<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 1999
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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 0-9607
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CENTRUM INDUSTRIES, INC.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1654011
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
441 East Main Street, Corry, PA 16407
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(814) 665-5042
--------------
(Registrant's telephone number, including area code)
(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 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 .
--- ---
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 November 4, 1999
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Common Stock - $.05 Par Value 8,486,001
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CENTRUM INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
COVER 1
INDEX 2
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheet
as of September 30, 1999 and March 31,1999. 3
Condensed Consolidated Statement of
Operations for the three month and six month
periods ended September 30, 1999 and 1998. 4
Condensed Consolidated Statement of
Cash Flows for the six month periods
ended September 30, 1999 and 1998. 5
Notes to Condensed Consolidated
Financial Statements 6
ITEM 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings 12
ITEM 4: Submission of Matters to a Vote of Security Holders 12
ITEM 6: Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
CENTRUM INDUSTRIES,INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
in thousands, except for share data
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1999 1999
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 76 $ 84
Accounts receivable, less allowance for doubtful
accounts of $113 and $60, respectively 9,195 7,778
Cost and estimated earnings in excess of
billings on uncompleted contracts 296 619
Inventories, net 9,597 10,475
Net assets held for sale 2,984 2,292
Prepaid expenses and other 350 229
-------------- --------------
Total current assets 22,498 21,477
Property, plant and equipment, net 17,398 17,911
Other assets 5,394 5,355
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Total assets $ 45,290 $ 44,743
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank lines of credit $ 9,956 $ 7,109
Current portion of long-term debt 1,743 1,844
Accounts payable 6,577 8,196
Deferred income taxes 253 238
Accrued expenses and other 2,542 2,534
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Total current liabilities 21,071 19,921
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Long-term debt, less current portion 16,365 17,055
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Other liabilities 706 783
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Commitments and contingent liabilities - -
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Shareholders' equity:
Preferred stock - $.05 par value, 1,000,000 shares
authorized, 70,000 issued and outstanding (liquidation
preference of $10 per share) 4 4
Common stock - $.05 par value, 45,000,000 shares
authorized, 8,406,001 issued and
outstanding at September 30, and March 31, 1998 424 424
Additional paid-in capital 8,104 8,104
Retained earnings (1,384) (1,548)
-------------- --------------
Total shareholders' equity 7,148 6,984
-------------- --------------
Total liabilities and shareholders' equity $ 45,290 $ 44,743
============== ==============
</TABLE>
3
<PAGE> 4
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------------------------
in thousands, except for share data
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net Sales $ 11,812 $ 13,652 $ 24,181 $ 28,167
Cost and expenses:
Cost of goods sold 9,264 10,111 19,059 21,118
Depreciation 470 417 926 810
----------- ----------- ----------- -----------
Gross margin 2,078 3,124 4,196 6,239
Selling, general and administrative expenses 1,701 2,144 3,402 4,254
----------- ----------- ----------- -----------
Operating income 377 980 794 1,985
----------- ----------- ----------- -----------
Other (income) expense:
Interest expense 672 704 1,284 1,453
Other (12) (6) (16) (47)
----------- ----------- ----------- -----------
Total other (income) expense, net 660 698 1,268 1,406
Income (loss) from continuing operations before income taxes (283) 282 (474) 579
Provision for income taxes (benefit) (116) 113 (192) 232
----------- ----------- ----------- -----------
Net income (loss) from continuing operations (167) 169 (282) 347
Income (loss) from discontinued operations, net of income taxes 155 (204) 446 (380)
----------- ----------- ----------- -----------
Net Income (loss) $ (12) $ (35) $ 164 $ (33)
=========== =========== =========== ===========
Basic income (loss) per common share:
Continuing operations $ (0.02) $ 0.02 $ (0.03) $ 0.04
=========== =========== =========== ===========
Discontinued operations $ 0.02 $ (0.02) $ 0.05 $ (0.05)
=========== =========== =========== ===========
Net Income $ (0.00) $ (0.00) $ 0.02 $ (0.00)
=========== =========== =========== ===========
Diluted income (loss) per common share:
Continuing operations $ (0.02) $ 0.02 $ (0.03) $ 0.04
=========== =========== =========== ===========
Discontinued operations $ 0.02 $ (0.02) $ 0.05 $ (0.04)
=========== =========== =========== ===========
Net Income $ (0.00) $ (0.00) $ 0.02 $ (0.00)
=========== =========== =========== ===========
Weighted average number of basic common shares
8,486,001 8,405,186 8,486,001 8,404,348
=========== =========== =========== ===========
Weighted average number of diluted common shares
8,506,793 9,116,569 8,535,637 8,935,804
=========== =========== =========== ===========
</TABLE>
4
<PAGE> 5
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
in thousands
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) from continuing operations $ (282) $ 347
Adjustments to reconcile net income to
net cash provided by (used for) operating activities:
Depreciation 926 810
Amortization - debt issue costs 178 299
Changes in assets and liabilities that provided
(used) operating cash
Accounts receivable (1,417) (430)
Inventories 878 (577)
Accounts payable (1,619) 985
Prepaid expenses, accrued expenses and other (297) (295)
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Net cash (used) provided by operating activities (1,633) 1,139
Net cash (used) provided by operating activities - Discontinued Operations (1,141) (583)
------- -------
Net cash (used) provided by operating activities (2,774) 556
Cash flows from investing activities:
Purchase of property and equipment (408) (1,815)
Other - (325)
Purchase of property and equipment - Discontinued Operations (244) (60)
------- -------
Net cash used for investing activities (652) (2,200)
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Cash flows from financing activities:
Net change in bank lines of credit 2,847 (490)
Net change in bank lines of credit - Discontinued Operations 1,384 418
Debt issue costs (27) -
Proceeds from the issuance of debt 112 6,165
Proceeds from capital leases 55 -
Repayments on long term debt (953) (5,431)
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Net cash provided by financing activities 3,418 662
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Decrease in cash and cash equivalents (8) (982)
Cash and cash equivalents at beginning of year 84 1,314
------- -------
Cash and cash equivalents at end of period $ 76 $ 332
======= =======
</TABLE>
5
<PAGE> 6
CENTRUM INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting principally of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of the results of operations for the three and six month periods ended
September 30, 1999 and 1998. Accounting policies followed by the Company are
described in Note 1 to the financial statements in its Annual Report on Form
10-K for the fiscal year ended March 31, 1999.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The condensed consolidated financial statements
should be read in conjunction with the financial statements, including notes
thereto, contained in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1999.
The results of operations for the three month and six month period ended
September 30, 1999, are not necessarily indicative of the results to be expected
for the full year. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Certain amounts within the previous year's financial statements have been
reclassified in order to be consistent with the current year presentation. In
this document, years reflect the fiscal year ended March 31, unless otherwise
noted.
NOTE B: COMPOSITION OF CERTAIN BALANCE SHEET ACCOUNTS (in 000's)
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, 1999 March 31, 1999
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<S> <C> <C>
Raw Materials $ 4,749 $ 4,753
Work in Progress 3,652 4,404
Finished Goods 1,196 1,318
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Total Inventories $ 9,597 $ 10,475
=============== ==============
Other assets consist of the following:
<CAPTION> September 30, 1999 March 31, 1999
------------------ --------------
<S> <C> <C>
Deferred Income Tax Benefits $ 4,048 $ 4,070
Debt Issuance Costs and Intangibles, less
accumulated amortization of $66 and
$9, respectively 499 372
Other Assets 847 913
--------------- --------------
Total Other Assets $ 5,394 $ 5,355
=============== ==============
</TABLE>
6
<PAGE> 7
NOTE C: DISCONTINUED OPERATIONS
During fiscal 1999, the Company made the strategic decision that the Metal
Forming Segment represents the most significant opportunity for future growth
and profitability for the Company. As a direct result of this decision, the
Company adopted a formal plan in March 1999 to sell American Handling, Inc. and
it's subsidiary, Northern Steel Company. Accordingly, these companies are
presented as discontinued operations. The following presents summarized
financial information excluding certain corporate expense allocations.
