<PAGE>
UNITED STATES
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 June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
Commission file number: 0-2349
GRAPHIC CONTROLS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 16-0834173
- ----------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
189 VAN RENSSELAER STREET, P.O. BOX 1271, BUFFALO, NY 14240
- ----------------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (716) 853-7500
--------------
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 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 [ ]
At the date of this filing, there were 100 shares, par value $1.00 per share of
common stock outstanding, all of which was owned by Graphic Holdings, Inc.
<PAGE>
GRAPHIC CONTROLS CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets
June 30, 1997 and December 31, 1996................................................... 1
Condensed consolidated statements of income
-- three months ended June 30, 1997 and 1996
six months ended June 30, 1997 and 1996............................................ 2
Condensed consolidated statements of cash flow
-- six months ended June 30, 1997 and 1996............................................ 3
Notes to condensed consolidated financial statements
-- June 30, 1996...................................................................... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................................ 5-7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 8
Item 6. Exhibits and Report on Form 8-K................................................ 8
Signature............................................................................... 9
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
GRAPHIC CONTROLS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
1996 1997
------------ -----------
(1) (UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 563 $ 261
Accounts receivable, net............................. 37,208 37,913
Inventories.......................................... 32,697 38,197
Income tax recoverable............................... 1,755 1,043
Other................................................ 1,138 1,686
-------- --------
Total current assets............................... 73,361 79,100
Property, plant and equipment:
Land................................................. 1,097 1,096
Buildings and improvements........................... 11,160 11,295
Machinery and equipment.............................. 29,589 32,625
-------- --------
41,846 45,016
Less accumulated depreciation........................ 6,750 10,568
-------- --------
35,096 34,448
Goodwill, net......................................... 229,693 227,564
Financing costs, net.................................. 11,150 9,982
Acquisition escrow accounts........................... 9,002 8,963
Other assets.......................................... 6,715 7,735
-------- --------
$365,017 $367,792
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Cash overdraft....................................... $ 2,954 $ --
Accounts payable..................................... 14,261 13,978
Employees' compensation.............................. 7,154 5,516
Accrued expenses..................................... 5,009 6,243
Income taxes payable................................. -- --
Deferred income taxes................................ 1,970 1,970
Current portion of long-term debt.................... 8,015 11,475
-------- --------
Total current liabilities.......................... 39,363 39,182
Long-term debt........................................ 219,728 223,313
Deferred income taxes................................. 1,199 1,197
Other non-current liabilities......................... 22,962 22,861
Shareholder's equity:
Common stock ($1 par)
Authorized - 5,000,000 shares; issued & outstanding
100 shares.......................................... -- --
Additional paid-in capital........................... 82,366 82,366
Retained earnings (accumulated deficit).............. (288) (302)
Equity adjustment from foreign currency translation.. (313) (825)
-------- --------
Total shareholder's equity......................... 81,765 81,239
-------- --------
$365,017 $367,792
======== ========
</TABLE>
(1) The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes to condensed consolidated financial statements.
