September 24, 1993
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, NW
Stop 1-4
Washington D.C. 20549-1004
Attention: Filing Desk
RE: Thiokol Corporation - Commission File No. 1-6179
Annual Report on Form 10-K for Fiscal Year Ended June 30, 1994
Gentlemen:
Pursuant to Regulation S-T and Form 10-K, we transmit herewith
the Thiokol Corporation Form 10-K under the Securities and
Exchange Act of 1934.
Pursuant to General Instructions D(3) there are no changes
in any accounting principal or practices from the prior year.
The Exhibit Schedule is on page 18.
The Financial Data Schedule, Exhibit 27, is on page 93.
Sincerely,
Edwin M. North
Thiokol Corporation
Corporate Secretary
<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(FEE REQUIRED)
--------------
For the fiscal year ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
----------------
Commission file number 1-6179
THIOKOL CORPORATION
Incorporated in the State of Delaware IRS Employer
Identification
No. 36-2678716
Principal Executive Offices
2475 Washington Boulevard, Ogden, Utah 84401
Telephone Number: (801) 629-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Common Stock, par value New York Stock Exchange
$1.00 per share Chicago Stock Exchange
Common Stock Purchase Rights
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
---- ----
Aggregate market value of Registrant's voting stock held by
non-affiliates, based upon the closing price of said stock on the
New York Stock Exchange-Composite Transaction Listing on August 31,
1994, ($25.625 per share): $479,118,030.
Number of shares of Common Stock outstanding as of August 31,
1994: 18,697,289.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Annual Report to Stockholders for the fiscal year
ended June 30, 1994: Parts I, II, and IV.
2. Portions of definitive Proxy Statement dated September 23,
1994: Parts III and IV.
- - ------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
Thiokol Corporation (the "Company") is primarily a
manufacturer of solid rocket propulsion systems for the aerospace
and defense markets. The Company is also a manufacturer of
specialty fastening systems for aerospace and industrial
applications. Founded in 1930, Thiokol Corporation and its
successor, Thiokol Chemical Corporation (old Thiokol),
operated in various corporate forms until merged in 1982 with
Morton-Norwich Products, Inc., and operated thereafter as a
division of Morton Thiokol, Inc. Since the 1989 spin-off of its
specialty chemicals, salt and automotive-restraint businesses to a
newly-formed publicly-traded company, Morton International, Inc.
("Morton International"), as a pro rata dividend distribution to
shareholders, the Company's aerospace and defense business has
operated independently as Thiokol Corporation. In 1991, the
Company acquired the aerospace and industrial fastener business of
Huck Manufacturing Company. The Company operates this fastening
systems segment of the business as a wholly-owned subsidiary, Huck
International, Inc. In January 1994, Huck acquired the threaded
lock bolts, locknuts and related product line assets of the Deutsch
Manufacturing Company.
Business Segments
The Company operates in two business segments: (i) propulsion
systems and related products and services for the aerospace and
defense markets, and (ii) fastening systems for the industrial and
aerospace markets. The Company's propulsion-systems segment
consists of propulsion systems, gas generators, flare and ordnance
products, and metal and composite components. It also includes
services, principally under contracts and subcontracts with the
National Aeronautics and Space Administration (NASA), the
Department of Defense, and aerospace prime contractors for space,
defense, and commercial applications. The Company's fastening
systems segment consists of threaded and non-threaded lock bolts,
locknuts, blind rivets, and product-installation tooling. All of
the Company's propulsion and fastening systems activities are
conducted directly by the Company or by its wholly-owned domestic
and foreign subsidiaries.
Propulsion Systems. The propulsion systems segment consists
primarily of research, development, production, sale, and services
for launch support of solid propellent propulsion systems for both
orbital and suborbital launch applications. Such systems include
the redesigned solid rocket motor (RSRM) used for NASA's Space
Shuttle. In fiscal year 1991 the Company was awarded a contract to
build 142 solid rocket motor booster motors for NASA's Space
Shuttle program. This contract has $2.2 billion remaining through
its projected completion date in fiscal year 2000. The delivery
rate is subject to NASA funding and NASA's shuttle flight
scheduling. During fiscal year 1994, NASA's advanced solid rocket
motor program (ASRM) was canceled. The Company has agreed to
utilize NASA's Yellow Creek facilities in Mississippi originally
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designed for the ASRM program, and to convert these facilities to
production of nozzles used on the Shuttle's RSRM solid rocket
motors. The Company also plans to utilize the facilities for other
program nozzle design, development, and fabrication work.
The Company's family of Castor motors is used in the first and
second stages of a number of small expendable launch vehicles and
as strap-on boosters for medium and heavy lift vehicles for space,
defense, and commercial applications. Four Castor IVA motors have
been used successfully as strap-on boosters with the Atlas IIAS
launch of the AT&T Telestar 4 communications satellite. This
launch vehicle configuration has the capability of placing payloads
of up to 8,150 pounds in geosynchronous orbit. The Company has
contracted to deliver four sets of Castor IVA motors. Other
applications include the Maxus and Comet launch vehicles. The
Company has developed and successfully test fired the Castor 120TM
motor, a low cost 120,000 pound class solid rocket motor, designed
for first and second stage propulsion and for strap-on applications
in the expendable launch vehicle market. The first production
motor will be used as the first stage of the Lockheed family of
launch vehicles. The motor also has potential application for
small telecommunication satellite launch systems such as Motorola's
Iridium program and the Loral/Qualcomm Globalstar system. The
motor is capable of being configured as the first stage propulsion
for the Taurus launch vehicle. A new Castor IVA-XL motor with
substantially more performance than the present Castor IVA has been
successfully test fired for expendable launch vehicle applications.
The Company's family of STAR motors provides upper stage
propulsion systems for a number of launch vehicle systems. The
STAR motors also provide satellite positioning for space, defense,
and commercial applications. Movable nozzle technology was
successfully tested for STAR motor applications during fiscal year
1994. STAR motors were flown successfully on the Clementine
Mission, deployment of the Global Positioning Systems satellites,
and the Final Scout 4 launch vehicle, which also includes a
Castor II motor.
For strategic and tactical missile programs, the Company
produces or is qualified to produce a number of propulsion and
related products. The Company provides first stage, flight
termination and ordnance initiation systems for the Peacekeeper
missile; motor deliveries were completed during the first quarter
of fiscal year 1994. Under a joint venture agreement, the Company
produces portions of both the first and second stages of the U.S.
Navy's submarine-launched Trident II Missile System. The Company
provides tactical propulsion systems under fixed-price contracts
for HARM, Maverick, Patriot, Sidewinder, and Standard Missile.
During fiscal year 1994, the Company received contract awards for
HARM motor production, X-ray analysis of existing HARM motors and
warheads, and production work for the SICBM and MK-70. The
Hellfire production contract has been extended and the Company is
in sole-source production on the Navy's vertical-launch
anti-submarine rocket booster system.
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New product development includes support work on a heavy-lift
launch vehicle system, hybrid propulsion booster technologies,
propellant and nozzle technology for steering the Ballistic Missile
Defense Organization Lightweight Exoatmospheric Projectile (LEAP);
and development of the advanced solid axial stage for Theater
Missile Defense Applications.
The Company's gas generator operations consist of research,
development, production, and sale of solid propellant gas
generators. This family of products is designed for a variety of
functions for space, defense, and commercial applications including
thrust vector control actuation, missile launch eject system and
altitude control, and propulsion for dispensing ordnance.
The Company's flare operations consist of research,
development and production of visible and infrared illuminating
flares for military and commercial applications.
Ordnance operations consist of research, development,
production and sale of munitions, munitions simulators for
training, and the manufacture and sale of conventional artillery
mortar and rocket munitions and components.
Metal and composite components operations consist of research,
development, production of rocket motor cases, nozzles, and
precision parts for propulsion and missile systems.
The Company's service contracts include stacking of RSRM
motors, mating them to the external tank and orbiter, prelaunch
testing, and recovery of spent RSRM's for NASA's Space Shuttle
program at the Kennedy Space Center in Florida. The Company has
entered into an agreement with ASKOND, a Russian federation stock
company, to prepare an initial study and then demonstrate
conversion of Soviet ballistic missile propellant into commercial
commodities. Performance of this contract is subject to approval
and funding by the U.S. Department of Defense. The Company has
received an Air Force contract to provide design, testing, and
fabrication work for the Minuteman III ICBM Propulsion Replacement
Program. The Company also provides service to the United States
Army and NASA at Huntsville, Alabama; and to the United States Army
under facilities and operations management contracts for Army-owned
munitions facilities near Marshall, Texas and Shreveport,
Louisiana. The Army ammunition plant near Marshall, Texas will be
operated under a facilities contract, permitting the Company's use
of the facilities for both Department of Defense and third-party
contracts. The Louisiana Army ammunition plant will cease Army
loading operations during fiscal year 1995 and the Company will
maintain the facility in an inactive status for the Army. The
Company's Science and Engineering group maintains ongoing research
projects funded under various Company and government programs, and
provides technical support to all of the Company's propulsion
systems segments. Federal export laws, controls and regulations
impact or otherwise restrict the export of the Company's propulsion
and defense related products and services.
3
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Fastening Systems. The fastening systems segment consists of
the development, production, and sale of threaded and non-threaded
fasteners consisting of lock bolts, locknuts, blind rivets, cap
screws, and product installation tooling. Fasteners and fastening
systems are sold to customers directly by the Company and through
a distribution network, domestic and foreign. The fasteners are
manufactured from high strength metal and metal alloys and are
sold under various trade names and trademarks to aerospace and
industrial markets. Product installation tooling is also
manufactured and marketed to provide customers a complete fastener
installation system. The aerospace market consists of both
commercial and military aerospace manufacturing companies, domestic
and foreign. Customer product qualification is important for
aerospace market acceptance of the Company's fasteners. The
Company's fasteners have been qualified by major domestic and
foreign aerospace companies. Principal domestic and foreign
industrial markets include truck, trailer, railcar, and mining
applications. The construction industry utilizes the Company's
products for certain structural applications such as bridges and
building-steel columns.
Competition
Propulsion Systems. The Company believes it is the largest
producer of solid rocket propulsion systems for the U.S. market,
with a market share of about 40-45 percent. Three other
competitors share most of the remainder of the market. The Company
believes it supplies about one-third of the propulsion systems for
the highly competitive tactical market. The Company is the
sole-source producer of RSRM's for NASA's Space Shuttle, and given
the cancellation of ASRM in fiscal year 1994, the Company expects
to remain the only qualified producer for the foreseeable future.
The market for ordnance products is highly competitive, but the
Company is the sole government-qualified producer of several
pyrotechnic products. Both foreign governments and foreign private
enterprises have solid rocket propulsion systems that are
competitive with propulsion systems manufactured by the Company.
Principal competitive factors are technical performance, quality,
reliability, price, depth and capabilities of personnel, and
adequacy of facilities. With reductions in Department of Defense
expenditures for strategic and tactical programs, these markets are
declining and competitive pressures are increasing. As marketing
opportunities grow in the developing market for commercial launch
vehicles, competition in the light to medium lift vehicle
propulsion market will grow as competitors seek non-defense related
markets for their launch systems.
Fastening Systems. Fastening systems are manufactured by a
number of competitors with no one manufacturer having a major
position in the aerospace or industrial fastening markets.
Competitive with the Company's threaded and non-threaded fastening
systems are alternative fastening systems and fastening methods
including welded fasteners, composite adhesives and welding. The
Company's fastening systems compete on quality, delivery, price,
and ability to provide customer fastening installation solutions by
customizing the configuration of installation tooling and
fasteners. Competition for aerospace original equipment
manufacturers is also dependent on
4
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customer qualification of the Company's fasteners. The Company
maintains a proprietary patented position for certain of its
fastener designs for which certain limited licenses have been
granted to competitors. The Company also manufactures certain
fasteners under licenses from competitors.