<TABLE>
<CAPTION>
For the three months ended For the six months ended
September 30 September 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating revenues $ 8,276 $ 6,297 $ 16,861 $ 12,443
Income (loss) before
provision for income taxes 259 (340) 744 (633)
Income (loss) from discontinued
operations, net of income taxes 155 (204) 446 (380)
</TABLE>
As of:
<TABLE>
<CAPTION>
September 30, 1999 March 31, 1999
------------------ --------------
<S> <C> <C>
Current Assets $ 8,359 $ 6,897
Total Assets 12,400 11,400
Current Liabilities 9,570 8,962
Total Liabilities 9,416 9,108
Net Assets of discontinued
operations 2,984 2,292
</TABLE>
NOTE D: INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income used in the diluted earnings per share calculation is the same as net
income used in the basic earnings per share calculation for the three and six
month periods ended September 30, 1999 and 1998. In addition, approximately 3.7
and 1.8 million options and warrants were outstanding during the current and
prior year, respectively, but were not included in the computation of diluted
earnings per share as the effects of converting the options and warrants would
be antidilutive.
7
<PAGE> 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Summarized results of operations by business segment for the three and six month
periods ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
For the Quarter Ended % Change For the Six Months Ended % Change
------------------- -------------------
RESULTS OF OPERATIONS September 30, from Prior Year September 30, from Prior Year
--------------------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands) 1999 1998 1999 1999 1998 1999
- ------------------------------------------------------------------------------------------------------------------------------------
CONTINUING OPERATIONS
NET SALES:
Meatal Forming $ 11,395 $ 12,781 -10.8% $ 22,774 $ 26,365 -13.6%
Corporate & Other 417 871 -52.1% 1,407 1,802 -21.9%
------------------------------------------------------------------------------------------
$ 11,812 $ 13,652 -13.48% $ 24,181 $ 28,167 -14.15%
- ------------------------------------------------------------------------------------------------------------------------------------
GROSS MARGIN:
Metal Forming $ 1,982 $ 2,938 -32.5% $ 3,890 $ 5,865 -33.7%
Corporate & Other 96 186 -48.4% 306 374 -18.2%
------------------------------------------------------------------------------------------
$ 2,078 $ 3,124 -33.48% 4,196 6,239 -32.75%
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME(LOSS):
Metal Forming $ 639 $ 1,280 -50.1% $ 1,225 $ 2,605 -53.0%
Corporate & Other (262) (300) -12.7% (431) (620) -30.5%
------------------------------------------------------------------------------------------
$ 377 $ 980 -61.53% $ 794 $ 1,985 -60.00%
- ------------------------------------------------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS
Net Sales $ 8,276 $ 6,297 31.4% $ 16,861 $ 12,443 35.5%
Gross Margin $ 2,087 $ 1,429 46.0% $ 4,180 $ 2,918 43.2%
Operating Income (Loss) $ 330 $ (281) [1] $ 838 $ (515) [1]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
BASIS OF FINANCIAL STATEMENTS
During fiscal 1999, the Company committed to a plan to sell the Material
Handling Segment consisting of the operations of American Handling, Inc. (AHI)
and it's subsidiary, Northern Steel Company (Northern). The Company intends to
complete the sale before the fiscal 2000. Accordingly, the net assets of AHI and
Northern are treated as "held for sale" and the related operating results have
been classified as discontinued operations in the Condensed Consolidated
Financial Statements for the periods presented. The Company recorded net income
from these discontinued operations of $155,000 in the second quarter as compared
to a net loss of $204,000 in the prior year quarter and net income of $446,000
in the year to date results as compared to a net loss of $380,000 in the prior
year period. Please see "Discontinued Operations - Material Handling Segment"
for further discussion.
8
<PAGE> 9
CONTINUING OPERATIONS
CONSOLIDATED RESULTS
The Company's operations consist primarily of the Metal Forming Operations
segment. This segment manufactures steel forgings and seamless rolled rings for
power generation, compressor, bearing, oil and gas, mining and specialty machine
manufacturers, along with nonferrous castings for the glass container, pump and
valve industries. The remaining portions of the Company are discussed under the
heading Corporate and Other, which pertains to corporate activities and other
manufacturing operations that are not sufficiently material to warrant separate
discussion.
Consolidated revenues from continuing operations declined by 13.6% to $11.8
million for the quarter and by 14.2% to $24.2 million in the year to date
results in relation to the comparable prior year periods. This decrease in
revenue is primarily attributable to weaker demand in most markets served by the
Metal Forming segment. Gross margins for the quarter declined to 17.6% from
22.9% in the prior year quarter and to 17.4% from 22.2% in the comparable year
to date results as a result of the revenue reduction and pricing pressures in a
slow marketplace. The revenue weakness coupled with pressure on margins were the
primary reasons for the reduction in operating income to $377,000 from $980,000
and to $794,000 from $1,985,000 in the comparable prior year quarter and year to
date results, respectively. Interest expense decreased by $169,000 in the year
to date results because of savings generated from the new senior credit facility
closed at the end of fiscal 1999. The effective tax rate utilized in the current
and prior year provision is a 40% tax rate.
Management believes that the Company will continue to experience similar
operating conditions during the second half of Fiscal 2000 pending recovery of
demand in the industrial sectors of global markets and in the domestic oil and
gas industry.
METAL FORMING OPERATIONS
Sales for the Metal Forming Operations declined by $1.4 million or 10.8% during
the quarter and $3.6 million or 13.6% in the year to date results in relation to
the comparable prior year periods. Industry revenues for the year fell by
approximately 27% when compared to the comparable prior year period as published
by the Forging Industry Association. Demand in the metal forming operations has
been adversely affected by the global economic crisis and depressed conditions
in the industrial sectors of the domestic economy. Markets supplied by this
segment such as compressor, oil and gas, mining, agriculture and construction
equipment experienced a pronounced reduction in order volume during the second
half of fiscal 1999. However, during fiscal 2000, the Metal Forming
Operations revenue trend has benefited from renewed strength in the domestic
power generation markets. Strong demand in the power generation markets has
helped to offset the sluggish conditions in the overall market.
Margins during the second quarter declined to 17.4% from 23% in the prior year
quarter and to 17.1% from 22.2% in the comparable year to date results primarily
as a result of reduced volume and pricing pressure in the marketplace as a
result of the slow industry conditions discussed above. Interest expense
decreased by approximately $111,000 in the year to date results as a result of
savings from the new senior credit facility closed at the end of fiscal 1999.
Operating income fell to $639,000 from $1,280,000 in the prior year quarter and
to $1,225,000 from $2,605,000 in the comparable year to date period as a result
of the revenue and margin weakness discussed above.
9
<PAGE> 10
Management expects these industry conditions to persist during the remainder of
fiscal 2000 until demand in the industrial secotrs of global markets and the
domestic oil and gas industry recovers. As always, management continues its
focus on cost reductions and increased market penetration.
CORPORATE AND OTHER
The operating loss from these operations decreased to $731,000 in the current
fiscal year to date as compared to $946,000 in the prior year primarily as a
result of increased focus on cost reductions at Corporate.
DISCONTINUED OPERATIONS - MATERIAL HANDLING SEGMENT
As mentioned above, the Company has committed to a formal plan to sell the
operations that comprise the material handling segment. The sale of AHI and
Northern is planned to occur before the end of the fiscal year. For this reason,
the net assets of the segment have been classified as "held for sale" and the
operating results have been classified as discontinued operations in the
Consolidated Financial Statements for the periods presented.