-1-
<PAGE>
GRAPHIC CONTROLS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1996 1997 1996 1997
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net sales..................................... $ 62,828 $ 62,867 $ 113,433 $ 126,333
Cost of sales................................. 34,814 35,485 62,501 69,382
Gross profit................................ 28,014 27,382 50,932 56,951
Selling, general and administration expenses.. 18,783 18,770 33,594 37,181
Amortization expense 1,956 2,154 3,673 4,303
Other non-recurring expense.................. 1,448 1,857 1,466 2,948
---------- ---------- --------- ---------
Total operating expense..................... 22,187 22,781 38,733 44,432
Operating income............................. 5,827 4,601 12,199 12,519
Interest income............................... 9 3 23 3
Interest expense.............................. (5,453) (5,839) (9,998) (11,473)
---------- ---------- --------- ---------
Income (loss) before income taxes............. 383 (1,235) 2,224 1,049
Income tax expense (benefit).................. 669 (237) 1,844 1,063
--------- ---------- --------- ---------
Net income (loss)............................. $ (286) $ (998) $ 380 $ (14)
========== ========== ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-2-
<PAGE>
GRAPHIC CONTROLS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
PRE-ACQUISITION
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1997
--------------- --------------
<S> <C> <C>
Operating activities:
Net income (loss)............................... $ 380 $ (14)
Depreciation and amortization................... 6,809 8,257
Changes in assets and liabilities............... (3,655) (9,468)
-------- ---------
Net cash provided (used) by operations........ 3,534 (1,225)
-------- ---------
Investing activities:
Additions to property, plant and equipment...... (2,716) (3,168)
Purchase of Devon Industries, Inc............... (96,251) --
-------- ----------
Net cash used in investing activities......... (98,967) (3,168)
-------- ----------
Financing activities:
Repayment of senior debt........................ (2,480) (2,313)
Decrease in cash overdraft...................... -- (2,954)
Financing fees.................................. (2,749) --
Proceeds from senior bank facilities............ -- 9,358
Senior bank financing of Devon purchase......... 67,500 --
Proceeds from additional paid in capital........ 31,500 --
-------- ---------
Net cash provided by financing activities..... 93,771 4,091
-------- ---------
Increase (decrease) in cash and cash equivalents. (1,662) (302)
Cash and cash equivalents at beginning of period. 1,481 563
-------- ---------
Cash and cash equivalents at end of period....... $ (181) $ 261
======== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
GRAPHIC CONTROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Graphic Controls Corporation and Subsidiaries (the "Company") have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the three- and six-month periods ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1996.
NOTE B - INVENTORIES
The components of inventory consist of the following (in thousands):
DECEMBER 31 JUNE 30
1996 1997
----------- --------
Raw materials................ $12,822 $13,649
Work in process.............. 2,094 1,814
Finished products............ 17,781 22,734
------- -------
$32,697 $38,197
======= =======
NOTE C - PURCHASE OF DEVON INDUSTRIES, INC.
On February 29, 1996, the Company acquired all the outstanding common stock
of Devon Industries, Inc., a closely held California corporation ("Devon").
Devon is a developer, manufacturer, and marketer of disposable medical and
surgical supplies. The total cost of the transaction was approximately
$96 million, including estimated expenses of $5 million, plus up to $7 million
in deferred consideration contingent upon Devon's future financial performance.
The Devon transaction was financed with $67.5 million of bank debt and
$31.5 million of new equity provided by Bessemer Holdings, L.P. The pro forma
unaudited results of operations for the six months ended June 28, 1996 and
June 30, 1997, assuming consummation of the purchase and related financing as
of January 1, 1996, are as follows:
SIX MONTHS ENDED JUNE 30
1996 1997
----------- -----------
Net sales............ $124,677 $126,333
Net income........... $ 259 $ (14)
NOTE D - EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income," which is effective for fiscal years
beginning after December 15, 1997. The Company has not yet determined the
impact Statement No. 130 will have on its financial statements.
In June 1997, The Financial Accounting Standards Board issued Statement No. 131,
"Disclosure about Segments of an Enterprise and Related Information," which is
effective for fiscal years beginning after December 15, 1997. The Company has
not yet determined the impact Statement No. 131 will have on its financial
statements.
-4-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996.
Net Sales for the three months ended June 30, 1997 were $62.9 million compared
to $62.8 million for the corresponding three months ended June 30, 1996.
Medical sales were $46.1 million for the three months ended June 30, 1997, an
increase of 2.8% from the corresponding 1996 fiscal period. The increased
medical sales for the second quarter 1997 were partially offset by approximately
$1.5 million for the continuation of distributor inventory reductions.