Research and Development
Company-sponsored research and development activities relate
to new products or services and improvement of existing products or
services. The Company's R&D cost was $15.4 million, $15.7 million,
and $14.2 million and represents 1.5%, 1.3%, and 1.1% of revenues
for fiscal years 1994, 1993, and 1992, respectively, while the
amount spent during the same periods for customer-sponsored R&D
(primarily U.S. government-funded) was approximately $25.5 million,
$23.2 million, and $49.1 million, respectively.
Environmental Matters
Compliance with federal, state, and local requirements adopted
to regulate the discharge of materials into the environment, or
otherwise relating to the protection of the environment, including
environmental requirements which, may be imposed with respect to
the Company's facilities, and formerly owned and operated
facilities, while having the potential to be a significant cost and
liability, are not at this time expected to have a material adverse
effect on the Company's financial condition or upon the competitive
position of the Company or its subsidiaries. Capital expenditures
and amounts expensed related to environmental matters respectively
were $3.4 million and $11.9 million for fiscal year 1994 and are
estimated to be $5.4 million and $10.1 million for fiscal year
1995. The Company maintains ongoing programs for environmental
site evaluations, continues its cooperation with federal and state
agencies in site investigations, and engages in environmental
remediation activities of its sites and sites of third parties.
The Company continues working on the reduction of ozone depleting
and other hazardous chemicals, the cost of which will be recovered
under the pricing of its products with the federal government.
The Company is presently involved with two Environmental
Protection Agency (EPA) superfund sites designated under the
Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") in Morris County, New Jersey, operated about thirty
years ago by the Company for government contract work. The Company
has negotiated a consent decree with the EPA concerning the
Rockaway Borough Well Field Site ("Klockner" site). With respect
to the Company's responsibilities for response costs, site
remediation and future operation and maintenance costs at this
site, the Company's total estimated cost for this site are
approximately $8.5 million of which approximately $1.0 million will
be spent during fiscal year 1995. The Company has received notice
from the State of New Jersey that it has been identified along with
others as a "potentially responsible party" at the Rockaway
Township Well Field ("Denville") Site. As partial settlement of
this matter, the Company has entered into an administrative consent
order
<PAGE>
5
to replace Rockaway Township's air stripper water treatment
system at an estimated cost of $250,000. Anticipated costs for
remediation and future operation and maintenance at this site are
estimated to be approximately $4.9 million. Management believes
that it has valid claims, regarding both sites, for contribution by
other responsible parties including the federal government.
Compliance with a directive issued by the Utah Department of
Environmental Quality has resulted in assessments of $.524 million
and payments of approximately $3.3 million in future capital
expenditures for construction of a wastewater treatment facility at
Promontory, Utah. Part of the operating and depreciation costs
will be paid by or otherwise reimbursed by the federal government.
The Company believes that the eventual cost for site
remediation matters known at this time, before any recoveries from
insurance, third party contributions by other responsible parties
including the federal government is estimated to be $20 million.
The Company's policy and accounting for environmental matters is
set forth in Footnotes A and L of the Company's financial
statements. Resolution of the environmental matters discussed
above could have a material effect on a future period's income or
cash flows if the Company is unsuccessful in obtaining
reimbursement from other parties, including its insurance carriers,
and is unable to recover such costs from the federal government.
The Company believes that after recoveries from third parties,
insurance carriers and the federal government, any net liability
for which it may ultimately be responsible in excess amounts
currently accrued would not be material to the Company's financial
condition.
Employees
The approximate number of employees of the Company on June 30,
1994, was 8,000 compared to 9,300 on June 30, 1993. Fastening
systems employees totaled 1,400 on June 30, 1994, compared to 1,200
on June 30, 1993. Propulsion systems employment levels are down,
reflecting lower levels of business activity in non-Shuttle related
propulsion programs. Reductions in Shuttle related employment
reflect improved production efficiencies. Ordnance related
employment levels are down, reflecting lower loading rates at the
government-owned contractor-operated Army ammunition plants and
cost reductions. Employment levels at these plants will be further
reduced as production is phased out. Fastening Systems employment
levels reflect the Deutsch acquisition and improved volumes for
industrial fasteners.
Raw Materials
Although most of the raw materials used by the Company are
readily available, certain key raw material suppliers (such as
suppliers of propellant raw materials and nozzle and case component
materials) must be approved by the federal government. With a
limited number of such approved suppliers, delivery of these
materials could be disrupted at the supplier level at any time and
have a material adverse impact on
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production and delivery schedules until government approval of
alternative suppliers is obtained.
Seasonality
The business of the Company is not subject to seasonal
fluctuations.
Patents and Trademarks
The Company has approximately 411 patents and patent
applications, of which 318 are related to the propulsion systems
business segment and 93 are related to the fastening systems
segment including patents acquired in the Deutsch acquisition. As
a government contractor, the Company conducts independent research
and development (IR&D) to enable it to maintain its competitive
position. Research and development work is also performed under
contracts with the Department of Defense, NASA, and other
government agencies (Contract R&D).
Approximately 84 percent of the Company's patents in the
propulsion systems segment of the business were developed under
Company funded IR&D related budgets. The Company has full
ownership interest in its patents developed under these budgets and
lesser rights in the patents it developed under Contract R&D
programs.
Propulsion Systems segment patents have the following
remaining duration: approximately 60 percent of the patents have a
duration of more than 10 years; 12 percent, 5-10 years; and 28
percent less than 5 years. Patent coverage includes propulsion
system design, case, nozzle and propellants. Patents also cover
ordnance and flare related products. Under contracts with the
federal government, licenses have been granted to the government
for limited use of certain patented technology.
Fastening Systems segment patents have the following remaining
duration: approximately 50 percent of the patents have a duration
of more than 10 years; 27 percent, 5-10 years; and 23 percent less
than 5 years. Major aerospace fastening systems covered by
patents include the lightweight grooved proportional lock bolt with
a remaining patent life of 8 years, and the "Unimatic" blind bolt
with a remaining patent life of more than 10 years. The
"Unimatic" blind rivet has a remaining patent life of 8 years.
Major industrial fastening systems covered by patents include
"Huck-Fit" lock bolts, "Magna-Lok" blind rivets, and "Magna-Grip"
lock bolts with patent lives remaining of more than 10 years.
Certain of the Company's fastener products are manufactured under
licenses from competitors.
Although the Company believes that its present competitive
position is enhanced by its patent and its technical expertise,
know-how and proprietary information, no patent or group of patents
is material to the conduct of the business of the Company.
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Trademarks are important for product identification in the
fastening systems segment of the business but are not significant
to the Company's propulsion business.
Customers
Propulsion-segment customers are primarily the Federal
government and its prime and subcontractors. Commercial propulsion
customers, primarily in the launch vehicle market, are being
developed but are not yet material to the Company's customer base.
Federal government contracts and subcontracts entered into by the
Company, are by their terms, subject to termination by the
government or the prime contractor either for convenience or
default. Such contracts are also subject to funding appropriations
by Congress. Since the Federal government provides, directly and
indirectly, approximately 78 percent of the Company's business, the
termination or discontinuance of funding of a substantial portion
of such business would have a material adverse effect on its
operations. No single non-government customer is material to
the overall business conducted by the Company. Fastening systems
customers are comprised of industrial and aerospace original
equipment manufacturers, domestic and foreign, doing business with
the Company on a purchase order basis. Foreign customers and sales
are not yet material to the Company's customer and sales base.
Backlog Orders
The Company's backlog of propulsion systems orders on June 30,
1994, and June 30, 1993, was $2.5 billion and $3.2 billion,
respectively. The NASA Space Shuttle solid rocket motor booster
and related contracts comprise approximately 84 percent of the
backlog. It is expected that approximately 29 percent of the
orders in backlog on June 30, 1994, will be completed by June 30,
1995; and the remainder thereafter through fiscal year 2000. The
backlog represents the value of contracts for which goods and
services are to be provided and includes $.5 billion in government
contracts for which funds have been approved. The backlog is
believed to consist of firm contracts and although they can be
changed or canceled, the amount of changes and cancellations for
which the Company would not receive reimbursement is not expected
to be materially significant to the Company's business. The
contract backlog consists of a combination of cost plus award fee,
cost plus fixed fee, cost plus incentive fee, fixed price incentive
fee, and firm fixed price contracts. The Company's fastening
systems backlog was approximately $39 million on June 30, 1994.
ITEM 2. PROPERTIES
The Company operates manufacturing, research and development
facilities at 16 locations, and administrative and sales offices,
warehouses and service centers at approximately 22 locations
worldwide. The Company considers the condition of its
manufacturing facilities, warehouses, and other properties to be
generally in good
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operating condition and suitable for their intended purposes. All
Company-owned property is held in fee with no encumbrances.
Company leased property obligations are set forth in Footnote M of
the Company's financial statements.
Selected key facilities at the Company's Utah Space Operations
have been recently upgraded and modernized to achieve performance
and operating efficiencies. New facilities are being developed at
Iuka, Mississippi, in conjunction with NASA for nozzle fabrication
and are expected to be operational mid-calendar year 1996. These
facilities will expand the company's solid rocket propulsion nozzle
manufacturing and research capabilities. The Company's Space
Operations facilities are considered adequate and sufficient to
meet operating needs.
Company-owned facilities related to its defense business are
adequate to meet current levels of business activity. The Company
is reviewing certain underutilized facilities of its non-space
propulsion operations and other defense-related product lines with
the objective of reducing costs and making the Company more
competitive for these products. Government-owned and contractor-
operated Army ammunition facilities are not fully utilized and are
on the planned government closure list.
The Fastener Systems facilities are sufficient and adequate to
meet anticipated improvements in the aerospace fastening market.
Industrial fastening systems facilities are being expanded to
eliminate certain production constraints which will yield improved
production capabilities and lower costs for the strong industrial
fastener market.
During fiscal year 1994, additions to property, plant, and
equipment totalled $21.2 million and net property, plant and
equipment added as the result of an acquisition totaled $8.2
million. The Company is negotiating with the United States Air
Force concerning the continued management and use of Air Force
Plant 78 located in Northern Utah. The Company has received notice
from the United States Air Force that operations at this facility
are to be discontinued by June 30, 1996. Operations will be
relocated to other Company-owned or leased properties if
negotiations with the Air Force are not successfully concluded.
The following table sets forth manufacturing locations and the
approximate square footage.
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<TABLE>
<CAPTION>
Buildings (000's Square Feet)
--------------------------------------
Manufacturing Location Company Government
by Segment Owned Leased Owned Total
- - -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Propulsion Systems Segment:
- - --------------------------
Northern Utah 2,067 593 605 3,265
Elkton, Maryland 378 378
Huntsville, Alabama 32 973 1,005
Shreveport, Louisiana 2,731 2,731
Iuka, Mississippi 699 699(1)
Marshall, Texas 1,408 1,408
Carson, City, Nevada 156 156
Fastening Systems Segment:
- - -------------------------
Domestic:
Carson, California 153 153
Lakewood, California 114 114
Tucson, Arizona 76 12 88
Kingston, New York 105 105
Waco, Texas 316 316
International:
Us, France 60 60
Osterode, Germany 25 25
Shropshire, United Kingdom 50 50
- - -----------------
(1)Expected to be operational mid-calendar year 1996.
