, in particular, in the
businesses of the Company's customers and competitors.
Page 9 of 12
<PAGE>
FARREL CORPORATION
------------------
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
----------------------------------------------
(In thousands, except per share and share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
March 30, March 31,
1997 1996
---- ----
<S> <C> <C>
PRIMARY
Net (loss)/income applicable to common stock ($106) $181
=========== ===========
Weighted average number of common shares
outstanding during the period 5,942,382 5,982,669
Stock option and purchase plans 1,272 2,508
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Total common and common equivalent
shares outstanding 5,943,654 5,985,177
Net (loss)/income per common and common
equivalent share - primary ($0.02) $0.03
=========== ===========
FULLY DILUTED
Net (loss)/income applicable to common stock ($106) $181
=========== ===========
Weighted average number of common shares
outstanding during the period 5,942,382 5,985,177
Stock option and purchase plans 1,272 2,508
----------- -----------
Total common and common equivalent
shares outstanding 5,943,654 5,987,685
=========== ===========
Net (loss)/income per common and common
equivalent share - fully diluted ($0.02) $0.03
=========== ===========
</TABLE>
Page 10 of 12
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 4(a) Amendment to Credit Agreement between Farrel Corporation and
Chase Manhattan Bank of Connecticut, N.A. and Chase Manhattan
Bank of London dated April 23, 1997
Exhibit 11 (Regulation S-K) Computation of Earnings Per Share.
See Page 10.
Exhibit 27 Financial Data Schedule
Reports on Form 8-K
No Reports on Form 8-K were filed by the registrant during the periods
covered by this report.
Page 11 of 12
<PAGE>
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.
FARREL CORPORATION
REGISTRANT
DATE: MAY 9, 1996 /S/ ROLF K. LIEBERGESELL
-----------------------------------
ROLF K. LIEBERGESELL
CHIEF EXECUTIVE OFFICER, PRESIDENT
AND CHAIRMAN OF THE BOARD
DATE: MAY 9, 1996 /S/ CATHERINE M. BOISVERT
-----------------------------------
CATHERINE M. BOISVERT
VICE PRESIDENT AND CONTROLLER
(CHIEF ACCOUNTING OFFICER)
Page 12 of 12
SIXTH AMENDMENT AGREEMENT
SIXTH AMENDMENT AGREEMENT (this "Agreement") dated as of April
23, 1997 among FARREL CORPORATION, a corporation organized under the
laws of Delaware (the "U.S. Company"), FARREL LIMITED, a corporation
organized under the laws of England (the "UK Company") (each of the
foregoing entities is referred to herein individually as a "Borrower"
and, collectively, as the "Borrowers"), THE CHASE MANHATTAN BANK, a New
York banking corporation ("Chase Connecticut") and successor by merger
to The Chase Manhattan Bank, N.A., and THE CHASE MANHATTAN BANK, LONDON
BRANCH, the London branch of a New York banking corporation ("Chase
U.K.") (each of the foregoing entities is referred to herein
individually as a "Bank" and, collectively, as the "Banks").
WHEREAS, the Borrowers and the Banks have entered into that
certain Credit Agreement dated as of March 20, 1993 which has been
amended by the First Amendment thereto, dated as of April 23, 1993; the
Second Amendment thereto, dated as of December 6, 1993; the Third
Amendment thereto, dated as of March 31, 1995; the Fourth Amendment
thereto, dated as of October 31, 1995; and, the Fifth Amendment thereto,
dated as of June 23, 1996 (as in effect prior to the effectiveness of
this Agreement, the "Existing Credit Agreement," and, as amended by this
Agreement, the "Amended Credit Agreement"), pursuant to which the Banks
have extended credit to the Borrowers evidenced by certain Promissory
Notes (as amended, the "Notes" issued by the Borrowers;
WHEREAS, the Borrowers and the Banks have agreed to enter into
this Agreement to provide for the waiver of the amendment to certain
covenants; and
WHEREAS, the Facility Documents, as amended and supplemented
by this Agreement and as each may be amended or supplemented from time
to time, are referred to herein as the "Amended Facility Documents".
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1. AMENDMENTS TO EXISTING AGREEMENTS AND WAIVER.
Section 1.0.1 Each of the Borrowers and the Banks hereby
consent and agree to the amendments to the Existing Credit Agreement
set forth below:
(a) Any and all references to "The Chase Manhattan Bank,
N.A." shall be deemed to mean its successor by merger, The Chase
Manhattan Bank, a New York banking corporation.
<PAGE>
(b) Section 8.04 of the Existing Credit Agreement is hereby
amended and restated to read as follows:
"Section 8.04. MINIMUM TANGIBLE NET WORTH. The
Borrowers shall maintain at all times Consolidated Tangible Net Worth of
not less than $23,000,000."
Section 1.02. WAIVER OF THE EXISTING CREDIT AGREEMENT. The
Borrower has stated it intends to pay cash dividends in respect of its
capital stock in an aggregate amount of not more than four million
dollars ($4,000,000) for the period from the date of this Amendment
through June 30, 1998, in addition to such rights as are currently
allowed under Section 7.06 of the Existing Credit Agreement. The Bank
has advised the Borrower that in the Bank's opinion such a transaction
would violate Section 7.06 of the Existing Credit Agreement unless the
Borrower received the Bank's prior consent to the transaction and/or a
waiver of the restrictions of said Section 7.06. Upon due consideration
of this proposed action, the Bank hereby advises the Borrower that the
Banks will not deem this proposed action, if taken, to be a violation of
said 7.06; that they will not declare a default under the Existing
Credit Agreement with respect to this proposed action; and that they
waive their rights to enforce said Section 7.06 as regards the
Borrower's taking such action; provided, however, that at the time such
action might be effective the Borrowers are not in default of said
Section 7.06 as regards or as a result of any other action of
transaction and/or not in default of any other terms and conditions of
the Amended Credit Agreement. This Waiver is limited to the particular
action described in this Section, and shall not be construed as waiving
any other term or condition of the Existing Credit Agreement. This
waiver is contingent upon the action, if any, finally taken by the
Borrower being consistent in scope and nature as described above in this
Section 1.02.