Furthermore, the temporary delay in the signing and conversion of several major
national contracts has resulted in immediate price discounts of approximately
$.8 million on existing volume without corresponding volume increases from the
new contract commitments. Industrial product sales were $13.1 million for the
three months ended June 30, 1997, a decrease of 7.2% from the corresponding
fiscal 1996 period, primarily due to timing of sales in the oil and gas segment
compared to last year. International sales were $3.7 million for the three
months ended June 30, 1997, a decrease of 5.1% from the corresponding fiscal
1996 period. The decrease is primarily attributable to the sale of the
Australian subsidiary which were included in the prior year's results.
Gross Profit for the second quarter of 1997 was $27.4 million, compared to $28.0
million for the second quarter 1996. The decrease was primarily the result of
the lower sales on the higher margin industrial products, unfavorable
manufacturing variances resulting from the lower distributor inventory volume
and the lower prices on existing sales based on future order commitments. The
gross profit margin of 43.6% decreased one percentage point from last year's
second quarter rate of 44.6% due to these factors.
Selling, General & Administrative Expenses (SG&A) for the second quarter of 1997
were $18.8 million, approximately at the same level as the second quarter 1996.
As a percentage of net sales, expenses remained at 29.9% of net sales for the
quarter ending June 1997 compared to last year second quarter.
Nonrecurring Expense for the three months ended June 30, 1997 of $1.9 million
increased by $.4 million from the comparable period last year. $1.0 million of
the expense for the quarter was due to the higher startup cost associated with
the physical move of the cable and leadwire manufacturing from our California
facility to New Jersey. The balance of the costs was primarily due to
consulting expenses paid to the Thomas Group. The Thomas Group has been
contracted to assist in the profit enhancing initiatives of the Company.
Operating Income for the the three months ended June 30, 1997 of $4.6 million
decreased by $1.2 million compared to the same quarter last year. Operating
margin decreased from 9.3% in the second quarter of fiscal 1996 to 7.3% in the
second quarter of fiscal 1997. Earnings before interest, taxes, depreciation,
amortization and nonrecurring and other charges was $10.5 million, a decrease of
5.4% from the comparable period last year.
Net Interest Expense for the three months ended June 30, 1997 of $5.8 million
increased by $.4 million compared to the same period last year. The increase
was due to temporary borrowings to meet the anticipated inventory requirements
of the new national account contracts.
-5-
<PAGE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996.
Net Sales for the six months ended June 30, 1997 were $126.3 million, an
increase of $12.9 million or 11.4% from net sales of $113.4 million for the
corresponding six months ended June 30, 1996. The increase is primarily the
result of incremental sales volume associated with the acquisition of Devon
Industries, Inc. which was completed on February 29, 1996. Medical sales of
$91.1 million for the six months ended June 30, 1997, an increase of 18% from
the same period last year, due primarily to the incremental sales volume of
Devon brand products. Partially offsetting the sales increase was a reduction
in distributor inventory volume of approximately $2.9 million. Industrial sales
were $27.7 million for the six months ended June 30, 1997 compared to $29.1
million for the same period last year, a decrease of 4.8%. International
sales were $7.5 million for the six months ended June 30, 1997 compared to
$7.1 million for the same period last year, an increase of 5.6%.
Gross Profit for the first six months of fiscal 1997 was $57.0 million, an
increase of $6.1 million from gross profit of $50.9 million for the
corresponding fiscal period. The majority of the increase was due to the
acquisition of Devon Industries. Gross profit margin percentage improved to
45.1% in the first six months of fiscal 1997 compared to 44.9% for the same
period last year. The increase is partly attributable to the higher margin on
the acquired Devon sales compared to existing medical sales.
Selling, General and Administrative Expenses (SG&A) of $37.2 million increased
10.7% for the first six months of fiscal 1997 from $33.6 million in the first
half of 1996. Substantially all of the increase was due to the Devon
acquisition. As a percentage of net sales, expenses decreased from 29.6% to
29.5% for the first half of 1997 compared to 1996. The decrease is partially
attributable to the consolidation of Devon Industries into Graphic Controls and
the rationalization of the international business. Amortization expenses
increased by $.6 million for the first half of 1997 compared to the same
period last year due to the higher goodwill expense resulting from the Devon
acquisition.