</TABLE>
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ITEM 3. LEGAL PROCEEDINGS
Litigation and Regulation
Aetna Casualty & Surety Co., et., al. v. Pacific Engineering
and Production Company of Nevada, et. al., Clark County, Nevada,
District Court, filed on September 16, 1988, was settled on
September 13, 1992, upon payment into escrow by all defendants of
agreed upon settlement amounts. These claims resulted from
explosions which occurred on May 4, 1988, at the ammonium
perchlorate (AP) plant of defendant Pacific Engineering located in
Henderson, Nevada. Some of the explosions involved AP manufactured
pursuant to orders from the Company for use in Space Shuttle solid
rocket motors. Plaintiffs alleged that the Company was
responsible, at least in part, for the design and operation of
certain storage equipment and activities at the Pacific Engineering
plant. Thiokol's settlement contribution of $18.7 million was
funded by its aircraft products liability carrier under a
continuing partial reservation of rights. The Company's position
with the insurance carrier is that full coverage should be provided
and the reservation of rights withdrawn. The Company and the
insurance carrier are negotiating a settlement which the Company
believes can be achieved to the mutual satisfaction of both
parties. If the Company's liability is not covered by insurance,
it may be entitled to indemnity from one or more agencies of the
federal government under contracts pursuant to which the AP was
being procured. Management therefore believes that the resolution
of this matter should not have a material effect upon the Company's
financial condition.
McDonnell Douglas v. Thiokol Corporation, United States
District Court, Central District of California, was filed in July
1992 by Plaintiff claiming damages of $17 million, for breach of
warranty and tort damages, plus about $19 million in prejudgment
interest. The action is based upon the failure in 1984 of two STAR
48 satellite placement motors, manufactured to Plaintiff's
specifications at the Company's Elkton division, to lift
telecommunication satellites into geosynchronous orbit. The action
is set for trial for the fall of 1994 and seeks recovery by
Plaintiff of its costs incurred to conduct its failure analysis and
motor redesign. These two STAR 48 motors were the subject of
litigation brought by different plaintiffs in California state
courts and resolved in favor of the Company. The courts determined
the Company did not negligently manufacture the STAR 48 motors and
that there was no cause of action against the Company for breach of
warranty. The Company is defending the present suit under an
agreement with its insurance carrier pursuant to which past and
future costs of defense are being reimbursed subject to a
reservation of rights. Although the damage claim is not covered by
insurance and the ultimate outcome of the current litigation is
uncertain at this time, the Company believes it has substantial
legal defenses and that the outcome of this suit will not have a
material adverse effect on the financial condition of the Company.
Miscellaneous. The Company has settled a Notice of Violation
from the State of Utah Department of Environmental Quality with
regard to wastewater discharge at
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Promontory, Utah. The cost of compliance with the directive and
accompanying assessments is described in Item 1, Environmental
Matters, and is incorporated herein by reference.
The Company is involved in a number of other pending legal and
administrative proceedings which are not expected individually or
in the aggregate to have a material adverse effect upon the
Company's financial condition.
Depending on the amount and the timing of an unfavorable
resolution of these matters, it is possible that the Company's
future results of operation's or cash flows could be materially
affected in a particular period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the Company's stockholders
during the fourth quarter of fiscal year 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT (as required by Instruction 3.
to Item 401(b) of Registration S-K)
Generally, Executive Officers are elected by the Board of
Directors at its first meeting following the Annual Meeting of
Stockholders. The officers generally serve until the next such
meeting, or until their successors are elected and qualified. The
next Annual Meeting of Stockholders will be held on October 25,
1994.
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The Executive Officers of the Company on June 30, 1994 were:
Positions Held During Past Five
Name and Age Years and Terms of Office
- - ------------ ----------------------------------
James R. Wilson (53). . . . . . President and Chief Executive
Officer since October 1993,
Executive Vice President,
Chief Financial Officer and
Treasurer (1992-October 1994);
Vice President and Chief Financial
Officer (1989-present); Senior
Vice President and Chief Financial
Officer, Circuit City Stores, Inc.
(1987-88).
Richard L. Corbin (48). . . . . Senior Vice President and Chief
Financial Officer since May
1994; Chief Financial
Officer and Vice President,
Administration Space Systems
Division of General Dynamics
Corporation (1976-May 1994).
James E. McNulty (50) . . . . . Executive Vice President Human
Resources and Administration
(1991-present); Vice
President Human Resources
(1989-1991); Vice President, Human
Relations, TRW Automotive, TRW,
Inc. (1980-89).
Joseph A. Lombardo (61) . . . . Vice President Space Operations
since April 1992; (1989-April
1992) Assistant General Manager
Space Operations; prior to 1989,
NASA Marshall Space Flight Center.
(1)Winston N. Brundige (49). . . Group Vice President Defense and
Expendable Launch Vehicles since
July 1, 1994; Vice President and
Division Manager Elkton Division
(1991-June 1994); Director of
Production (1990-1991); Director
of Engineering (1988-1990).
- - ------------------
(1)Effective July 1, 1994, Winston N. Brundige was elected
Vice President of the Corporation and assumed the position of Group
Vice President Defense and Expendable Launch Vehicles.
13
<PAGE>
Positions Held During Past Five
Name and Age Years and Terms of Office
- - ------------ ----------------------------------
William W. Brant (60) . . . . . Vice President Strategic
Operations (1990-present);
Division Vice President Strategic
Operations (1988-90).
R. Robert Harris (60) . . . . . Vice President and General
Counsel (1989-present); Vice
President, General Counsel
Ultrasystems Incorporated (1987-88);
Vice President, General Counsel and
Secretary Baker Hughes Incorporated
(1974-1987).
Robert K. Lund (56) . . . . . . Vice President Science and
Engineering (since 1991);
(1989-91) Technical Director
Advanced Technology; (1984-89)
Vice President of Engineering,
Wasatch Division Aerospace Group.
Luther C. Johnson (54). . . . . Vice President and General
Manager Ordnance Operations (since
April 1992); and Vice President
Tactical Operations (1987-92).
Royce W. Searle (61). . . . . . Vice President and Controller
(1989-present), Vice President,
Finance (1988-89), Vice President,
Finance and Contracts (1988) and
Vice President, Finance (1987-88),
Aerospace Group.
Nicholas J. Iuanow (34) . . . . Treasurer (1994); (1989-1993)
Assistant Treasurer of the
Company.
Edwin M. North (49) . . . . . . Secretary (1990-present);
Secretary and General Counsel
Carlisle Companies
Incorporated (1985-89).
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information concerning the market for the Company's common
equity and related security holder matters is included in the
section "Dividends and Recent Market Prices" and "Quarterly
Financial Highlights" of the Company's Annual Report to
Stockholders for fiscal year 1994, and is incorporated herein by
reference in Exhibit Number 13. As of August 31, 1994, there were
6,924 stockholders of record. The Company estimates there are
approximately 16,000 beneficial holders of the Company's common
stock.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the five fiscal years ended June
30, 1994, is included in the Company's Annual Report to
Stockholders for fiscal year 1994, and is incorporated herein by
reference in Exhibit Number 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three fiscal years ended June 30,
1994, is included in the Company's Annual Report to Stockholders
for fiscal year 1994, and is incorporated herein by reference in
Exhibit Number 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of the Company as of June 30,
1994, and 1993, and the consolidated statements of income, cash
flows, and stockholders' equity for each of the three years for the
periods ended June 30, 1994, 1993, 1992, and notes to consolidated
financial statements are included in the Company's Annual Report to
Stockholders for fiscal year 1994 and are incorporated herein by
reference in Exhibit Number 13.
Quarterly financial highlights are included in the Company's
Annual Stockholders' Report for the year ended June 30, 1994, and
are incorporated herein by reference in Exhibit Number 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's directors and nominees for
director is included on pages 3 through 5 of the Company's
definitive Proxy Statement dated September 23, 1994, and is
incorporated herein by reference. Information concerning
disclosure of delinquent files pursuant to Item 405 of Regulation
S-K is set forth on page 7 of the Company's definitive Proxy
Statement dated September 23, 1994, and is incorporated herein by
reference.
Information concerning the Company's Executive Officers is
included on pages 13 through 14 of Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation for fiscal year
1994 is included on pages 3 through 13 of the Company's definitive
Proxy Statement dated September 23, 1994, and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning beneficial ownership of the Company's
common stock is included on page 7 of the Company's definitive
Proxy Statement dated September 23, 1994, and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related
transactions is included on page 14 of the Company's definitive
Proxy Statement dated September 23, 1994, and is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
16
<PAGE>
1. Financial Statements
The following consolidated financial statements are included in
the Company's Annual Report to Stockholders for the fiscal year
ended June 30, 1994, and are incorporated herein by reference in
Exhibit Number 13.
Consolidated Statements of Income -- Years ended June 30,
1994, 1993, and 1992.
Consolidated Balance Sheets -- June 30, 1994, and June 30,
1993.
Consolidated Statements of Cash Flows, -- Years ended June
30, 1994, 1993, and 1992.
Consolidated Statements of Stockholders' Equity -- Years
ended June 30, 1994, 1993, and 1992.
Notes to Consolidated Financial Statements.
Management's Report on Financial Statements.
Report of Ernst & Young LLP, Independent Auditors.
2. Financial Statement Schedules
The following consolidated financial statement schedules for
the fiscal years 1994, 1993, and 1992, are submitted herewith:
Page
----
Schedule V -- Property, Plant and Equipment . . . . 24
Schedule VI -- Accumulated Depreciation, Depletion
and Amortization of Property, Plant and Equipment . .25
Schedule IX -- Short-Term Borrowings . . . . . . . . 26
Schedule X -- Supplementary Income Statement
Information. . . . . . . . . . . . . . . . . . . . .27
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are
inapplicable, and are therefore omitted.
17
<PAGE>
<TABLE>
<CAPTION>
3. Index to Exhibits
Exhibit
Number Description Page
- - ------- ----------- ----
<S> <C> <C>
(3) Certificate of Incorporation and By-Laws.
(a) (1)Restated Certificate of Incorporation of the N/A
Company, effective July 3, 1989.
(b) (1)Amended By-Laws of the Company: Incorporated N/A
by reference to Annex IV to Proxy Statement/
Prospectus dated May 22, 1989, for Special
Stockholders meeting held June 23, 1989.
(c) Amended By-Laws of the Company June 19, 1993, N/A
increasing Board of Directors.
(4) Instruments defining the rights of security holders
including indentures.
(a) (1)Rights Agreement dated January 26, 1989, N/A
between the Company and The First National Bank
of Chicago: Incorporated by reference to
Exhibit 1 to Form 8-A dated February 8, 1989.
(b) (1)Amendment dated June 22, 1989, to Rights N/A
Agreement between the Company and The First
National Bank of Chicago: Incorporated by
reference to Exhibit 2 to Form 8-K dated
July 3, 1989.
(c) (1)Amendment No. 2 to Rights Agreement dated N/A
January 18, 1990, between the Company and The
First National Bank of Chicago: Incorporated
by reference to Exhibit 3 to Form 8-K dated
January 18, 1990.
(d) See Exhibits (3)(a), (3)(b) and (3)(c) above. N/A
(10) Material contracts.
(a) (1)Key Executive Long-Term Incentive Plan N/A
effective for fiscal year 1990.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- - ------- ----------- ----
<S> <C> <C>
(b) (1)Key Executive Long-Term Bonus Plans effective N/A
fiscal year 1991.
(c) (1)Key Executive Annual Bonus Plan (Plan 1) N/A
effective for fiscal year 1990.
(d) (1)Staff Annual Bonus Plan effective for fiscal N/A
year 1991.
(e) (1)Staff Executive Annual Bonus Plan (Plan 2) N/A
effective for fiscal year 1990.