Revenues in the Material Handling Segment increased to $8.3 million in the
current year quarter from $6.3 million in the prior year quarter or 31.4% and in
the year to date results to $16.9 million from $12.4 million or 35.5% as a
result of increased market penetration at the segment. Orders from such new
sectors of the material handling market as construction, industrial supplies,
medical products and printing have strengthened the revenue stream at the
segment. Gross margins have also been positively impacted by these new sectors
climbing to 25.2% in the current year quarter from 22.7% in the comparable prior
year period. SG&A has been reduced to 20.8% of sales in the current year quarter
from 26.6% in the prior year and to 19.4% from 27.0% in the comparable year to
date results primarily as a result of cost reductions and the overall
improvement in the revenue base. As a result of these conditions, operating
income at the segment has improved to $330,000 from an operating loss of
$281,000 in the prior year quarter and to operating income of $838,000 from a
operating loss of $515,000 in the comparable year to date results. This trend in
revenue and profitability is expected to continue during the fiscal year as the
segment realizes the benefit of its marketing efforts and the resulting
diversification of its revenue base.
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities for continuing operations during the six month
period ended September 30, 1999 totaled $1.6 million as opposed to cash provided
of $1.1 million in the prior year period. Operating income plus depreciation
expense totaled $1.7 million during the current year as compared to $2.8 million
in the comparable prior year period. The operating income during the current
quarter and positive cashflow stemming from an approximate $900,000 reduction in
inventory were offset by an increase in accounts receivable and a reduction in
accounts payable primarily as a result of timing differences in cash receipts
and disbursements. The inventory reduction is a direct result of management's
ongoing focus in the efficient utilization of working capital.
Cash flows from operating activities during the remainder of the fiscal year are
expected to be sufficient to fund operations, including scheduled monthly debt
repayments and planned capital expenditures. The primary sources of funds
available to the Company for future operations, planned capital expenditures and
debt
10
<PAGE> 11
repayments include cash generated by operations and funds available under the
line of credit agreement, and proceeds from the sale of the material handling
segment.
YEAR 2000 (Y2K) DATE CONVERSION ISSUES
The Y2K issue was caused by many computers and software systems using an
abbreviated two-digit date field to designate a year. As a result, computerized
systems may not properly process transactions using a year 2000 or later date.
The Company initiated an evaluation of its critical Information Technology (IT)
computer hardware and software systems and non-IT systems, such as business,
operating, and plant floor systems. The Company's objective is to address the
Y2K issues, both internally and externally. Remediation of Y2K noncompliance
consists of replacing, upgrading, repairing, modifying or retiring IT and non-IT
systems or specific system components. The Metal Forming Operations Segment has
assessed the Y2K issue as part of the ongoing implementation of their normal
upgrading of hardware and software. At the Material Handling Systems Segment,
American Handling has integrated their operations with Northern, whose software
is Y2K capable. The Company presently believes that based on information
available to date, with scheduled modifications to existing software and
conversions to new software, the Y2K issue will not pose significant operational
problems for the Company's computer systems as so modified and converted.
However, if such modifications and conversions are not completed timely, the Y2K
issue may have a material impact on the operations of the Company.
The process of contingency planning has begun during the remediation of the
internal IT and non-IT systems. Management expects that post remediation testing
will be completed by the end of 1999 and contingency plans formalized at that
time.
The Company has undertaken assessing the Y2K readiness of key suppliers and
customers. However, the Company is unable to definitively determine that all key
suppliers and customers will be Y2K compliant. Alternative suppliers are being
identified for key vendors as part of the contingency planning for external Y2K
noncompliance. In addition, there can be no assurance that the systems of other
companies on which the Company relies will be corrected as planned or that such
failure to correct this issue by another company would not have an adverse
effect on the Company.
Costs to address the Y2K issue have not been individually tracked or budgeted as
separate projects by the segments. The Y2K costs, which have been incurred, have
been recorded as part of the normal operating costs. The total cost for the
Company to achieve Y2K compliance is currently estimated at $200,000,
approximately ninety percent of this amount has already been incurred. In
addition, while many costs have been anticipated, the ultimate costs of the Y2K
issue are unknown.
Management believes the risk of unresolved Y2K problems or unanticipated
remediation costs in the year 2000 or later having a material adverse impact on
the Company's results of operations, liquidity or financial position to be low.
However, the Company will continue to assess the risk associated with both
internal and external factors and the possible impact of various scenarios
involving Y2K issues. The mostly likely worst case scenario involves production
disruption due to the inability of a supplier to provide critical elements. The
Company is unable to quantify the impact of such a scenario, but management
believes such an occurrence would be temporary in nature.
The foregoing disclosure is based on the Company's current expectations,
estimates and projections, which could ultimately change.
11
<PAGE> 12
FORWARD LOOKING INFORMATION
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are
indicated by words or phrases such as "anticipate," "estimate," "projects,"
"management believes," and similar words or phrases. Such statements are subject
to certain risks, uncertainties or assumptions, and are based on management's
current expectations. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated or projected.
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The Company is involved in litigation arising out of the normal course of
business activities. None of these legal proceedings including the matters
discussed in the Company's Annual Report on Form 10K for the fiscal year ended
March 31, 1999 are expected to have a material adverse effect on the Company.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(A): The exhibits listed in the Exhibit Index
are filed as part of this report.
(B): Reports on Form 8-K
None
12
<PAGE> 13
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.
CENTRUM INDUSTRIES, INC.
------------------------
(Registrant)
Date: November 8, 1999 By: /s/ Timothy M. Hunter
------------------ ---------------------
Timothy M. Hunter
Chief Financial Officer
13
<PAGE> 14
EXHIBIT INDEX
Exhibit No. Description
-----------------------------------------------------------------------
EX 10.47 Waiver and Amendment No. 1 to the Loan and Security
Agreement dated as of February 25, 1999, by and among
BankAmerica Business Credit, Inc. as Lender and McInnes
Steel Company, MRR-Memphis Forge Company, Erie Bronze
& Aluminum Company, Eballoy Glass Products Company,
McInnes International, Inc., American Handling, Inc.,
Northern Steel Company and Micafil, Inc. as Borrowers.
EX 10.48 Amendment No. 2 to the Loan and Security Agreement
dated as of February 25, 1999, by and among BankAmerica
Business Credit, Inc. as Lender and McInnes Steel
Company, MRR-Memphis Forge Company, Erie Bronze &
Aluminum Company, Eballoy Glass Products Company,
McInnes International, Inc., American Handling, Inc.,
Northern Steel Company and Micafil, Inc. as Borrowers.
EX 10.49 Third Amendment to the Loan and Security Agreement
dated as of February 25, 1999, by and among BankAmerica
Business Credit, Inc. as Lender and McInnes Steel
Company, MRR-Memphis Forge Company, Erie Bronze &
Aluminum Company, Eballoy Glass Products Company,
McInnes International, Inc., American Handling, Inc.,
Northern Steel Company and Micafil, Inc. as Borrowers.
EX 27 Financial Data Schedule
14
<PAGE> 1
EXHIBIT 10.47
WAIVER AND AMENDMENT NO. 1 TO
LOAN AND SECURITY AGREEMENT
THIS WAIVER AND AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is dated as of June 24, 1999 and is entered into by and among the
financial institutions listed on the signature pages hereof (individually, a
"Lender" and collectively, the "Lenders"), Bank of America National Trust and
Savings Association, successor-in-interest to BankAmerica Business Credit, Inc.,
as agent for the Lenders (in its capacity as agent, the "Agent"), and McInnes
Steel Company, McInnes International, Inc., Taylor Forge Company, Erie Bronze &
Aluminum Company, American Handling, Inc., Northern Steel Company, Micafil, Inc.
and Eballoy Glass Products Company (individually, a "Borrower" and collectively,
the "Borrowers"). All capitalized terms used herein but not otherwise defined
shall have the meanings ascribed to them in the Agreement (as hereinafter
defined).