Nonrecurring Expense and other charges increased by $1.5 million for the six
months ended June 30, 1997 compared with the same period last year from $1.5
million to $3.0 million. The majority of this increase represents startup cost
associated with the manufacturing of cable and leadwires in the New Jersey
facility.
Operating Income increased by $.3 million from $12.2 million in the first six
months of 1996 to $12.5 million in the first half of fiscal 1997 as a result
of the foregoing factors. Earnings before interest, taxes, depreciation,
amortization, and nonrecurring and other charges was $23.7 million for the six
months ended June 30, 1997, an increase of 15.9% for the same period last year.
Net Interest Expense was $11.5 million for the first half of fiscal 1997
compared to $10.0 million for the same period last year. The increase resulted
from a higher debt balance primarily as a result of the Devon acquisition.
Liquidity and Capital Resources. Cash flows used by operations for the first
six months of fiscal 1997 was $1.2 million as compared to $3.5 million provided
by operations for the six months ended June 1996. Operating cash flows for 1997
were negatively impacted by an increase in inventories of approximately $5.5
million due to the ramp up for the projected increase in sales for the Premier
contract and the unanticipated slowdown in distributor purchases.
Net cash used by investing activities was $3.2 million reflecting purchases of
machinery and equipment to primarily support the growth in medical products.
Cash flows from financing activities were $4.1 million for the first half ended
June 30, 1997. The increase was provided by borrowings under the Company's
revolving bank line of credit to support the increase in working capital
requirements. On June 30, 1997 the Company had aggregate borrowings under its
credit facility of $159.8 million and $14.9 million available under its bank
line of credit.
Resulting from the integration of Devon and the identification of several new
areas of potential cost savings, the Company spent $7.7 million on a one-time
basis in 1996 and will incur additional one-time expenses in 1997 relating to
the anticipated profit enhancing actions by the Company and the Thomas Group.
In connection with such increased expenditures, the Company amended its credit
agreement (See Exhibit 10.1).
-6-
<PAGE>
Effects of New Accounting Pronouncements. In June 1997, the Financial
Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive
Income," which is effective for fiscal years beginning after December 15, 1997.
The Company has not yet determined the impact Statement No. 130 will have on its
financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosure about Segments of an Enterprise and Related Information, which is
effective for fiscal years beginning after December 15, 1997. The Company has
not yet determined the impact Statement No. 131 will have on its financial
statements.
Forward-Looking Statements. Statements, either written or oral, which express
the Company's expectation for the future with respect to financial performance
or operating strategies can be identified as forward-looking statements.
Caution must be taken to consider these statements in light of the following
factors: current and contemplated cost-containment measures will be successfully
implemented; key distributors will make purchases at the same level as their
sales; demand for the Company's products will follow recent growth trends; key
customers will comply with the terms of their contract; competitors will not
introduce new products which will substantially reduce Graphic Controls' market
share in its most significant product lines; and the Company will continue to
manufacture high quality products at competitive costs and maintain or increase
product pricing. In the event any of the above factors do not occur as
management anticipates, actual results could differ materially from the
expectations expressed in the forward-looking statements.
-7-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Utah Medical filed on June 3, 1997, a lawsuit in the U.S. District
Court for the Central District of Utah against the Company
for alleged patent infringement with respect to the
Company's Softrans 4000 Intrauterine Pressure Catheter. The
Company has denied the allegation and intends to vigorously
defend its right to manufacture and distribute the Softrans product.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits filed as part of this report are listed below:
Exhibit No. Description
----------- -----------
10.1 Credit Agreement Amendment dated May 29, 1997
10.2 Waiver dated March 25, 1997
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
-8-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Graphic Controls Corporation
-------------------------------------------
Registrant
August 15, 1997 Anthony W. Borowicz
------------------ -------------------------------------------
Date Anthony W. Borowicz, Vice President-Finance
(Principal Financial Officer and Duly
Authorized Officer)
AMENDMENT
AMENDMENT, dated as of May __, 1997 (this "Amendment"), to the
Credit Agreement dated as of September 28, 1995, as amended and restated through
February 29, 1996 (as further amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among Graphic Controls
Corporation, a New York corporation (the "Borrower"), Graphic Holdings, Inc.,
a Delaware corporation ("Holdings"), the several banks and other financial
institutions from time to time parties thereto (the "Lenders"), the Co-Agents
named therein and The Chase Manhattan Bank (as successor to Chemical Bank),
a New York banking corporation, as agent for the Lenders (the "Agent").