ARTICLE 2. MISCELLANEOUS.
Section 2.01. DEFINED TERMS. The terms used herein and not
defined herein shall have the meanings assigned to such terms in the
Existing Credit Agreement.
Section 2.02. REAFFIRMATION. Each of the Borrowers
acknowledge and reaffirms all of its other respective obligations and
duties under the Amended Facility Documents to which its is a party.
Section 2.03. REPRESENTATIONS. Each Borrower hereby
represents and warrants to the Banks that: (i) the covenants,
representations and warranties set forth in the Existing Credit
Agreement and in each of the other Facility Documents are true and
correct on and as of the date hereof as if made on and as of said date
and as if each reference therein to the Existing Credit Agreement were a
reference to the Existing Credit Agreement as amended by this Agreement;
(ii) no Event of Default specified in the Facility Document and no event
which, with the giving of notice or lapse of time or both, would become
such an Event of Default has occurred and is continuing; (iii) since
June 23, 1996 there has been no material adverse change in the financial
condition or business operations of the Borrower which has not been
disclosed to the Banks; and (iv) the
<PAGE>
making and performance by the Borrower of this Agreement have been duly
authorized by all necessary corporate action.
Section 2.04. CONDITIONS. The amendments and waiver to the
Existing Credit Agreement set forth in Article 1 above shall become
effective on the date first above written provided that the Banks shall
have received, on or prior to that date, in form and substance
satisfactory to the Banks, a counterpart of this Agreement duly executed
and delivered by the Borrowers. Except as expressly provide in this
Agreement, the Existing Credit Agreement shall remain unchanged and in
full force and effect.
Section 2.05. AMENDMENTS AND WAIVERS. Any provisions of this
Agreement may be amended or modified only by an instrument in writing
signed by the Borrowers and the Banks and any provision of this
Agreement may be waived by the Banks.
Section 2.06. NOTICES. Unless the party to be notified
otherwise notifies the other party in writing as provided in this
Section, notices shall be given in accordance with the requirements of
Section 10.06 of the Amended Credit Agreement.
Section 2.07. TABLE OF CONTENTS; HEADINGS. Any table of
contents and the headings and captions hereunder are for convenience
only and shall not affect the interpretation and construction of this
Agreement.
Section 2.08. SEVERABILITY. The provisions of this Agreement
are intended to be severable. If for any reason any provision of this
Agreement shall be held invalid or unenforceable in whole or in part in
any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
in any manner affecting the validity or enforceability thereof in any
other jurisdiction or the remaining provisions hereof in any
jurisdiction.
Section 2.09. COUNTERPARTS. This Agreement may be executed
in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any party hereto may execute
this Agreement by signing any such counterpart.
Section 2.10. INTEGRATION. The Amended Facility Documents
set forth the entire agreement among the parties hereto relating to the
transactions contemplated thereby and supersede any prior oral or
written statements or agreements with respect to such transactions.
SECTION 2.11. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF CONNECTICUT.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day first above written.
FARREL CORPORATION, a Delaware
corporation
By: /S/ROLF K. LIEBERGESELL
----------------------------------
Name: Rolf K. Liebergesell
Title: Chairman, President & CEO
FARREL LIMITED, A United Kingdom
corporation
By: /S/ROLF K. LIEBERGESELL
----------------------------------
Name: Rolf K. Liebergesell
Title: Chairman
THE CHASE MANHATTAN BANK,
LONDON BRANCH
By: /S/JOHN NEEDHAM
----------------------------------
Name: John Needham
Title: Vice President
THE CHASE MANHATTAN BANK
By: /S/THOMAS D. MCCORMICK
----------------------------------
Name: Thomas D. McCormick
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FARREL CORPORATION AS OF MARCH 30, 1997 AND
FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-30-1997
<EXCHANGE-RATE> 1
<CASH> 4,363
<SECURITIES> 0
<RECEIVABLES> 14,406
<ALLOWANCES> 326
<INVENTORY> 20,664
<CURRENT-ASSETS> 42,250
<PP&E> 17,820
<DEPRECIATION> 8,931
<TOTAL-ASSETS> 52,050
<CURRENT-LIABILITIES> 21,561
<BONDS> 0
0
0
<COMMON> 61
<OTHER-SE> 27,895
<TOTAL-LIABILITY-AND-EQUITY> 52,050
<SALES> 16,123
<TOTAL-REVENUES> 16,123
<CGS> 12,785
<TOTAL-COSTS> 12,785
<OTHER-EXPENSES> 3,946
<LOSS-PROVISION> (136)
<INTEREST-EXPENSE> 44
<INCOME-PRETAX> (172)
<INCOME-TAX> 66
<INCOME-CONTINUING> (106)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (106)
<EPS-PRIMARY> ($0.02)
<EPS-DILUTED> ($0.02)
</TABLE>