WITNESSETH:
WHEREAS, the Lenders, the Agent and the Borrowers have entered into
that certain Loan and Security Agreement dated as of February 25, 1999 (the
"Agreement");
WHEREAS, certain Events of Default, as more particularly described
herein, have occurred under the Agreement; and
WHEREAS, the Borrowers desire to have the Events of Default waived and
to amend the Agreement and the Lenders and the Agent are willing to do so,
subject to the terms and conditions stated herein;
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Borrowers, the Lenders and the Agent hereby agree as
follows:
SECTION 1. Waiver of Default. The Agent and the Lenders hereby waive
the Events of Default and any remedies available to the Agent and Lenders
arising from the following: (a) the Consolidated Adjusted Tangible Net Worth of
Centrum and its Subsidiaries determined as of March 31, 1999, was less than
$6,500,000, the minimum amount required under Section 9.26 of the Agreement,
provided, however, that such waiver shall be subject to the condition that the
final calculation of the Consolidated Adjusted Tangible Net Worth of Centrum and
its Subsidiaries as of March 31, 1999 shall not be less than $4,000,000; and (b)
the Fixed Charge Coverage Ratio of Centrum and its Subsidiaries for the period
of four consecutive fiscal quarters ended on March 31, 1999, was less than 1.10
to 1.0, the minimum ratio required under Section 9.27 of the Agreement,
provided, however, that such waiver shall be subject to the condition that the
final calculation of the net loss (before taxes) of Centrum and its Subsidiaries
for the period of four consecutive fiscal quarters ended on March 31, 1999 shall
not be greater than ($5,815,000). This waiver is only applicable and shall only
be effective for the specific instances, for the specific purposes, and for the
specific periods for which given. Such waiver is expressly limited to the facts
and circumstances
-1-
<PAGE> 2
referred to herein and shall not operate (a) as a waiver of or consent to
non-compliance with any other section of the Agreement or any other Loan
Document, (b) as a waiver of, or a restriction on or prejudice with respect to,
any right, power or remedy of the Agent or any Lender under the Agreement or any
other Loan Document, or (c) as a waiver of or consent to any other Event of
Default or Default under the Agreement or any other Loan Document.
SECTION 2. Amendment to the Agreement. The Agent, the Lenders and the
Borrowers agree that the Agreement shall be amended, effective as of the date
hereof (unless otherwise expressly provided) as follows:
(a) Effective as of June 1, 1999, clauses (a), (b) and (c) of
Section 3.1(a) of the Agreement are hereby amended and restated to read
in their entirety as follows:
"(a) with respect to Base Rate Capital Expenditure
Loans, Base Rate Term Loans, Acquisition Line advances based
on the Base Rate, and all other Obligations (other than the
Base Rate Revolving Loans and LIBOR Rate Loans), 0.75% per
annum (the `First Base Rate Margin'), provided, however, that
the First Base Rate Margin shall be reduced to 0.50% per annum
at such time (if ever) as both of the following conditions
shall have been met to the satisfaction of the Agent: (i)
Centrum and its Subsidiaries shall have maintained a Fixed
Charge Coverage Ratio of at least 1.1 to 1.0 (A) for the
fiscal quarter ending June 30, 1999, for the period of the one
fiscal quarter ended on such date, (B) for the fiscal quarter
ending September 30, 1999, for the period of the two
consecutive fiscal quarters ended on such date, or (C) for the
fiscal quarter ending December 31, 1999, for the period of the
three consecutive fiscal quarters ended on such date; and (ii)
no Default or Event of Default shall have occurred and be
continuing at the time of such proposed reduction of the First
Base Rate Margin; provided further, however, that after any
such reduction of the First Base Rate Margin, if Centrum and
its Subsidiaries shall not continue to maintain a Fixed Charge
Coverage Ratio of at least 1.1 to 1.0 in any succeeding fiscal
quarter, for the respective periods stated in clause (i) of
the preceding proviso, prior to the fiscal quarter ending
March 31, 2000, the First Base Rate Margin shall be increased
to 0.75% per annum;
(b) with respect to Base Rate Revolving Loans, 0.25%
per annum (the `Second Base Rate Margin'), provided, however,
that the Second Base Rate Margin shall be reduced to 0% per
annum at such time (if ever) as both of the following
conditions shall have been met to the satisfaction of the
Agent: (i) Centrum and its Subsidiaries shall have maintained
a Fixed Charge Coverage Ratio of at least 1.1 to 1.0 (A) for
the fiscal quarter ending June 30, 1999, for the period of the
one fiscal quarter ended on such date, (B) for the fiscal
quarter ending September 30, 1999, for the period of the two
consecutive fiscal quarters ended on such date, or (C) for the
fiscal quarter ending December 31, 1999, for the period of the
three consecutive fiscal quarters ended on such date; and (ii)
no Default or Event of Default shall have occurred and be
continuing at the time of such proposed reduction of the
Second Base Rate Margin; provided further, however, that after
any such reduction of the Second Base Rate Margin, if Centrum
and its Subsidiaries shall not continue to maintain a
-2-
<PAGE> 3
Fixed Charge Coverage Ratio of at least 1.1 to 1.0 in any
succeeding fiscal quarter, for the respective periods stated
in clause (i) of the preceding proviso, prior to the fiscal
quarter ending March 31, 2000, the Second Base Rate Margin
shall be increased to 0.25% per annum; and
(c) with respect to LIBOR Revolving Loans, 2.50% per
annum (the `First LIBOR Rate Margin'), and with respect to
LIBOR Term Loans, LIBOR Capital Expenditure Loans and
Acquisition Line advances based on the LIBOR Rate, 3.0% per
annum (the `Second LIBOR Rate Margin'), provided, however,
that the First LIBOR Rate Margin shall be reduced to 2.25% per
annum and the Second LIBOR Rate Margin shall be reduced to
2.75% per annum at such time (if ever) as both of the
following conditions shall have been met to the satisfaction
of the Agent: (i) Centrum and its Subsidiaries shall have
maintained a Fixed Charge Coverage Ratio of at least 1.1 to
1.0 (A) for the fiscal quarter ending June 30, 1999, for the
period of the one fiscal quarter ended on such date, (B) for
the fiscal quarter ending September 30, 1999, for the period
of the two consecutive fiscal quarters ended on such date, or
(C) for the fiscal quarter ending December 31, 1999, for the
period of the three consecutive fiscal quarters ended on such
date; and (ii) no Default or Event of Default shall have
occurred and be continuing at the time of such proposed
reduction of the First LIBOR Rate Margin and the Second LIBOR
Rate Margin; provided further, however, that after any such
reduction of the First LIBOR Rate Margin and the Second LIBOR
Rate Margin, if Centrum and its Subsidiaries shall not
continue to maintain a Fixed Charge Coverage Ratio of at least
1.1 to 1.0 in any succeeding fiscal quarter, for the
respective periods stated in clause (i) of the preceding
proviso, prior to the fiscal quarter ending March 31, 2000,
the First LIBOR Rate Margin shall be increased to 2.50% per
annum and the Second LIBOR Rate Margin shall be increased to
3.00% per annum;"
(b) Section 6.9(c) of the Agreement is hereby amended and
restated to read in its entirety as follows:
"(c) All payments, including immediately available
funds received by the Agent at a bank designated by it,
received by the Agent on account of Accounts or as proceeds of
other Collateral will be the Agent's sole property for its
benefit and the benefit of the Lenders and will be credited to
the Borrower's Loan Account (conditional upon final
collection) after allowing one (1) Business Day for
collection; provided, however, that such payments shall be
deemed to be credited to the Borrower's Loan Account
immediately upon receipt for purposes of (i) determining
Availability, (ii) calculating the Unused Line Fee pursuant to
Section 3.5, and (iii) calculating the amount of interest
accrued thereon solely for purposes of determining the amount
of interest to be distributed by the Agent to the Lenders (but
not the amount of interest payable by the Borrower). At the
discretion of Agent, all such payments that are received by
the Agent on account of Accounts shall also be deemed to have
been applied to the payment of such Accounts, and also applied
to the reduction of the aggregate amount of the Net Amount of
Eligible Accounts and any corresponding reduction of the
Availability, immediately upon receipt."