W I T N E S S E T H :
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Borrower, Holdings, the Lenders and the Agent desire that
certain provisions of the Credit Agreement be amended in the manner provided
for in this Amendment;
NOW THEREFORE, in consideration of the premises herein contained and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms used
herein which are defined in the Credit Agreement, as amended hereby, are used
herein as therein defined.
2. Amendment of Section 8.13. Section 8.13 of the Credit Agreement is hereby
amended by (a) deleting the phrase "2.00 to 1.00" set forth opposite each of
the Test Periods ending June 30, 1997 and September 30, 1997 and substituting
therefor each such time the phrase "1.90 to 1.00" and (b) deleting the phrase
"2.50 to 2.00" set forth opposite the Test Period ending March 31, 1998 and
substituting therefor the phrase "2.25 to 1.00".
3. Amendment of Section 8.14. Section 8.14 of the Credit Agreement is
herebyamended by (a) deleting the phrase "3.50 to 1.00" set forth opposite the
Fiscal Quarter ending June 30, 1997 and substituting therefor the phrase
"3.75 to 1.00", (b) deleting the phrase "2.75 to 1.00" set forth opposite the
Fiscal Quarter ending September 30, 1997 and substituting therefor the phrase
"3.65 to 1.00", (c) deleting the phrase "2.75 to 1.00" set forth opposite the
Fiscal Quarter ending December 31, 1997 and substituting therefor the phrase
"3.25 to 1.00", (d) deleting the phrse "2.50 to 1.00" set forth opposite the
Fiscal Quarter ending March 31, 1998 and substituting therefor the phrase
"3.00 to 1.00" and (e) deleting the phrase "2.50 to 1.00" set forth opposite
the Fiscal Quarter ending June 30, 1998 and substituting therefor the phrase
"2.60 to 1.00".
4. Amendment of Section 10. Section 10 of the Credit Agreement is hereby
amended by deleting from the definition of "Consolidated Net Income" the
second proviso thereto in its entirety and substituting therefor the
following provisos:
"provided further that in calculating Consolidated Net Income for each fiscal
quarter of 1996, amounts aggregating up to $18,000, $1,448,000, $3,409,000
and $2,846,000, respectively, for each of the first, second, third and fourth
fiscal quarters of 1996 incurred or expended to achieve cost savings at the
Borrower as related to facility consolidations and/or relocations and factory
and warehouse systems upgrades and to integrate the operations of Devon with
the operations of the Borrower which would otherwise be deducted in calculating
Consolidated Net Income for such respective fiscal quarter shall not be
required to be deducted and provided further that in calculating Consolidated
Net Income for each fiscal quarter of 1997 and 1998, amounts incurred in each
such fiscal quarter aggregating up to $5,500,000 of one-time costs for the
entire 1997 and 1998 fiscal years incurred in connection with the Thomas
Group Study relating to the Borrower's process improvement initiatives which
would otherwise be deducted in calculating Consolidated Net Income for each
respective fiscal quarter shall not be required to be deducted."
5. Effectiveness. This Amendment shall become effective as of the date first
written above on the condition that (a) the Borrower shall have delivered to
the Agent duly executed copies of this Amendment, (b) the Agent shall have
received duly executed copies of the Acknowledgment and Consent attached
hereto signed by each of the Guarantors and (c) the Required Lenders shall
have executed this Amendment.