(f) (1),(2),(3)1989 Stock Awards Plan: Incorporated N/A
by reference to Annex VI to Proxy Statement/
Prospectus dated May 22, 1989, for Special
Stockholders Meeting held June 23, 1989.
(g) (2),(3)1989 Stock Awards Plan as amended by N/A
stockholder approval October 15, 1993.
(h) (2),(3)Survivor Income Benefits Plan, amended N/A
through March 24, 1983.
(i) (1)Arrangements, whereby the Company compensates N/A
its independent auditors for tax services to
certain key executives, for which there is no
written document.
(j) (1),(2),(3)Form of Employment Agreement between N/A
the Company and certain of its executive officers
including the Chief Executive Officer and the
other four highest paid executive officers.
(k) (1),(2),(3)Amended Form of Employment Agreement N/A
between certain of its executive officers
including the five most highly compensated.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- - ------- ----------- ----
<S> <C> <C>
(l) (1),(3)Consulting Agreement effective July 1, N/A
1993, between the Company and U. Edwin Garrison,
the terms of which are described and are
incorporated by reference from the 1994 Proxy
Statement dated September 23, 1994.
(m) (1)Note Agreement $120,000,000 dated N/A
June 19, 1990.
(n) Credit Agreement dated 09/30/93 among Thiokol 31
Corporation and The First National Bank of
Chicago Bank of America National Trust and
Savings Association NBD Bank, N.A. and The
Northern Trust Company.
(o) (2),(3)Thiokol Corporation Pension Plan (Second N/A
Restatement Effective January 1, 1989).
(p) (2),(3)Thiokol Corporation Supplemental Executive N/A
Retirement Plan (Effective July 1, 1992).
(11) Statement re computation of per share earnings.
(a) Statement re computation of per share earnings of 28
the Company and subsidiaries, for the three years
ended June 30, 1994, 1993, and 1992.
(13) Annual Report to security holders.
(a) Applicable Sections of the Annual Report to 77
Stockholders of the Company for fiscal year
1994 Incorporated by Reference.
(22) Subsidiaries of the registrant.
(a) Subsidiaries of the Company. 29
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- - ------- ----------- ----
<S> <C> <C>
(24) Consents.
(a) Consent of Ernst & Young LLP, independent 30
auditors.
(27) Financial Data Schedule. 92
(b) REPORTS ON FORM 8-K
None.
</TABLE>
_____________
(1)All documents are incorporated by reference to Exhibit 3(a)
to Form 10-K for the fiscal years ended June 30, 1989, through June
30, 1994.
(2)Participation by the Company's Chief Executive Officer and
four most highly compensated Executive Officers and Executive
Officers as a group in the compensation plans identified in Exhibit
10 described on page 9 in the Company's definitive Proxy
Statement dated September 23, 1994, which description is
incorporated herein by reference. Each management contract or
compensatory plan or arrangement required to be filed as an
exhibit to this Form 10-K pursuant to Item 14c.
(3)A description of these contracts is set forth in the
Company's definitive Proxy Statement dated September 23, 1994, and
are filed as Exhibits pursuant to Form 10-K, Part IV, Item 14(a)3.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, as of the 21st day of September 1994.
THIOKOL CORPORATION
(Registrant)
s/Richard L. Corbin
By____________________________
Richard L. Corbin
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant in the capacities indicated, as of the
21st day of September 1994.
SIGNATURE TITLE
--------- -----
s/James R. Wilson President, Chief Executive
- - ------------------------------ Officer and Director
James R. Wilson (Principal Executive Officer)
s/Richard L. Corbin Senior Vice President and
- - ------------------------------ Chief Financial Officer
Richard L. Corbin (Principal Finance Officer)
s/Royce W. Searle Vice President and Controller
- - ------------------------------ (Principal Accounting
Royce W. Searle Officer)
s/U. Edwin Garrison
- - ------------------------------ Director, Chairman of the
U. Edwin Garrison Board
22
<PAGE>
s/Neil A. Armstrong
- - ------------------------------ Director
Neil A. Armstrong
s/James R. Burnett
- - ------------------------------ Director
James R. Burnett
s/L. Dennis Kozlowski
- - ------------------------------ Director
L. Dennis Kozlowski
s/Charles S. Locke
- - ------------------------------ Director
Charles S. Locke
s/Robert T. Marsh
- - ------------------------------ Director
Robert T. Marsh
s/Joseph A. Rice
- - ------------------------------ Director
Joseph A. Rice
s/James M. Ringler
- - ------------------------------ Director
James M. Ringler
s/Donald C. Trauscht
- - ------------------------------ Director
Donald C. Trauscht
23
<PAGE>
SCHEDULE V - PROPERTY, PLANT, AND EQUIPMENT
THIOKOL CORPORATION
(in thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Other Changes Balance at
Beginning Additions at Add (Deduct) End of
Classification of Period Cost Retirements Describe Period
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1994:
Land $ 17,302 $ 38 (D) $ 17,340
Buildings and 239,189 $ 3,312 $ 288 115 (C) 242,552
Improvements 224 (D)
Machinery and 327,380 16,519 10,366 8,134 (C) 342,496
Equipment 829 (D)
Construction 20,503 1,353 (A) 123 8 (D) 21,741
in Progress -------- ------- ------- ------- --------
$604,374 $21,184 $10,777 $9,348 $624,129
======== ======= ======= ======= ========
Year ended June 30, 1993:
Land $ 17,575 $ 23 $ (296) (D) $ 17,302
Buildings and 231,211 9,512 $ 720 (814) (D) 239,189
Improvements
Machinery and 313,347 18,098 7,065 5,267 (C) 327,380
Equipment (2,267) (D)
Construction 28,538 (7,794) (A) 190 (51) (D) 20,503
in Progress -------- -------- ------- -------- -------
$590,671 $19,839 $7,975 $1,839 $604,374
======== ======= ======= ======= ========
Year ended June 30, 1992:
Land $ 12,441 $ 1,087 $ 3,985 (C) $ 17,575
62 (D)
Buildings and 196,258 21,911 $ 275 12,902 (C) 231,211
Improvements 542 (D)
(127) (B)
Machinery and 240,438 38,246 26,503 60,806 (C) 313,347
Equipment 233 (D)
127 (B)
Construction 42,522 (23,837) (A) 94 9,724 (C) 28,538
in Progress 223 (D)
-------- ------- ------ ------ -------
$491,659 $37,407 $26,872 $88,477 $590,671
======== ======= ======= ======= ========
__________________
Note A - Additions for the year at cost, less transfers of completed units to other
classifications.
Note B - Reclassification among property, plant, and equipment accounts.
Note C - Acquisitions.
Note D - Foreign currency translation adjustment.
</TABLE>
24
<PAGE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT, AND EQUIPMENT
THIOKOL CORPORATION
(in thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
Additions
Balance at Charged to Other Changes Balance at
Beginning Costs and Add (Deduct) End of
Classification of Period Expenses Retirements Describe Period
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1994:
Buildings and $ 94,281 $ 9,709 $ 263 $ 120 (C) $103,847
Improvements
Machinery and 180,831 26,265 9,196 312 (C) 198,212
Equipment -------- ------- ------ ------- --------
$275,112 $35,974 $9,459 432 $302,059
======== ======= ====== ======= ========
Year ended June 30, 1993:
Buildings and $ 82,634 $12,022 $ 257 $ (118) (C) $ 94,281
Improvements
Machinery and 161,502 26,622 6,181 (1,112) (C) 180,831
Equipment -------- ------- ------ ------- --------
$244,136 $38,644 $6,438 $(1,230) $275,112
======== ======= ====== ======= ========
Year ended June 30, 1992:
Buildings and $ 70,043 $11,959 $ 311 $ 988 (A) $ 82,634
Improvements (87) (B)
42 (C)
Machinery and 145,574 27,014 18,645 7,449 (A) 161,502
Equipment 87 (B)
23 (C)
-------- ------- ------- ------- --------
$215,617 $38,973 $18,956 $8,502 $244,136
======== ======= ======= ======= ========
__________________
Note A - Huck assets acquired.
Note B - Reclassification among property, plant and equipment accounts.
Note C - Foreign currency translation adjustment.
Note D - Annual depreciation provision was computed in general accordance with the
following rates:
Building and Improvements 2% to 33%
Machinery and Equipment 6% to 33%
</TABLE>
25
<PAGE>
SCHEDULE IX - SHORT-TERM BORROWINGS
THIOKOL CORPORATION
(in thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Balance at Average Outstanding Outstanding Interest Rate
Short-Term End of Interest During the During the During the
Borrowings Period Rate Period Period (B) Period (C)
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended
June 30, 1994: $27,090 5.54% $29,727 $23,496 7.02%
Notes payable
to banks
Year ended
June 30, 1993: $26,989 7.53% $32,901 $24,768 9.84%
Notes payable
to banks
Year ended
June 30, 1992: $20,113 10.57% $20,158 $10,662 10.51%
Notes payable
to banks
__________________
Note A - Notes payable to banks represent borrowings under lines of credit borrowing
arrangements which have no termination date but are reviewed annually for renewal.
Note B - The average amount outstanding during the period was computed by dividing the total
of month-end outstanding principal balances by 12.
Note C - The weighted average interest rate during the period was computed by dividing the
actual interest expense by the average short-term debt outstanding.
</TABLE>
26
<PAGE>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
THIOKOL CORPORATION
(in thousands)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
Col. A Col. B
- - --------------------------------------------------------------------------------------------
Charged to
Item Costs and Expenses
- - --------------------------------------------------------------------------------------------
<S> <C>
Year ended June 30, 1994: $19,948
Maintenance and Repairs
Year ended June 30, 1993: $30,780
Maintenance and Repairs
Year ended June 30, 1992: $34,667
Maintenance and Repairs
Note: Disclosure of amortization of intangible assets, advertising, taxes, other than
payroll and income taxes, and royalty charges have been omitted as such amounts are less than
one percent of sales for each year.
</TABLE>
27
<PAGE>
EXHIBIT 11 (a)
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THIOKOL CORPORATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended June 30
---------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Primary
Average shares outstanding. 19,658 20,068 19,808
Additional shares assuming exercise of
dilutive stock options--based on
treasury stock method using average
market prices. 315 316 343
------- ------- -------
Total shares: 19,973 20,384 20,151
======= ======= =======
Net (loss) income: $(3,515) $63,797 $62,989
(Loss) earnings per share: $ (.18) $ 3.13 $ 3.12
======== ======= =======
Fully Diluted
Average shares outstanding. 19,658 20,068 19,808
Additional shares assuming exercise of
dilutive stock options--based on
treasury stock method using the year-end
market price, if higher than average
market price. 315 641 343
------- ------- -------
Total shares: 19,973 20,709 20,151
======= ======= =======
Net (loss) income: $(3,515) $63,797 $62,989
(Loss) earnings per share: $ (.18) $ 3.08 $ 3.12
======== ======= =======
</TABLE>
28
<PAGE>
EXHIBIT (22)(a)
SUBSIDIARIES OF THIOKOL CORPORATION
The following is a list of operating subsidiary corporations of
the Company as of June 30, 1994. Certain subsidiaries not
considered significant have been omitted.
State or Other
Jurisdiction of
Subsidiary Incorporation
- - ---------- -----------------------
Omneco, Inc.. . . . . . . . . . . . . . . . . . . .Nevada
Huck International, Inc.. . . . . . . . . . . . . .Delaware
Huck S.A. . . . . . . . . . . . . . . . . . . . . .France
Huck International GmbH & Co. . . . . . . . . . . .Germany
Huck International Ltd. . . . . . . . . . . . . . .United Kingdom
29
<PAGE>
EXHIBIT (24)
Consent of Independent Auditors
We consent to the incorporation by reference in the Annual
Report (Form 10-K) of Thiokol Corporation of our report dated
August 2, 1994, included in the 1994 Annual Report to Shareholders
of Thiokol Corporation.