-3-
<PAGE> 4
(c) Section 9.26 of the Agreement is hereby amended and
restated to read in its entirety as follows:
"9.26 Adjusted Tangible Net Worth. Centrum and its
Subsidiaries will maintain Consolidated Adjusted Tangible Net
Worth, determined as of the last day of each fiscal quarter,
of not less than $4,000,000, plus an amount equal to 90% of
Centrum's and its Subsidiaries' consolidated net income
(without regard to any loss) from each fiscal year of Centrum
and its Subsidiaries commending with the fiscal year ending
March 31, 1999, provided that commencing at such time as the
Consolidated Adjusted Tangible Net Worth of Centrum and its
Subsidiaries shall equal or exceed $6,500,000 as of the last
day of any fiscal quarter, the amount to be added to the
minimum Consolidated Adjusted Tangible Net Worth requirement
under this Section 9.26 shall be 50%, rather than 90%, of
Centrum's and its Subsidiaries' consolidated net income
(without regard to any loss) from each fiscal year of Centrum
and its Subsidiaries occurring thereafter."
(d) Section 9.27 of the Agreement is hereby amended and
restated to read in its entirety as follows:
"9.27 Fixed Charge Coverage Ratio. Centrum and its
Subsidiaries will maintain a Fixed Charge Coverage Ratio for
each period of four consecutive fiscal quarters ended at the
end of the fiscal quarter set forth below (except that (i) for
the fiscal quarter ending June 30, 1999, the ratio shall be
determined for the period of the one fiscal quarter ended on
such date, (ii) for the fiscal quarter ending September 30,
1999, the ratio shall be determined for the period of the two
consecutive fiscal quarters ended on such date, and (iii) for
the fiscal quarter ending December 31, 1999, the ratio shall
be determined for the period of the three consecutive fiscal
quarters ended on such date) of not less than the ratio set
forth below opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ratio
<S> <C>
June 30, 1999 1.0 to 1.0
September 30, 1999 1.0 to 1.0
December 31, 1999 1.0 to 1.0
March 31, 2000 1.1 to 1.0
June 30, 2000 1.1 to 1.0
September 30, 2000 1.1 to 1.0
December 31, 2000 1.1 to 1.0
March 31, 2001 1.1 to 1.0
June 30, 2001 and
each fiscal quarter thereafter 1.25 to 1.0"
</TABLE>
SECTION 3. Conditions. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent:
-4-
<PAGE> 5
(a) Amendment. Fully executed copies of this Amendment signed
by the Borrowers, the Lenders and the Agent and ratifications signed by
the Corporate Guarantors shall be delivered to the Agent.
(b) Resolutions from the Borrowers. A certificate executed by
the Secretary or Assistant Secretary of each Borrower certifying that
such Borrower's Board of Directors has adopted resolutions authorizing
the execution, delivery and performance by such Borrower of this
Amendment shall be delivered to the Agent.
(c) Resolutions from the Corporate Guarantors. A certificate
executed by the Secretary or Assistant Secretary of each Corporate
Guarantor certifying that such Corporate Guarantor's Board of Directors
has adopted resolutions authorizing the execution, delivery and
performance by such Corporate Guarantor of the ratification of this
Amendment shall be delivered to the Agent.
(d) Fee. The Borrowers shall have paid the Agent, for the
account of the Lenders, a waiver and amendment fee in the amount of
$25,000, which fee shall be earned upon execution of this Amendment and
shall be non-refundable upon such payment to the Agent. The Agent, the
Lenders and the Borrowers agree that such fee shall be financed by the
Lenders as a Revolving Loan.
(e) Other Documents. The Borrower shall have executed and
delivered to the Agent such other documents and instruments as the
Agent may request.
SECTION 4. Miscellaneous.
(a) Survival of Representations and Warranties. All
representations and warranties made in the Agreement or any other
document or documents relating thereto, including, without limitation,
any Loan Document furnished in connection with this Amendment, shall
survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Agent or any Lender or any
closing shall affect the representations and warranties or the right of
the Agent or such Lender to rely thereon.
(b) Reference to Agreement. The Agreement, each of the Loan
Documents, and any and all other agreements, documents or instruments
now or hereafter executed and delivered pursuant to the terms hereof,
or pursuant to the terms of the Agreement as amended hereby, are hereby
amended so that any reference therein to the Agreement shall mean a
reference to the Agreement as amended hereby.
(c) Agreement Remains in Effect. The Agreement and the Loan
Documents remain in full force and effect, and each Borrower ratifies
and confirms its agreements and covenants contained therein. Each
Borrower hereby confirms that, after giving effect to this Amendment,
no Event of Default or Default exists as of such date.
(d) Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this
-5-
<PAGE> 6
Amendment and the effect thereof shall be confined to the provision so
held to be invalid or unenforceable.
(e) APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE
AND TO BE PERFORMABLE IN THE STATE OF ILLINOIS AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
(f) Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Agent, the Lenders and the Borrowers
and their respective successors and assigns; provided, however, that no
Borrower may assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Agent and the
Lenders.
(g) Counterparts. This Amendment may be executed in one or
more counterparts, each of which when so executed shall be deemed to be
an original, but all of which when taken together shall constitute one
and the same instrument.
(h) Headings. The headings, captions and arrangements used in
this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
(i) Expenses of the Agent. The Borrowers jointly and severally
agree to pay on demand all costs and expenses incurred by the Agent in
connection with the preparation, negotiation and execution of this
Amendment and the other Loan Documents executed pursuant hereto and any
and all subsequent amendments, modifications, and supplements hereto or
thereto, including, without limitation, the costs and fees of the
Agent's legal counsel and the allocated cost of the Agent's in-house
counsel.
[signatures continued on following pages]
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date first written above.
"BORROWERS":
MCINNES STEEL COMPANY
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
-----------------------------
Title: Chief Financial Officer/Treasurer
-----------------------------------
MCINNES INTERNATIONAL, INC.
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Treasurer
-----------------------------
TAYLOR FORGE COMPANY
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Vice President/Treasurer
-----------------------------
ERIE BRONZE & ALUMINUM COMPANY
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Treasurer
-----------------------------
AMERICAN HANDLING, INC.
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Vice President
-----------------------------
NORTHERN STEEL COMPANY
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Treasurer
-----------------------------
MICAFIL, INC.