6. Representations and Warranties. (a) The respective representations and
warranties made by each of the Borrower and the other Loan Parties contained
in the Credit Documents to which each is a party are true and correct, in all
material respects, on and as of the date hereof after giving effect to this
Amendment; and (b) Each of the Borrower and Holdings has the power and
authority and the legal right to make and deliver this Amendment and has
taken all necessary action to authorize the execution and delivery of this
Amendment.
7. No Other Amendments or Waivers. Except as expressly waived herein, the
Credit Agreement shall continue to be, and shall remain, in full force and
effect in accordance with its terms.
8. Counterparts. This Amendment may be executed in counterparts and all of
the said counterparts taken together shall be deemed to constitute one and
the same instrument.
9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
10. Expenses. The Borrower agrees to pay or reimburse the Agent for all of
its out-of-pocket costs and expenses incurred in connection with the
development, preparation, negotiation and execution of this Amendment,
including, without limitation, the reasonable fees and disbursements of
counsel to the Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their duly authorized officers as of the date first
written above.
GRAPHIC HOLDINGS, INC.
By:_________________________
Title:
GRAPHIC CONTROLS CORPORATION
By:_________________________
Title:
THE CHASE MANHATTAN BANK, as Agent
and as a Lender
By:_________________________
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Co-Agent and as a Lender
By:__________________________
Title:
FLEET BANK OF MASSACHUSETTS, N.A.,
as Co-Agent and as a Lender
By:___________________________
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By:____________________________
Title:
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V.
By: its Managing Director
ABN TRUSTCOMPANY (NEDERLAND) B.V.
By:____________________________
Title:
By:____________________________
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By:_____________________________
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By:______________________________
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE
By:_______________________________
Title:
COMERICA BANK
By:________________________________
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:________________________________
Title:
MANUFACTURERS AND TRADERS TRUST COMPANY
By:________________________________
Title:
SOCIETE GENERALE, NEW YORK BRANCH
By:________________________________
Title:
PILGRIM PRIME RATE TRUST
By:________________________________
Title:
NATIONAL CITY BANK
By:________________________________
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By:________________________________
Title:
AERIES FINANCE LTD.
By:________________________________
Title:
<PAGE>
ACKNOWLEDGMENT AND CONSENT
Each of the undersigned Guarantors, as of May 29, 1997, hereby consents and
agrees to the terms and conditions of the foregoing Amendment, and
acknowledges and agrees that its obligation under each of the Credit
Documents are and shall remain in full force and effect after giving effect
to the foregoing Amendment.
Graphic Holding Corporation
Tronomed, Inc.
Tronomed Express, Inc.
Devon Industries, Inc.
By:
Name:
Title:
WAIVER
WAIVER, dated as of March 25, 1997 (this "Waiver"), under the Credit
Agreement dated as of September 28, 1995, as amended and restated through
February 29, 1996 (as further amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Graphic Controls Corporation, a
New York corporation (the "Borrower"), Graphic Holdings, Inc., a Delaware
corporation ("Holdings"), the several banks and other financial institutions
from time to time parties thereto (the "Lenders"), the Co-Agents named therein
and The Chase Manhattan Bank (as successor to Chemical Bank), a New York banking
corporation, as agent for the Lenders (the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, Holdings, the Lenders and the Agent desire that
certain provisions of the Credit Agreement be waived in the manner provided
for in this Waiver;
NOW THEREFORE, in consideration of the premises herein contained and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms used
herein which are defined in the Credit Agreement, as amended hereby, are used
herein as therein defined.
2. Waiver of Sections 8.13 and 8.14. The Required Lenders waive compliance
by Holdings and the Borrower for the fiscal quarter ending March 31, 1997
with the provisions of Sections 8.13 and 8.14 of the Credit Agreement through
May 31, 1997; provided that after May 31, 1997, the failure of Holdings and
the Borrower to comply with Sections 8.13 and 8.14, as then in effect, for
the fiscal quarter ending March 31, 1997 shall constitute an Event of Default.