Our audits also included the financial statement schedules of
Thiokol Corporation listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is
to express an opinion based on our audits. In our opinion, the
financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the
Registration Statements (Form S-8, Nos. 33-18630, 33-2921, 33-
10316, 2-76672, 2-90885 and 33-38322) pertaining to certain
Employee Savings and Investment Plans and Stock Option Plans of
Thiokol Corporation of our report dated August 2, 1994, with
respect to the consolidated financial statements incorporated
herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedules
included in this Annual Report (Form 10-K) of Thiokol Corporation.
ERNST & YOUNG LLP
Salt Lake City, Utah
September 21, 1994
30
<PAGE>
THIOKOL CORPORATION
CREDIT AGREEMENT
This Credit Agreement dated as of September 30, 1993 is
among Thiokol Corporation, a Delaware corporation, each of the
undersigned banks and The First National Bank of Chicago,
individually and as agent for such banks. The parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement:
"Absolute Rate Auction" means a solicitation of Bid Quotes
setting forth Bid Absolute Rates pursuant to Section 2.2.
"Absolute Rate Interest Period" means, with respect to a Bid
Absolute Rate Advance, a period of not less than 7 and not more
than 180 days commencing on a Business Day selected by the
Company pursuant to this Agreement. If such Absolute Rate
Interest Period would end on a day which is not a Business Day,
such Absolute Rate Interest Period shall end on the next
succeeding Business Day.
"Advance" means either a Syndicated Advance or a Bid
Advance.
"Administrative Agent" means The First National Bank of
Chicago in its capacity as agent for the Banks pursuant to
Article X, and not in its individual capacity as a Bank, and any
successor Administrative Agent appointed pursuant to Article X.
"Aggregate Available Commitment" means at any time the
Aggregate Commitment at such time less the Outstandings at such
time.
"Aggregate Commitment" means the aggregate of the
Commitments of all the Banks hereunder.
"Agreement" means this credit agreement, as it may be
amended from time to time.
"Article" means an article of this Agreement unless another
document is specifically referenced.
"Assessment Rate" means, for any CD Interest Period, the net
assessment rate per annum (rounded upwards, if necessary, to the
next higher 1/100 of 1%) payable to the Federal Deposit Insurance
Corporation (or any successor) for the insurance of domestic
deposits of
31
<PAGE>
First Chicago during the calendar year in which the first day of
such CD Interest Period falls, as reasonably estimated by the
Administrative Agent on the first day of the CD Interest Period.
"Authorized Representative" means the Chief Financial
Officer or the Treasurer of the Company or any other officer or
employee of the Company designated in writing as an "Authorized
Representative" under this Agreement by the Chief Financial
Officer or the Treasurer of the Company.
"Bankruptcy Code" means Title 11, United States Code
Sections 1 et seq., as the same may be amended from time to time,
and any successor thereto or replacement therefor which may be
hereafter enacted.
"Banks" means the banks listed on the signature pages of
this Agreement and their respective successors and assigns.
"Base Eurodollar Rate" means, with respect to a Eurodollar
Rate Advance or Bid Eurodollar Advance for the relevant
Eurodollar Interest Period, the rate determined by the
Administrative Agent to be the rate at which deposits in U.S.
Dollars are offered by First Chicago to first-class banks in the
London interbank market at approximately 11 a.m. (London time)
two Business Days prior to the first day of such Eurodollar
Interest Period, in the approximate amount of First Chicago's
relevant Eurodollar Rate Loan and having a maturity approximately
equal to such Eurodollar Interest Period (for purposes of Bid
Eurodollar Advances, such amount shall be determined as if First
Chicago were to participate in such Advance ratably in proportion
to its Commitment).
"Base Fixed CD Rate" means, with respect to a Fixed CD Rate
Advance for the relevant CD Interest Period, the rate determined
by the Administrative Agent to be the arithmetic average (rounded
upwards, if necessary, to the next higher 1/100th of 1%) of the
prevailing bid rates quoted to the Agent at or before 10 a.m.
(Chicago time) on the first day of such CD Interest Period by
three New York or Chicago certificate of deposit dealers of
recognized standing selected by the Administrative Agent in its
sole discretion for the purchase at face value of certificates of
deposit of First Chicago in the approximate amount of First
Chicago's relevant Fixed CD Rate Loan and having a maturity
approximately equal to such CD Interest Period (provided that, if
such quotations from such dealers are not available to First
Chicago, First Chicago shall provide equivalent rate reasonably
determined by it on the basis of another source or sources
reasonably selected by it).
"Bid Absolute Rate" means, with respect to a Bid Absolute
Rate Loan made by a given Bank for the relevant Absolute Rate
Interest Period, the rate of interest per annum (rounded to the
nearest 1/100th of 1%) offered by such Bank and accepted by the
Company.
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"Bid Absolute Rate Advance" means a borrowing hereunder
consisting of the aggregate amount of the several Bid Absolute
Rate Loans made by some or all of the Banks to the Company at the
same time and for the same Interest Period.
"Bid Absolute Rate Loan" means a Loan which bears interest
at the Bid Absolute Rate.
"Bid Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Bid Loans made by some or all of
the Banks to the Company at the same time and for the same
Interest Period.
"Bid Borrowing Notice" is defined in Section 2.2.6.
"Bid Eurodollar Advance" means a borrowing hereunder
consisting of the aggregate amount of the several Bid Eurodollar
Loans made by some or all of the Banks to the Company at the same
time and for the same Interest Period.
"Bid Eurodollar Loan" means a Loan which bears interest at
the Bid Eurodollar Rate.
"Bid Eurodollar Rate" means, with respect to a Bid
Eurodollar Loan made by a given Bank for the relevant Eurodollar
Interest Period, the sum of (a) the Base Eurodollar Rate and (b)
the Bid Margin offered by such Bank and accepted by the Company.
"Bid Loan" means a Bid Eurodollar Loan or a Bid Absolute
Rate Loan.
"Bid Margin" means the margin above or below the applicable
Base Eurodollar Rate offered for a Bid Eurodollar Loan, expressed
as a percentage (rounded to the nearest 1/10,000th of 1%) to be
added or subtracted from such Base Eurodollar Rate.
"Bid Note" means a promissory note in substantially the form
of Exhibit "B" hereto, with appropriate insertions, duly executed
and delivered to the Administrative Agent by the Company and
payable to the order of a Bank in the amount of the initial
Aggregate Commitment, including any amendment, modification,
renewal or replacement of such promissory note.
"Bid Quote" means a Bid Quote substantially in the form of
Exhibit "E" hereto completed and delivered by a Bank to the
Administrative Agent in accordance with Section 2.2.4.
"Bid Quote Request" means a Bid Quote Request substantially
in the form of Exhibit "C" hereto completed and delivered by the
Company to the Administrative Agent in accordance with Section
2.2.2.
"Borrowing Date" means a date on which an Advance is made
hereunder.
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"Borrowing Notice" means a Syndicated Borrowing Notice or a
Bid Borrowing Notice.
"Business Day" means (a) with respect to borrowing, payment
or rate selection of Eurodollar Rate Advances or Bid Eurodollar
Advances, a day (other than a Saturday or Sunday) on which banks
generally are open for business in Chicago and New York for the
conduct of substantially all of their commercial lending
activities and on which dealings in U.S. Dollars are carried on
in the London interbank market and (b) for all other purposes, a
day (other than a Saturday or Sunday) on which banks generally
are open for business in Chicago and New York for the conduct of
substantially all of their commercial lending activities.
"Capitalized Lease" of any Person means any lease or lease
agreement which creates a Capitalized Lease Obligation of such
Person.
"Capitalized Lease Obligation" of any Person means the
obligation of such Person, as lessee, to pay rent for the
letting, use or hire of real or personal property which in
accordance with GAAP is required to be presented on the balance
sheet of such Person as a liability.
"CD Interest Period" means, with respect to a Fixed CD Rate
Advance, a period of 30, 60, 90 or 180 days commencing on a
Business Day selected by the Company pursuant to this Agreement.
If such CD Interest Period would end on a day which is not a
Business Day, such CD Interest Period shall end on the next
succeeding Business Day.
"Commitment" means, for each Bank, the obligation of the
Bank to make Loans not exceeding the amount set forth opposite
its signature below, as such amount may be modified from time to
time.
"Company" means Thiokol Corporation, a Delaware corporation.
"Consent Period" is defined in Section 2.3.15.
"Consolidated Earnings Before Interest and Taxes" means, for
any fiscal quarter, the sum of (i) earnings before income taxes
for such fiscal quarter, plus (ii) interest expenses for such
fiscal quarter less (iii) equity earnings of unconsolidated
Subsidiaries of the Company for such quarter, determined on a
consolidated basis for the Company and the Consolidated
Subsidiaries in accordance with GAAP.
"Consolidated Funded Debt" means all Indebtedness of the
Company and its Consolidated Subsidiaries which, on the date of
determination, would be required to be shown on the Company's
consolidated balance sheet prepared in accordance with GAAP.
"Consolidated Interest Expense" means, for any fiscal
quarter, the aggregate interest expense for the Company and all
of its Consolidated Subsidiaries for such fiscal quarter.
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"Consolidated Tangible Net Worth" means the aggregate amount
of common stockholders' equity as determined from a consolidated
balance sheet of the Company and its Consolidated Subsidiaries,
prepared in accordance with GAAP, less intangible assets of the
Company and its Consolidated Subsidiaries determined in
accordance with GAAP.
"Consolidated Subsidiary" means any Subsidiary that is
consolidated on a balance sheet of the Company in accordance with
GAAP.
"Continuing Bank" is defined in Section 2.3.15.
"Corporate Base Rate" means a rate per annum equal to the
corporate base rate of interest announced by First Chicago from
time to time, changing when and as said corporate base rate
changes.
"Conversion/Continuation Notice" is defined in Section
2.1.5.
"Default" means an event described in Article VII.
"Dollars" and "$" mean lawful money of the United States of
America.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Effective Date" means any Business Day on which the Company
has complied with all of the terms and conditions of Section 4.1,
the Company has paid all requisite fees to the Administrative
Agent, and the Company, the Administrative Agent and the Banks
have executed this Agreement.
"Extension Request" is defined in Section 2.3.15.
"Eurodollar Auction" means a solicitation of Bid Quotes
setting forth Bid Margins based on the Base Eurodollar Rate
pursuant to Section 2.2.
"Eurodollar Interest Period" means, with respect to a Bid
Eurodollar Advance or a Eurodollar Rate Advance, a period of one,
two, three, six, nine, or twelve months commencing on a Business
Day selected by the Company pursuant to this Agreement. Such
Eurodollar Interest Period shall end on the day in the succeeding
calendar month which corresponds numerically to the beginning day
of such Eurodollar Interest Period; provided, however, that if
there is no such numerically corresponding day in such succeeding
month, such Eurodollar Interest Period shall end on the last
Business Day of such succeeding month. If a Eurodollar Interest
Period would otherwise end on a day which is not a Business Day,
such Eurodollar Interest Period shall end on the next succeeding
Business Day; provided,
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however, that if said next succeeding Business Day falls in a new
month, such Eurodollar Interest Period shall end on the
immediately preceding Business Day.