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Treasurer
-----------------------------
EBALLOY GLASS PRODUCTS COMPANY
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Treasurer
-----------------------------
"AGENT":
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as the Agent
By: /s/ Beverly J. Gray
-----------------------------
Name: Beverly J. Gray
---------------------------
Title: V.P./Sr. Account Executive
-----------------------------
"LENDERS":
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Lender
By: /s/ Beverly J. Gray
-----------------------------
Name: Beverly J. Gray
---------------------------
Title: V.P./Sr. Account Executive
-----------------------------
-7-
<PAGE> 8
CONSENTS AND REAFFIRMATIONS
The undersigned hereby consent to the terms and conditions of that
Waiver and Amendment No. 1 to Loan and Security Agreement dated as of February
25, 1999, among the financial institutions listed on the signature pages thereto
(individually, a "Lender" and collectively, the "Lenders"), Bank of America
National Trust and Savings Association, successor-in-interest to BankAmerica
Business Credit, Inc., as agent for the Lenders (in its capacity as agent, the
"Agent"), and McInnes Steel Company, McInnes International, Inc., Taylor Forge
Company, Erie Bronze & Aluminum Company, American Handling, Inc., Northern Steel
Company, Micafil, Inc. and Eballoy Glass Products Company, and reaffirm their
obligations under those certain Guaranty of Payment Agreements each dated as of
February 25, 1999 (collectively, the "Corporate Guaranties") made by the
undersigned in favor of the Agent and the Lenders, and acknowledge and agree
that the Corporate Guaranties and all other Loan Documents remain in full force
and effect.
Dated as of June 24, 1999
CENTRUM INDUSTRIES, INC.
By: /s/ Timothy M. Hunter
----------------------------
Name: Timothy M. Hunter
--------------------------
Title: Chief Financial Officer
-------------------------
MCINNES SERVICES, INC.
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Secretary/Treasurer
--------------------------
LASALLE EXPLORATION, INC.
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Treasurer/Assistant Secretary
-------------------------------
-8-
<PAGE> 1
EXHIBIT 10.48
AMENDMENT NO. 2 TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT (this "Amendment")
is dated as of August 5, 1999 and is entered into by and among the financial
institutions listed on the signature pages hereof (individually, a "Lender" and
collectively, the "Lenders"), Bank of America, National Association, formerly
BankAmerica Business Credit, Inc., as agent for the Lenders (in its capacity as
agent, the "Agent"), and McInnes Steel Company, McInnes International, Inc.,
Taylor Forge Company, Erie Bronze & Aluminum Company, American Handling, Inc.,
Northern Steel Company, Micafil, Inc. and Eballoy Glass Products Company
(individually, a "Borrower" and collectively, the "Borrowers"). All capitalized
terms used herein but not otherwise defined shall have the meanings ascribed to
them in the Agreement (as hereinafter defined).
WITNESSETH:
WHEREAS, the Lenders, the Agent and the Borrowers have entered into
that certain Loan and Security Agreement dated as of February 25, 1999, as
amended, supplemented or otherwise modified prior to the date hereof (the
"Agreement"); and
WHEREAS, the Borrowers desire to amend the Agreement and the Lenders
and the Agent are willing to do so, subject to the terms and conditions stated
herein;
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Borrowers, the Lenders and the Agent hereby agree as
follows:
SECTION 1. Amendment to the Agreement. The Agent, the Lenders and the
Borrowers agree that the Agreement shall be amended, effective as of the date
hereof, as follows:
(a) Clause (g) of the definition of "Eligible Accounts"
appearing in Section 1.1 of the Agreement is hereby amended and
restated to read in its entirety as follows:
"(g) owed by an Account Debtor which: (i) does not maintain its
chief executive office in the United States or Canada; or (ii)
is not organized under the laws of the United States or any
state thereof or Canada; or (iii) is the government of any
foreign country or sovereign state, or of any state, province,
municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality
thereof; except to the extent that such Account is secured or
payable by a letter of credit or foreign credit insurance, all
in form and substance and assigned in a manner satisfactory to
the Agent in its discretion; provided that the aggregate of all
Accounts included in Eligible Accounts due to such foreign
credit insurance shall not exceed $750,000.00;"
(b) Clause (d) of Section 6.7 of the Agreement is hereby amended
and restated to read in its entirety as follows:
-1-
<PAGE> 2
"(d) on a monthly basis, by the 25th day of each month for the
prior month (or more frequently if requested by the Agent),
Inventory reports by category, with additional detail showing
additions to and deletions from the Inventory;"
(c) Section 9.29 of the Agreement is hereby amended and restated
to read in its entirety as follows:
"9.29 Unused Availability. The Borrower shall
maintain Availability, with all its obligations with customary
terms within the industry, (a) on the average for each
calendar month, in an amount no less than $500,000, (b) on
each day in September, 1999, in an amount no less than
$100,000, (c) on each day in October, 1999, in an amount no
less than $200,000, (d) on each day in November, 1999, in an
amount no less than $300,000, and (e) on December 1, 1999 and
each day thereafter, in an amount no less than $350,000."
SECTION 2. Overadvance. The Agent and the Lenders hereby agree that,
during the period from and including August 5, 1999 through and including August
18, 1999, the Aggregate Revolver Outstandings on any day may exceed the
Availability in effect on such day (with the Availability for this purpose
calculated as if the Aggregate Revolver Outstandings were zero) by an aggregate
amount up to (but not exceeding) $500,000, provided that in no event shall the
Aggregate Revolver Outstandings exceed the Maximum Revolver Amount, and provided
further that on and after August 19, 1999 the Aggregate Revolver Outstandings
shall no longer be permitted to exceed the Availability (with the Availability
for this purpose calculated as if the Aggregate Revolver Outstandings were zero)
in effect on such day or thereafter, and the Borrowers shall immediately pay to
the Agent, for the account of the Lenders, the amount of any such excess. The
Agent's and the Lenders' agreement contained in this Section 2 shall not be
deemed to change the limits of the Maximum Revolver Amount or to otherwise
change the limits of the Availability or to make the Agent and the Lenders
obligated to exceed such limits on any other occasion.
This agreement is only applicable and shall only be effective for the
specific instance, for the specific purpose, and for the specific period for
which given. Such agreement is expressly limited to the facts and circumstances
referred to herein and shall not operate (a) as a waiver of or consent to
non-compliance with any section of the Agreement or any other Loan Document, (b)
as a waiver of, or a restriction on or prejudice with respect to, any right,
power or remedy of the Agent or any Lender under the Agreement or any other Loan
Document, or (c) as a waiver of or consent to any Event of Default or Default
under the Agreement or any other Loan Document.
SECTION 3. Conditions. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent:
(a) Amendment. Fully executed copies of this Amendment signed
by the Borrowers, the Lenders and the Agent and ratifications signed by
the Corporate Guarantors shall be delivered to the Agent.
(b) Resolutions from the Borrowers. A certificate executed by
the Secretary or Assistant Secretary of each Borrower certifying that
such Borrower's Board of Directors has
-2-
<PAGE> 3
adopted resolutions authorizing the execution, delivery and performance
by such Borrower of this Amendment shall be delivered to the Agent.
(c) Resolutions from the Corporate Guarantors. A certificate
executed by the Secretary or Assistant Secretary of each Corporate
Guarantor certifying that such Corporate Guarantor's Board of Directors
has adopted resolutions authorizing the execution, delivery and
performance by such Corporate Guarantor of the ratification of this
Amendment shall be delivered to the Agent.
(d) Fee. The Borrowers shall have paid the Agent, for the
account of the Lenders, an amendment fee in the amount of $20,000,
which fee shall be earned upon execution of this Amendment and shall be
non-refundable upon such payment to the Agent. The Agent, the Lenders
and the Borrowers agree that such fee shall be financed by the Lenders
as a Revolving Loan.
(e) Other Documents. The Borrowers shall have executed and
delivered to the Agent such other documents and instruments as the
Agent may request.
SECTION 4. Miscellaneous.
(a) Survival of Representations and Warranties. All
representations and warranties made in the Agreement or any other
document or documents relating thereto, including, without limitation,
any Loan Document furnished in connection with this Amendment, shall
survive the execution and delivery of this Amendment and the other Loan
Documents, and no investigation by the Agent or any Lender or any
closing shall affect the representations and warranties or the right of
the Agent or such Lender to rely thereon.