3. Effectiveness. This Waiver shall become effective as of the date first
written above on the condition that (a) the Borrower shall have delivered to
the Agent duly executed copies of this Waiver, (b) the Agent shall have
received duly executed copies of the Acknowledgment and Consent attached
hereto signed by each of the Guarantors and (c) the Required Lenders shall
have executed this Waiver.
4. Representations and Warranties. (a) The respective representations and
warranties made by each of the Borrower and the other Loan Parties contained
in the Loan Documents to which each is a party are true and correct, in all
material respects, on and as of the date hereof after giving effect to this
Waiver; and
(b) Each of the Borrower and Holdings has the power and authority and the
legal right to make and deliver this Waiver and has taken all necessary
action to authorize the execution and delivery of this Waiver.
5. No Other Amendments or Waivers. Except as expressly waived herein, the
Credit Agreement shall continue to be, and shall remain, in full force and
effect in accordance with its terms.
6. Counterparts. This Waiver may be executed in counterparts and all of the
said counterparts taken together shall be deemed to constitute one and the
same instrument.
7. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
8. Expenses. The Borrower agrees to pay or reimburse the Agent for all of
its out-of-pocket costs and expenses incurred in connection with the
development, preparation, negotiation and execution of this Waiver,
including, without limitation, the reasonable fees and disbursements of
counsel to the Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver
to be executed and delivered by their duly authorized officers as of the date
first written above.
GRAPHIC HOLDINGS, INC.
By:_________________________
Title:
GRAPHIC CONTROLS CORPORATION
By:_________________________
Title:
THE CHASE MANHATTAN BANK,
as Agent and as a Lender
By:_________________________
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Co-Agent and as a Lender
By:__________________________
Title:
FLEET BANK OF MASSACHUSETTS, N.A.,
as Co-Agent and as a Lender
By:___________________________
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By:____________________________
Title:
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS B.V.
By: its Managing Director
ABN TRUSTCOMPANY (NEDERLAND) B.V.
By:____________________________
Title:
By:____________________________
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By:_____________________________
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By:______________________________
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE
By:_______________________________
Title:
COMERICA BANK
By:________________________________
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:________________________________
Title:
MANUFACTURERS AND TRADERS TRUST COMPANY
By:________________________________
Title:
SOCIETE GENERALE, NEW YORK BRANCH
By:________________________________
Title:
PILGRIM PRIME RATE TRUST
By:________________________________
Title:
NATIONAL CITY BANK
By:________________________________
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By:________________________________
Title:
AERIES FINANCE LTD.
By:________________________________
Title:
<PAGE>
ACKNOWLEDGMENT AND CONSENT
Each of the undersigned Guarantors, as of March 25, 1997, hereby
consents and agrees to the terms and conditions of the foregoing Waiver, and
acknowledges and agrees that its obligation under each of the Credit Documents
are and shall remain in full force and effect after giving effect to the
foregoing Amendment.
Graphic Holding Corporation
Tronomed, Inc.
Tronomed Express, Inc.
Devon Industries, Inc.
By:
----------------------------
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> (261)
<SECURITIES> 0
<RECEIVABLES> 38,782
<ALLOWANCES> (869)
<INVENTORY> 38,197
<CURRENT-ASSETS> 79,100
<PP&E> 45,016
<DEPRECIATION> (10,568)
<TOTAL-ASSETS> 367,792
<CURRENT-LIABILITIES> 39,182
<BONDS> 223,313
0
0
<COMMON> 0
<OTHER-SE> 81,239
<TOTAL-LIABILITY-AND-EQUITY> 367,792
<SALES> 126,333
<TOTAL-REVENUES> 126,336
<CGS> 69,382
<TOTAL-COSTS> 113,814
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 80
<INTEREST-EXPENSE> 11,473
<INCOME-PRETAX> 1,049
<INCOME-TAX> 1,063
<INCOME-CONTINUING> (14)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>