"Eurodollar Rate" means, with respect to a Eurodollar Rate
Advance for the relevant Eurodollar Interest Period, the sum of
(a) the quotient of (i) the Base Eurodollar Rate applicable to
that Eurodollar Interest Period, divided by (ii) one minus the
Reserve Requirement (expressed as a decimal) applicable to that
Eurodollar Interest Period, if any, plus (b) 0.25% per annum.
The Eurodollar Rate shall be rounded, if necessary, to the next
higher 1/100th of 1%.
"Eurodollar Rate Advance" means an Advance which bears
interest at a Eurodollar Rate.
"Eurodollar Rate Loan" means a Loan which bears interest at
a Eurodollar Rate.
"FAS 106" means Statement of Financial Accounting Standards
No. 106 of the Financial Accounting Standards Board (Employers
Accounting for Postretirement Benefits Other than Pensions).
"FAS 112" means Statement of Financial Accounting Standards
No. 112 of the Financial Accounting Standards Board (Employers
Accounting for Postemployment Benefits).
"Federal Funds Rate" means, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as
published for such day (or, if such day is not a Business Day,
for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the
quotations at approximately 10 a.m. (Chicago time) on such day on
such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"First Chicago" means The First National Bank of Chicago in
its individual capacity and not as agent hereunder.
"Fixed CD Rate" means, with respect to a Fixed CD Rate
Advance for the relevant CD Interest Period, a rate per annum
equal to the sum of (a) the quotient of (i) the Base Fixed CD
Rate applicable to that CD Interest Period, divided by (ii) one
minus the Reserve Requirement (expressed as a decimal) applicable
to that CD Interest Period, if any, plus (b) the Assessment Rate
applicable to that CD Interest Period, plus (c) 0.375% per annum.
The Fixed CD Rate shall be rounded, if necessary, to the next
higher 1/100 of 1%.
"Fixed CD Rate Advance" means an Advance which bears
interest at a Fixed CD Rate.
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<PAGE>
"Fixed CD Rate Loan" means a Loan which bears interest at a
Fixed CD Rate.
"Fixed Rate" means the Fixed CD Rate, the Eurodollar Rate,
the Bid Eurodollar Rate or the Bid Absolute Rate.
"Fixed Rate Advance" means an Advance which bears interest
at a Fixed Rate.
"Fixed Rate Loan" means a Loan which bears interest at a
Fixed Rate.
"Floating Rate" means, for any day, a rate per annum equal
to the higher of (a) the Corporate Base Rate for such day and (b)
the Federal Funds Rate for such day plus .5% per annum.
"Floating Rate Advance" means an Advance which bears
interest at the Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at
the Floating Rate.
"GAAP" means generally accepted principles of accounting as
in effect at the time of application to the provisions hereof
provided that for purposes of determining compliance with
Sections 6.2.7 and 6.2.8, the first $75,000,000 of the one-time
after tax effects of FAS 106 and FAS 112, when adopted by the
Company, shall be excluded from the Company's calculations.
"Guaranty" of any Person means any agreement by which such
Person assumes, guarantees, endorses, contingently agrees to
purchase or provide funds for the payment of, or otherwise
becomes liable upon, the obligation of any other Person, or
agrees to maintain the net worth or working capital or other
financial condition of any other Person or otherwise assure any
creditor of such other Person against loss, and shall include,
without limitation, the contingent liability of such Person under
or with respect to any Letter of Credit.
"Indebtedness" of any Person means, without duplication, (a)
the obligations of such Person (i) for borrowed money, (ii) under
or with respect to notes payable and drafts accepted which
represent extensions of credit (whether or not representing
obligations for borrowed money) to such Person or (iii) for the
deferred purchase price of property or services other than
current accounts payable arising in the ordinary course of
business on terms customary in the trade, (b) the obligations of
others, whether or not assumed, secured by Liens on property of
such Person or payable out of the proceeds of or production from
property now or hereafter owned or acquired by such Person, (c)
the Capitalized Lease Obligations of such Person and (d) the
obligations of such Person under Guaranties by such Person of any
Indebtedness (other than obligations for borrowed money incurred
to finance the purchase of property leased to such Person
pursuant to a Capitalized Lease of such Person) of any other
Person.
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"Interest Period" means a CD Interest Period, a Eurodollar
Interest Period, or an Absolute Rate Interest Period.
"Invitation for Bid Quotes" means an Invitation for Bid
Quotes substantially in the form of Exhibit "D" hereto completed
and delivered by the Administrative Agent to the Banks in
accordance with Section 2.2.3.
"Lending Installation" means, for each type of Loan, any
office, branch, subsidiary or affiliate of any Bank.
"Letter of Credit" of any Person means a letter of credit or
similar instrument which is issued upon the application of such
Person or upon which such Person is account party or for which
such Person is in any way liable.
"Lien" means, with respect to the property of any Person,
any security interest, mortgage, pledge, lien, claim, charge,
encumbrance, conditional sale agreement, title retention
agreement, lessor's interest under a Capitalized Lease or
analogous instrument, in, of or on any of the property of such
Person.
"Loan" means, with respect to a Bank, such Bank's portion of
any Advance.
"Loan Documents" means this Agreement and the Notes.
"Minimum Extension Amount" means an amount greater than 50%
of the Aggregate Commitment as of the Effective Date.
"Note" means a Bid Note or a Syndicated Note.
"Obligations" means all unpaid principal and accrued and
unpaid interest under the Notes, all accrued and unpaid
commitment and facility fees and all other obligations of the
Company or any Subsidiary to the Banks or to any Bank or the
Administrative Agent arising under the Loan Documents.
"Outstandings" means at any time the aggregate of the
principal amounts of all outstanding Advances.
"Payment Date" shall mean the last Business Day of each
quarter, commencing September 30, 1993.
"Permitted Lien" means any lien described in clauses (a)
through (j) of Section 6.2.6.
"Person" means any corporation, natural person, firm, joint
venture, partnership, trust, unincorporated organization,
government or any department or agency of any government.
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"Plan" means a defined benefit pension plan as such term is
defined in Section 3(35) of ERISA for the unfunded liabilities of
which upon termination the Company or any Subsidiary could be
held liable by the Pension Benefit Guaranty Corporation.
"Plan Year" means a plan year as defined in Section 3(39) of
ERISA.
"Prepayment Event" means the earliest to occur of (a) the
date of a public announcement that a Person or group of
affiliated or associated Persons (an "Acquiring Person") has
acquired, or has obtained the right to acquire, legal or
beneficial ownership of more than 50% of the outstanding shares
of the Voting Stock of the Company, (b) the date of the
commencement of a tender offer or exchange offer that would
result in an Acquiring Person legally or beneficially owning more
than 50% of the outstanding shares of the Voting Stock of the
Company, and (c) the date an Acquiring Person acquires all or
substantially all of the assets of the Company.
"Prior Agreement" means that certain Credit Agreement dated
as of August 24, 1989, among the Company, First Chicago as
administrative agent, and the banks party thereto.
"Rate Option" means the Eurodollar Rate, the Fixed CD Rate
or the Floating Rate.
"Regulation D" means Regulation D of the Board of Governors
of the Federal Reserve System from time to time in effect and
shall include any successor or other regulation or official
interpretation of said Board of Governors relating to reserve
requirements applicable to member banks of the Federal Reserve
System.
"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System from time to time in effect and
shall include any successor or other regulation or official
interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or
carrying margin stocks applicable to member banks of the Federal
Reserve System.
"Reportable Event" means a reportable event as defined in
Section 4043 of ERISA.
"Required Banks" means Banks in the aggregate holding at
least 66 2/3% of the aggregate unpaid principal amount of the
Syndicated Advances or, if no Syndicated Advances are
outstanding, Banks in the aggregate having at least 66 2/3% of
the Aggregate Commitment. If no Syndicated Advances are
outstanding and the Aggregate Commitment has been cancelled or
terminated, "Required Banks" shall mean Banks in the aggregate
holding at least 66 2/3% of the aggregate unpaid principal amount
of the Bid Advances.
"Reserve Requirement" means, with respect to a Eurodollar
Interest Period or a CD Interest Period, the maximum aggregate
reserve requirement (including all basic, supplemental, marginal
and other reserves) which is imposed under Regulation D on new
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non-personal time deposits of $100,000 or more with a maturity
equal to that of the CD Interest Period (in the case of Fixed CD
Rate Advances) or on Eurocurrency liabilities (in the case of
Eurodollar Rate Advances).
"Section" means a numbered section of this Agreement, unless
another document is specifically referenced.
"Security" shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
"Special Absolute Rate Auction" is defined in Section 2.2.2.
"Subsidiary" of a Person means (i) any corporation more than
50% of the outstanding securities having ordinary voting power of
which shall at the time be owned or controlled, directly or
indirectly, by such Person or by one or more of its Subsidiaries
or by such Person and one or more of its Subsidiaries, or (ii)
any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or
controlled. Unless otherwise expressly provided, all references
herein to a "Subsidiary" shall mean a Subsidiary of the Company.
"Syndicated Advance" means a borrowing hereunder consisting
of the aggregate amount of the several Syndicated Loans made by
the Banks to the Company at the same time, at the same Rate
Option and for the same Interest Period.
"Syndicated Borrowing Notice" is defined in Section 2.1.4.
"Syndicated Loan" means a Eurodollar Rate Loan, a Fixed CD
Rate Loan or a Floating Rate Loan.
"Syndicated Note" means a promissory note in substantially
the form of Exhibit "A" hereto, with appropriate insertions, duly
executed and delivered to the Administrative Agent by the Company
and payable to the order of a Bank in the amount of its
Commitment, including any amendment, modification, renewal or
replacement of such promissory note.
"Termination Date" means the date occurring three years
after the date of this Agreement or any anniversary of such date
as may be determined in accordance with section 2.3.15, or any
earlier date on which the Commitments are cancelled by the
Company or otherwise terminated pursuant to this Agreement.
"Type" means, with respect to any Syndicated Advance, its
nature as a Floating Rate Advance, Eurodollar Advance or Fixed CD
Rate Advance.
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"Unfunded Liabilities" means, with regard to any Plan, the
excess of the current value of the Plan's benefits guaranteed
under ERISA over the current value of the Plan's assets allocable
to such benefits as of the first day of the Plan Year of such
Plan or as of any other date on which such Unfunded Liabilities
are computed. The current value of the Plan's assets allocable
to such benefits shall include any accrued contribution due but
not yet paid; provided, however, that such contribution is paid
within 90 days after it is due.
"Unmatured Default" means an event which but for the lapse
of time or the giving of notice, or both, would constitute a
Default.
"Voting Stock" means Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies,
entitled to elect the corporate directors (or Persons performing
similar functions).
"Withdrawing Bank" is defined in Section 2.3.15.
"Wholly-Owned Subsidiary" means any Subsidiary of which all
of the outstanding voting securities or ownership interests
having ordinary voting power are owned or controlled, directly or
indirectly, by the Company or one or more Wholly-Owned
Subsidiaries, or by the Company and one or more Wholly-Owned
Subsidiaries, or any similar business organization which is so
owned or controlled.
The foregoing definitions shall be equally applicable to
both the singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
-----------
2.1. Syndicated Advances.
-------------------
2.1.1. Commitments to Make Syndicated Loans. From and
including the date of this Agreement and prior to the Termination
Date, each Bank severally agrees, on the terms and conditions set
forth in this Agreement, to make Syndicated Loans to the Company
from time to time in amounts not to exceed in the aggregate at
any one time outstanding the amount of its Commitment. Subject
to the terms of this Agreement, the Company may borrow, repay and
reborrow at any time prior to the Termination Date.
2.1.2. Ratable Loans. Each Syndicated Advance hereunder
shall consist of Syndicated Loans made from the several Banks
ratably in proportion to the ratios that their respective
Commitments bear to the Aggregate Commitment.