(b) Reference to Agreement. The Agreement, each of the Loan
Documents, and any and all other agreements, documents or instruments
now or hereafter executed and delivered pursuant to the terms hereof,
or pursuant to the terms of the Agreement as amended hereby, are hereby
amended so that any reference therein to the Agreement shall mean a
reference to the Agreement as amended hereby.
(c) Agreement Remains in Effect. The Agreement and the Loan
Documents remain in full force and effect, and each Borrower ratifies
and confirms its agreements and covenants contained therein. Each
Borrower hereby confirms that, after giving effect to this Amendment,
no Event of Default or Default exists as of such date.
(d) Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this Amendment and the effect
thereof shall be confined to the provision so held to be invalid or
unenforceable.
(e) APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE
AND TO BE PERFORMABLE IN THE STATE OF ILLINOIS
-3-
<PAGE> 4
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF ILLINOIS.
(f) Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Agent, the Lenders and the Borrowers
and their respective successors and assigns; provided, however, that no
Borrower may assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Agent and the
Lenders.
(g) Counterparts. This Amendment may be executed in one or
more counterparts, each of which when so executed shall be deemed to be
an original, but all of which when taken together shall constitute one
and the same instrument.
(h) Headings. The headings, captions and arrangements used in
this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
(i) Expenses of the Agent. The Borrowers jointly and severally
agree to pay on demand all costs and expenses incurred by the Agent in
connection with the preparation, negotiation and execution of this
Amendment and the other Loan Documents executed pursuant hereto and any
and all subsequent amendments, modifications, and supplements hereto or
thereto, including, without limitation, the costs and fees of the
Agent's legal counsel and the allocated cost of the Agent's in-house
counsel.
[signatures continued on following pages]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date first written above.
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Chief Financial Officer/Treasurer
-----------------------------------
MCINNES INTERNATIONAL, INC.
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Treasurer
-----------------------------------
TAYLOR FORGE COMPANY
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Vice President/Treasurer
-----------------------------------
ERIE BRONZE & ALUMINUM COMPANY
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Treasurer
-----------------------------------
AMERICAN HANDLING, INC.
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Vice President
-----------------------------------
NORTHERN STEEL COMPANY
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Treasurer
-----------------------------------
MICAFIL, INC.
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Treasurer
-----------------------------------
EBALLOY GLASS PRODUCTS COMPANY
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Treasurer
-----------------------------
"AGENT":
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as the Agent
By: /s/ Beverly J. Gray
--------------------------------
Name: Beverly J. Gray
------------------------------
Title: V.P./Sr. Account Executive
-----------------------------
"LENDERS":
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Lender
By: /s/ Beverly J. Gray
--------------------------------
Name: Beverly J. Gray
------------------------------
Title: V.P./Sr. Account Executive
-----------------------------
-5-
<PAGE> 6
CONSENTS AND REAFFIRMATIONS
The undersigned hereby consent to the terms and conditions of that
Amendment No. 2 to the Loan and Security Agreement dated as of February 25,
1999, among the financial institutions listed on the signature pages thereto
(individually, a "Lender" and collectively, the "Lenders"), Bank of America,
National Association, formerly BankAmerica Business Credit, Inc., as agent for
the Lenders (in its capacity as agent, the "Agent"), and McInnes Steel Company,
McInnes International, Inc., Taylor Forge Company, Erie Bronze & Aluminum
Company, American Handling, Inc., Northern Steel Company, Micafil, Inc. and
Eballoy Glass Products Company, and reaffirm their obligations under those
certain Guaranty of Payment Agreements each dated as of February 25, 1999
(collectively, the "Corporate Guaranties") made by the undersigned in favor of
the Agent and the Lenders, and acknowledge and agree that the Corporate
Guaranties and all other Loan Documents remain in full force and effect.
Dated as of August 5, 1999
CENTRUM INDUSTRIES, INC.
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Chief Financial Officer
-----------------------------
MCINNES SERVICES, INC.
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Secretary/Treasurer
-----------------------------
LASALLE EXPLORATION, INC.
By: /s/ Timothy M. Hunter
--------------------------------
Name: Timothy M. Hunter
------------------------------
Title: Treasurer/Assistant Secretary
-------------------------------
-6-
<PAGE> 1
EXHIBIT 10.49
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Agreement")
is dated as of September 22, 1999 and is entered into by and among the financial
institutions listed on the signature pages hereof (individually, a "Lender" and
collectively, the "Lenders"), Bank of America, National Association, formerly
BankAmerica Business Credit, Inc., as agent for the Lenders (in its capacity as
agent, the "Agent"), and McInnes Steel Company, McInnes International, Inc.,
Taylor Forge Company, Erie Bronze & Aluminum Company, American Handling, Inc.,
Northern Steel Company, Micafil, Inc. and Eballoy Glass Products Company
(individually, a "Borrower" and collectively, the "Borrowers"). All capitalized
terms used herein but not otherwise defined shall have the meanings ascribed to
them in the Agreement (as hereinafter defined).
WITNESSETH:
WHEREAS, the Lenders, the Agent and the Borrowers have entered into
that certain Loan and Security Agreement dated as of February 25, 1999, as
amended, supplemented or otherwise modified prior to the date hereof (the
"Agreement");
WHEREAS, the Borrowers have requested that the Lender provide advances
under the Revolving Loans (as that term is defined in the Agreement) in excess
of that would be otherwise available under the Agreement; and
WHEREAS, the Lenders and the Agent agree to the Borrowers' request,
subject to the terms and conditions stated herein;
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Borrowers, the Lenders and the Agent hereby agree as
follows:
SECTION 1. Overadvance. The Agent and the Lenders hereby agree that,
during the period from and including September 22, 1999 through and including
October 31, 1999 (the "Overadvance Period"), the Aggregate Revolver Outstandings
on any day may exceed the Availability in effect on such day (with the
Availability for this purpose calculated as if the Aggregate Revolver
Outstandings were zero) by an aggregate amount up to (but not exceeding)
$500,000, provided that in no event shall the Aggregate Revolver Outstandings
exceed the Maximum Revolver Amount, and provided further that after October 31,
1999 the Aggregate Revolver Outstandings shall no longer be permitted to exceed
the Availability (with the Availability for this purpose calculated as if the
Aggregate Revolver Outstandings were zero) in effect on such day or thereafter,
and the Borrowers shall immediately pay to the Agent, for the account of the
Lenders, the amount of any such excess.
At all times during the Overadvance Period not less than $500,000 of
Revolving Loans shall be Base Rate Revolving Loans. During the Overadvance
Period (and, if the Aggregate Revolver Outstandings exceed Availability
immediately following the end of the Overadvance Period, continuing after the
Overadvance Period until Aggregate Revolver Outstandings no longer exceed
Availability),
-1-
<PAGE> 2
the Applicable Margin shall be 2% for the outstanding principal balance of Base
Rate Revolving Loans up to $500,000. The Agent's and the Lenders' agreement
contained in this Section 1 shall not be deemed to change the limits of the
Maximum Revolver Amount or to otherwise change the limits of the Availability or
to make the Agent and the Lenders obligated to exceed such limits on any other
occasion.
This Section 1 is only applicable and shall only be effective for the
specific instance, for the specific purpose, and for the specific period for
which given. This Section 1 is expressly limited to the facts and circumstances
referred to in this Agreement and shall not operate (a) as a waiver of or
consent to non-compliance with any other section of the Agreement or any other
Loan Document, (b) as a waiver of, or a restriction on or prejudice with respect
to, any right, power or remedy of the Agent or any Lender under the Agreement or
any other Loan Document, or (c) as a waiver of or consent to any Event of
Default or Default under the Agreement or any other Loan Document.
SECTION 2. Conditions. The effectiveness of this Agreement is subject
to the satisfaction of the following conditions precedent:
(a) Execution by Parties. Fully executed copies of this
Agreement signed by the Borrowers, the Lenders and the Agent and
ratifications signed by the Corporate Guarantors shall be delivered to
the Agent.
(b) Fee. The Borrowers shall have paid the Agent, for the
account of the Lenders, an amendment fee in the amount of $50,000,
which fee shall be earned upon execution of this Agreement and shall be
non-refundable upon such payment to the Agent. The Agent, the Lenders
and the Borrowers agree that such fee shall be financed by the Lenders
as a Revolving Loan.
(c) Other Documents. The Borrowers shall have executed and
delivered to the Agent such other documents and instruments as the
Agent may request.
(d) Appraisals. The Borrowers acknowledge and agree by signing
below that (a) Section 6.5 of the Agreement requires that whenever a
Default or Event of Default exists, the Borrower shall, at its expense
and upon the Agent's request, provide the Agent with appraisals or
updates thereof of any or all of the Collateral on terms further
described in Section 6.5, (b) the Agent has requested such appraisals
from the Borrowers even though to the best of Borrowers' knowledge no
Default or Event of Default exists, and (c) in order to induce Agent
and the Lenders to enter into this Agreement, the Borrowers shall
provide such appraisals.
SECTION 3. Miscellaneous.
(a) Survival of Representations and Warranties. All
representations and warranties made in the Agreement or any other
document or documents relating thereto, including, without limitation,
any Loan Document furnished in connection with this Agreement, shall
survive the execution and delivery of this Agreement and the other Loan
Documents, and no
-2-
<PAGE> 3
investigation by the Agent or any Lender or any closing shall affect
the representations and warranties or the right of the Agent or such
Lender to rely thereon.
(b) Reference to Agreement. The Agreement, each of the Loan
Documents, and any and all other agreements, documents or instruments
now or hereafter executed and delivered pursuant to the terms hereof,
or pursuant to the terms of the Agreement as amended hereby, are hereby
amended so that any reference therein to the Agreement shall mean a
reference to the Agreement as modified hereby. This Agreement is one of
the Loan Documents and a default of by the Borrowers of their
agreements hereunder shall be an Event of Default under the Agreement.
(c) Agreement Remains in Effect. The Agreement and the Loan
Documents remain in full force and effect, and each Borrower ratifies
and confirms its agreements and covenants contained therein. Each
Borrower hereby confirms that, after giving effect to this Agreement,
no Event of Default or Default exists as of such date.
(d) Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this Agreement and the effect
thereof shall be confined to the provision so held to be invalid or
unenforceable.
(e) APPLICABLE LAW. THIS WAIVER AND ALL OTHER LOAN DOCUMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN THE STATE OF ILLINOIS AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
(f) Successors and Assigns. This Waiver is binding upon and
shall inure to the benefit of the Agent, the Lenders and the Borrowers
and their respective successors and assigns; provided, however, that no
Borrower may assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Agent and the
Lenders.
(g) Counterparts. This Waiver may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an
original, but all of which when taken together shall constitute one and
the same instrument.
(h) Headings. The headings, captions and arrangements used in
this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
(i) Expenses of the Agent. The Borrowers jointly and severally
agree to pay on demand all costs and expenses incurred by the Agent in
connection with the preparation, negotiation and execution of this
Agreement and the other Loan Documents executed pursuant hereto and any
and all subsequent amendments, modifications, waivers, and supplements
hereto or thereto, including, without limitation, the costs and fees of
the Agent's legal counsel and the allocated cost of the Agent's
in-house counsel.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"BORROWERS":
MCINNES STEEL COMPANY
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Chief Financial Officer/Treasurer
----------------------------------
MCINNES INTERNATIONAL, INC.
By: /s/ Timothy M. Hunter
---------------------------
Name: Timothy M. Hunter
-------------------------
Title: Treasurer
----------------------------------
TAYLOR FORGE COMPANY
By: /s/ Timothy M. Hunter
---------------------------
Name: Timothy M. Hunter
-------------------------
Title: Vice President/Treasurer
----------------------------------
ERIE BRONZE & ALUMINUM COMPANY
By: /s/ Timothy M. Hunter
---------------------------
Name: Timothy M. Hunter
-------------------------
Title: Treasurer
----------------------------------
AMERICAN HANDLING, INC.
By: /s/ Timothy M. Hunter
---------------------------
Name: Timothy M. Hunter
-------------------------
Title: Vice President
----------------------------------
NORTHERN STEEL COMPANY
By: /s/ Timothy M. Hunter
---------------------------
Name: Timothy M. Hunter
-------------------------
Title: Treasurer
----------------------------------
MICAFIL, INC.
By: /s/ Timothy M. Hunter
---------------------------
Name: Timothy M. Hunter
-------------------------
Title: Treasurer
----------------------------------
EBALLOY GLASS PRODUCTS COMPANY
By: /s/ Timothy M. Hunter
---------------------------
Name: Timothy M. Hunter
-------------------------
Title: Treasurer
----------------------------------
"AGENT":
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as the Agent
By: /s/ Beverly J. Gray
---------------------------
Name: Beverly J. Gray
-------------------------
Title: V.P./Sr. Account Executive
-----------------------------
"LENDERS":
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Lender
By: /s/ Beverly J. Gray
---------------------------
Name: Beverly J. Gray
-------------------------
Title: V.P./Sr. Account Executive
-----------------------------
-4-
<PAGE> 5
CONSENTS AND REAFFIRMATIONS
The undersigned hereby consent to the terms and conditions of that
Amendment No. Three to the Loan and Security Agreement dated as of February 25,
1999, among the financial institutions listed on the signature pages thereto
(individually, a "Lender" and collectively, the "Lenders"), Bank of America,
National Association, formerly BankAmerica Business Credit, Inc., as agent for
the Lenders (in its capacity as agent, the "Agent"), and McInnes Steel Company,
McInnes International, Inc., Taylor Forge Company, Erie Bronze & Aluminum
Company, American Handling, Inc., Northern Steel Company, Micafil, Inc. and
Eballoy Glass Products Company, and reaffirm their obligations under those
certain Guaranty of Payment Agreements each dated as of February 25, 1999
(collectively, the "Corporate Guaranties") made by the undersigned in favor of
the Agent and the Lenders, and acknowledge and agree that the Corporate
Guaranties and all other Loan Documents remain in full force and effect.
Dated as of September 22, 1999
CENTRUM INDUSTRIES, INC.
By: /s/ Timothy M. Hunter
-----------------------------
Name: Timothy M. Hunter
---------------------------
Title: Chief Financial Officer
--------------------------
MCINNES SERVICES, INC.
By: /s/ Timothy M. Hunter
---------------------------
Name: Timothy M. Hunter
-------------------------
Title: Secretary/Treasurer
--------------------------------
LASALLE EXPLORATION, INC.
By: /s/ Timothy M. Hunter
---------------------------
Name: Timothy M. Hunter
-------------------------
Title: Treasurer/Assistant Secretary
--------------------------------
-5-
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<CASH> 76
<SECURITIES> 0
<RECEIVABLES> 9,195
<ALLOWANCES> 113
<INVENTORY> 9,597
<CURRENT-ASSETS> 22,498
<PP&E> 17,398
<DEPRECIATION> 5,649
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0
4
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<OTHER-SE> 6,720
<TOTAL-LIABILITY-AND-EQUITY> 45,290
<SALES> 24,181
<TOTAL-REVENUES> 24,197
<CGS> 19,985
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<INCOME-PRETAX> (474)
<INCOME-TAX> (192)
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