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2.1.3. Syndicated Advance Rate Options. The Syndicated
Advances may be Floating Rate Advances, Fixed CD Rate Advances or
Eurodollar Rate Advances, or a combination thereof, selected by
the Company in accordance with Sections 2.1.4 and 2.1.5.
2.1.4. Method of Selecting Rate Options and Interest
Periods for Syndicated Advances. The Company shall select the
Rate Options and Interest Periods applicable to each Syndicated
Advance from time to time. The Company shall give the
Administrative Agent irrevocable notice (a "Syndicated Borrowing
Notice") not later than 10:00 a.m. Chicago time on the Borrowing
Date of each Floating Rate Advance, at least one Business Day
before the Borrowing Date of each Fixed CD Rate Advance and at
least three Business Days before the Borrowing Date for each
Eurodollar Rate Advance, specifying:
(a) the Borrowing Date, which shall be a Business Day, of
such Syndicated Advance,
(b) the aggregate amount of such Syndicated Advance, which
shall be less than or equal to the Aggregate Available
Commitment,
(c) the Rate Option selected for such Syndicated Advance,
and
(d) in the case of each Fixed Rate Advance, the Interest
Period applicable thereto.
2.1.5. Conversion and Continuation of Outstanding
Syndicated Advances. Floating Rate Advances shall continue as
Floating Rate Advances unless and until such Floating Rate
Advances are converted into Fixed Rate Advances. Each Fixed Rate
Advance of any Type shall continue as a Fixed Rate Advance of
such Type until the end of the then applicable Interest Period
therefor, at which time such Fixed Rate Advance shall be
automatically converted into a Floating Rate Advance unless the
Company shall have given the Administrative Agent a
Conversion/Continuation Notice requesting that, at the end of
such Interest Period, such Fixed Rate Advance either continue as
a Fixed Rate Advance of such Type for the same or another
Interest Period or be converted into an Advance of another Type.
Subject to the terms of Section 2.3.2, the Company may elect from
time to time to convert all or any part of a Syndicated Advance
of any Type into any other Type or Types of Syndicated Advances;
provided that (i) any conversion of any Fixed Rate Advance shall
be made on, and only on, the last day of the Interest Period
applicable thereto, and (ii) no Advance may be continued as or
converted into a Fixed Rate Advance at such times as a Default or
Unmatured Default has occurred and is continuing. The Company
shall give the Administrative Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of an
Advance or continuation of a Fixed Rate Advance not later than
10:00 a.m. Chicago time on the date of the requested conversion
into a Floating Rate Advance and at least one Business Day, in
the case of a conversion into or continuation of a Fixed CD Rate
Advance, or three Business Days, in the case of a conversion into
or continuation of a Eurodollar Advance, prior to the date of the
requested conversion or continuation, specifying:
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(i) the requested date, which shall be a Business Day, of
such conversion or continuation;
(ii) the aggregate amount and Type of the Advance which is
to be converted or continued; and
(iii) the amount and Type(s) of Advance(s) into which such
Advance is to be converted or continued and, in the
case of a conversion into or continuation of a Fixed
Rate Advance, the duration of the Interest Period
applicable thereto.
2.2. Competitive Bid Advances.
2.2.1. Bid Option. In addition to Syndicated Advances
pursuant to Section 2.1, but subject to the terms and conditions
of this Agreement, the Company may, as set forth in this Section
2.2, request the Banks to make offers to make Bid Loans to the
Company. The Banks may, but shall have no obligation to, make
such offers and the Company may, but shall have no obligation to,
accept any such offers in the manner set forth in this Section
2.2.
2.2.2. Bid Quote Request. When the Company wishes to
request offers to make Bid Loans under this Section 2.2, it shall
transmit to the Administrative Agent by telecopy or telefacsimile
a Bid Quote Request so as to be received (x) in the case of a
Eurodollar Auction, no later than noon Chicago time at least four
Business Days prior to the Borrowing Date proposed therein or (y)
in the case of an Absolute Rate Auction, no later than noon
Chicago time at least one Business Day prior to the Borrowing
Date proposed therein (or, in either case upon reasonable prior
notice to the Banks, such other time and date as the Company and
the Administrative Agent may agree); provided, however, that from
time to time as the Company and the Administrative Agent may
agree, but not more than twice during any one month, the Company
may transmit a Bid Quote Request in the case of an Absolute Rate
Auction so as to be received on or before 10:00 a.m. Chicago time
on the Borrowing Date proposed therein (a "Special Absolute Rate
Auction"). A Bid Quote Request shall specify:
(a) the proposed Borrowing Date, which shall be a
Business Day, for the proposed Bid Advance,
(b) the aggregate amount of such Bid Advance, which
shall be less than or equal to the Aggregate
Available Commitment,
(c) whether the Bid Quotes requested are to set forth
a Bid Margin or a Bid Absolute Rate, and
(d) the Interest Period applicable thereto.
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The Company may request offers to make Bid Loans for more than
one, but not more than three, Interest Periods in a single Bid
Quote Request. No Bid Quote Request shall be given within five
Business Days (or such other number of days as the Company and
the Administrative Agent may agree) of any other Bid Quote
Request.
2.2.3. Invitation for Bid Quotes. Promptly upon receipt
of a Bid Quote Request, the Administrative Agent shall send to
the Banks by telecopy or telefacsimile an Invitation for Bid
Quotes substantially in the form of Exhibit "D" hereto, which
shall constitute an invitation by the Company to each Bank to
submit Bid Quotes offering to make the Bid Loans to which such
Bid Quote Request relates in accordance with this Section 2.2.
2.2.4. Submission and Contents of Bid Quotes.
(a) Each Bank may submit a Bid Quote containing an
offer or offers to make Bid Loans in response to
any Invitation for Bid Quotes. Each Bid Quote
must comply with the requirements of this Section
2.2.4 and must be submitted to the Administrative
Agent by telecopy or telefacsimile at its offices
specified in or pursuant to Article XII as
follows:
(i) in the case of a Euro-dollar Auction, no later
than 9:30 a.m. Chicago time at least three
Business Days prior to the proposed Borrowing
Date;
(ii) in the case of an Absolute Rate Auction, no later
than 9:30 a.m. Chicago time on the proposed
Borrowing Date;
(iii) in the case of a Special Absolute Rate Auction,
no later than 11:30 a.m. Chicago time on the
proposed Borrowing Date; and
(iv) in any case upon reasonable prior notice to the
Banks, such other time and date as the Company and
the Administrative Agent may agree;
provided that Bid Quotes submitted by First Chicago may be
submitted, and may only be submitted, if the Administrative
Agent or First Chicago notifies the Company of the terms of
the offer or offers contained therein as follows:
(i) in the case of a Euro-dollar Auction, no later
than 9:15 a.m. Chicago time at least three
Business Days prior to the proposed Borrowing
Date;
(ii) in the case of an Absolute Rate Auction, no later
than 9:15 a.m. Chicago time on the proposed
Borrowing Date; and
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(iii) in the case of a Special Absolute Rate Auction,
no later than 11:15 a.m. Chicago time on the
proposed Borrowing Date.
Subject to Article IV, any Bid Quote so made shall be
irrevocable except with the written consent of the
Administrative Agent given on the instructions of the
Company.
(b) Each Bid Quote shall be in substantially the form of
Exhibit "E" hereto and shall in any case specify:
(i) the proposed Borrowing Date, which shall be the
same as that set forth in the applicable
Invitation for Bid Quotes,
(ii) the principal amount of the Bid Loan for which
each such offer is being made (including, in the
quoting Bank's discretion, the minimum amount, if
any, of the Bid Loan offered by such Bank which
may be accepted by the Company) which principal
amount (1) may be greater than, less than or equal
to the Commitment of the quoting Bank, (2) must be
$1,000,000 or a larger integral multiple thereof
and (3) may not exceed the principal amount of
Bid Loans for which offers were requested,
(iii) in the case of a Eurodollar Auction, the Bid
Margin offered for each such Bid Loan,
(iv) in the case of an Absolute Rate Auction, the Bid
Absolute Rate offered for each such Bid Loan, and
(v) the identity of the quoting Bank.
(c) Any Bid Quote shall be disregarded that:
(i) is not substantially in the form of Exhibit "E"
hereto or does not specify all of the information
required by Section 2.2.4(b);
(ii) contains qualifying, conditional or similar
language, other than any such language contained
in Exhibit "E";
(iii) proposes terms other than or in addition to those
set forth in the applicable Invitation for Bid
Quotes; or
(iv) arrives after the time set forth in Section
2.2.4(a).
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2.2.5. Notice to Company. The Administrative Agent shall
promptly notify the Company of the terms (i) of any Bid Quote
submitted by a Bank that is in accordance with Section 2.2.4,
(ii) of any Bid Quote described in Section 2.2.4(c) or that
otherwise fails to comply with the requirements of this
Agreement, and (iii) of any Bid Quote that amends, modifies or is
otherwise inconsistent with a previous Bid Quote submitted by
such Bank with respect to the same Bid Quote Request. Any such
subsequent Bid Quote shall be disregarded by the Administrative
Agent unless such subsequent Bid Quote is submitted solely to
correct a manifest error in such former Bid Quote. The
Administrative Agent's notice to the Company shall specify the
aggregate principal amount of Bid Loans for which offers have
been received for each Interest Period specified in the related
Bid Quote Request and the respective principal amounts and Bid
Margins or Bid Absolute Rates, as the case may be, so offered.
2.2.6. Acceptance and Notice by Company. The Company
shall notify the Administrative Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to
Section 2.2.5 as follows:
(i) in the case of a Euro-dollar Auction, no later
than 11:00 a.m. Chicago time at least three
Business Days prior to the proposed Borrowing
Date;
(ii) in the case of an Absolute Rate Auction, no later
than 11:00 a.m. Chicago time on the proposed
Borrowing Date;
(iii) in the case of a Special Absolute Rate Auction, no
later than noon Chicago time on the proposed
Borrowing Date; and
(iv) in any case upon reasonable prior notice to the
Banks, such other time and date as the Company and
the Administrative Agent may agree.
Promptly upon such notification, the Administrative Agent shall
notify the Banks of the Company's acceptance or non-acceptance of
such offers. In the case of acceptance, such notice (a "Bid
Borrowing Notice") shall specify the aggregate principal amount
of offers for each Interest Period that are accepted. The
Company may accept any Bid Quote in whole or in part; provided
that:
(a) the aggregate principal amount of each Bid Advance may
not exceed the applicable amount set forth in the
related Bid Quote Request,
(b) acceptance of offers may only be made on the basis of
ascending Bid Margins or Bid Absolute Rates, as the
case may be,
(c) no Bid Quote may be accepted which would result in Bid
Advances being outstanding for more than ten different
Interest Periods at any one time, and
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(d) the Company may not accept any offer that is described
in Section 2.2.4(c) or that otherwise fails to comply
with the requirements of this Agreement.
2.2.7. Allocation by Administrative Agent. If offers are
made by two or more Banks with the same Bid Margins or Bid
Absolute Rates, as the case may be, for a greater aggregate
principal amount than the amount in respect of which offers are
accepted for the related Interest Period, the principal amount of
Bid Loans in respect of which such offers are accepted shall be
allocated by the Administrative Agent among such Banks as nearly
as possible (in such multiples, not greater than $100,000, as the
Administrative Agent may deem appropriate) in proportion to the
aggregate principal amount of such offers. Determinations by the
Administrative Agent of the amounts of Bid Loans shall be
conclusive in the absence of manifest error.
2.2.8. Payment on Last Day of Interest Period. Each Bid
Loan shall be paid in full by the Company on the last day of the
Interest Period applicable thereto.
2.3. General Facility Terms.
2.3.1. Method of Borrowing. Not later than 1:00 p.m.
Chicago time on each Borrowing Date, each Bank shall make
available its Loan or Loans in funds immediately available in
Chicago, to the Administrative Agent at its address specified
pursuant to Article XII. The Administrative Agent will make the
funds so received from the Banks available to the Company at the
Administrative Agent's aforesaid address. Notwithstanding the
foregoing provisions of this Section 2.3.1 but subject to Section
2.1.5, to the extent that a Loan made by a Bank matures on the
Borrowing Date of a requested Loan, such Bank shall first apply
the proceeds of the Loan it is then making to the repayment of
the maturing Loan.
2.3.2. Minimum Amount of Each Advance. Each Advance shall
be in the minimum amount of $1,000,000 (and in multiples of
$1,000,000 if in excess thereof), provided, however, that any
Floating Rate Advance may be in the aggregate amount of the
Aggregate Available Commitment.
2.3.3. Termination; Required Payments. The Commitments to
lend hereunder shall expire on the Termination Date. Any
outstanding Advances and all other unpaid Obligations shall be
paid in full by the Company on the Termination Date or, at the
election of the Required Banks in accordance with Section 8.1,
upon the occurrence of a Prepayment Event.
2.3.4. Optional Principal Payments. The Company may from
time to time pay all outstanding Floating Rate Advances, or, in a
minimum aggregate amount of $1,000,000, or any integral multiple
thereof, any portion of the outstanding Floating Rate Advances
upon one Business Day's prior notice to the Administrative Agent
without penalty or premium. A Fixed Rate Advance may be paid
prior to the last day of the applicable Interest Period;
provided,
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however, that the Company shall indemnify each Bank for any loss
or cost incurred by it resulting therefrom in accordance with
Section 3.4.
2.3.5. Facility Fees and Voluntary Reduction of
Commitments.
(a) The Company agrees to pay to the Administrative
Agent for the account of each Bank a facility fee
on the daily amount of such Bank's Commitment from
the Effective Date to but not including the
Termination Date, equal to (i) .25% per annum at
all times that the ratio of Consolidated Funded
Debt to Consolidated Tangible Net Worth is less
than 1.0 to 1, and (ii) .375% at all other times,
such fee payable in arrears on each Payment Date
hereafter and on the Termination Date.
(b) The Company may permanently reduce the Aggregate
Commitment in whole, or in part ratably among the
Banks in integral multiples of $4,000,000, upon at
least five Business Days' written notice to the
Administrative Agent, which shall be irrevocable
and shall specify the amount of any such
reduction, provided, however, that the amount of
the Aggregate Commitment may not be reduced below
the Outstandings at the time such reduction is to
take effect. All accrued facility fees shall be
payable on the effective date of any termination of
the obligations of the Banks to make Loans
hereunder.
2.3.6. Agency Fee and Auction Fee.
(a) The Company shall pay to the Administrative Agent
as compensation for its services hereunder an agency
fee as provided for in a letter agreement dated
August 13, 1993 between the Company and the
Administrative Agent.
(b) The Company shall pay an auction fee to the
Administrative Agent each time Bid Quotes are
requested in the amount of $200 per Bank per each
Bid Quote Request transmitted by the Company to the
Administrative Agent pursuant to Section 2.2.2.
2.3.7. Changes in Interest Rate, etc. Each Floating Rate
Advance shall bear interest on the outstanding principal amount
thereof, for each day from and including the date such Advance is
made or is converted from a Fixed Rate Advance into a Floating
Rate Advance pursuant to Section 2.1.5 to but excluding the date
it becomes due or is converted into a Fixed Rate Advance pursuant
to Section 2.1.5 hereof, at a rate per annum equal to the
Floating Rate for such day. Changes in the rate of interest on
that portion of any Advance maintained as a Floating Rate Advance
will take effect simultaneously with each change in the Floating
Rate. Each Fixed Rate Advance shall bear interest from and
including the first day of the Interest Period applicable thereto
to (but not including) the last day of such Interest Period at
the interest rate determined as applicable to such Fixed Rate
Advance. No Interest Period may end after the Termination Date.
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2.3.8. Rate after Maturity. Except as provided in the
next sentence, any Advance not paid at maturity, whether by
acceleration or otherwise, shall bear interest until paid in full
at a rate per annum equal to the Floating Rate plus 2% per annum.
In the case of a Fixed Rate Advance the maturity of which is
accelerated pursuant to Section 8.1, such Fixed Rate Advance
shall bear interest until paid in full at the higher of the rate
otherwise applicable to such Interest Period plus 2% per annum or
the Floating Rate plus 2% per annum.
2.3.9. Interest Payment Dates; Interest and Fee Basis.
Interest accrued on each Floating Rate Advance shall be payable
on each Payment Date, on any date on which the Floating Rate
Advance is prepaid, whether due to acceleration or otherwise, and
at maturity. Interest accrued on each Fixed Rate Advance shall
be payable on the last day of its applicable Interest Period and
on any date on which such Advance is prepaid, whether due to
acceleration or otherwise. Interest accrued on each Fixed Rate
Advance having an Interest Period longer than three months shall
also be payable on the last day of each three-month interval
during such Interest Period. Interest on Fixed Rate Advances and
facility fees shall be calculated for the actual number of days
elapsed on the basis of a year consisting of 360 days. Interest
on Floating Rate Advances shall be calculated for the actual
number of days elapsed on the basis of a year consisting of 365,
or when appropriate 366, days. Interest shall be payable for the
day an Advance is made but not for the day of any payment on the
amount paid if payment is received prior to 1:00 p.m. (Chicago
time) at the place of payment. In the event any such payment is
made with the proceeds of an Advance, such payment shall be
deemed to have been made prior to 1:00 p.m. (Chicago time) on the
day such Advance is made. If any payment of principal of or
interest on an Advance or any payment of fees shall become due on
a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal
payment or a payment of fees, such extension of time shall be
included in computing interest in connection with such principal
payment or in computing the amount of such payment of fees, as
the case may be.
2.3.10. Method of Payment. All payments of principal,
interest, and fees hereunder shall be made in immediately
available funds to the Administrative Agent at the Administrative
Agent's address specified pursuant to Article XII or at any other
Lending Installation of the Administrative Agent specified in
writing by the Administrative Agent to the Company by noon (local
time) on the date when due. Subject to Section 8.1(b), each such
payment shall be applied to any Advances and other amounts then
due in accordance with the written instructions from the Company
to the Administrative Agent before or accompanying such payment
and shall be applied ratably among those Banks for whom any
payment is then due in proportion to the type of Advance or other
payment then due. Each payment delivered to the Administrative
Agent for the account of any Bank shall be delivered promptly by
the Administrative Agent to such Bank in the same type of funds
which the Administrative Agent received at its address specified
pursuant to Article XII or at any Lending Installation specified
in a notice received by the Administrative Agent from such Bank.
The Administrative Agent is hereby authorized to charge the
account of the Company for each payment of principal, interest
and fees as it becomes due hereunder.
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2.3.11. Notes; Telephonic Notices. The Syndicated Loans
shall be evidenced by the Syndicated Notes. The Bid Loans shall
be evidenced by the Bid Notes. Each Bank is hereby authorized to
record on the schedule attached to each of its Notes, or
otherwise record in accordance with its usual practice, the date
and amount of each of its Loans of the type evidenced by such
Note; provided, however, that any failure to so record shall not
affect the Company's obligations under any Note. The Company
hereby authorizes the Banks and the Administrative Agent to
extend Advances, effect Rate Option selections and submit Bid
Quotes based on telephonic notices made by any person or persons
the Administrative Agent or any Bank in good faith believes to be
an Authorized Representative acting on behalf of the Company.
The Company agrees to deliver promptly to the Administrative
Agent a written confirmation of each telephonic notice signed by
an Authorized Representative. If the written confirmation
differs in any material respect from the action taken by the
Administrative Agent and the Banks, the records of the
Administrative Agent and the Banks shall govern absent manifest
error.
2.3.12. Notification of Advances, Interest Rates,
Prepayments and Commitment Reductions. Promptly after receipt
thereof, the Administrative Agent will notify each Bank of the
contents of each commitment reduction notice, Borrowing Notice,
Conversion/Continuation Notice, and repayment notice received by
it hereunder. The Administrative Agent will notify each Bank of
the interest rate applicable to each Fixed Rate Advance promptly
upon determination of such interest rate and will give each Bank
prompt notice of each change in the Corporate Base Rate.
2.3.13. Lending Installations. Each Bank may book the
Loans at any Lending Installation selected by the Bank and may
change the Lending Installation from time to time. All terms of
this Agreement shall apply to any such Lending Installation and
the Notes shall be deemed held by each Bank for the benefit of
such Lending Installation. Each Bank may, by written notice to
the Administrative Agent and the Company, designate a Lending
Installation through which Loans are made by it and for whose
account Loan payments are to be made. In the event that any Bank
has booked its outstanding Eurodollar Rate Loans or Bid
Eurodollar Loans at such a designated Lending Installation, the
Company hereby agrees, upon the written request of such Bank and
receipt of such Bank's applicable Note, to execute and deliver to
such Bank for the account of such Bank's existing Lending
Installation and the account of such designated Lending
Installation, respectively, both: (i) as the case may be, a new
Syndicated Note which shall exclusively evidence all of such
Bank's Floating Rate Loans and Fixed CD Rate Loans then and
thereafter outstanding or a new Bid Note which shall exclusively
evidence all of such Bank's Bid Absolute Rate Loans then and
thereafter outstanding and (ii) as the case may be, a new
Syndicated Note which shall exclusively evidence all of such
Bank's Eurodollar Rate Loans then and thereafter outstanding or a
new Bid Note which shall exclusively evidence all of such Bank's
Bid Eurodollar Loans then and thereafter outstanding, each of
said new Notes to be in substantially the form of Exhibit "A"
hereto in the case of Syndicated Notes or the form of Exhibit "B"
hereto in the case of Bid Notes with such appropriate changes in
either case as may be agreed to by such Bank, the Company and the
Administrative Agent and each
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of their respective legal counsel. Upon such Bank's receipt of
its new Notes, it is hereby authorized and instructed by the
Company to record on the respective schedules attached thereto
all of such Bank's Loans then outstanding of the type evidenced
by each such Note.
2.3.14. Non-Receipt of Funds by the Administrative Agent.
Unless the Company or a Bank, as the case may be, notifies the
Administrative Agent prior to the date on which it is scheduled
to make payment to the Administrative Agent of (a) in the case of
a Bank, the proceeds of a Loan or (b) in the case of the Company,
a payment of principal, interest or fees to the Administrative
Agent for the account of the Banks, that it does not intend to
make such payment, the Administrative Agent may assume that such
payment has been made. The Administrative Agent may, but shall
not be obligated to, make the amount of such payment available to
the intended recipient in reliance upon such assumption. If such
Bank or the Company, as the case may be, has not in fact made
such payment to the Administrative Agent, the recipient of such
payment shall, on demand by the Administrative Agent, repay to
the Administrative Agent the amount so made available together
with interest thereon in respect of each day during the period
commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent
recovers such amount at a rate per annum equal to (a) in the case
of payment by a Bank, the Federal Funds Rate for such day or (b)
in the case of payment by the Company, the interest rate
applicable to the relevant Loan.
2.3.15. Extension of Termination Date. The Company may,
by written notice to the Administrative Agent (each such notice
an "Extension Request") given not later than 60 days but not
sooner than 90 days prior to any anniversary of the date of this
Agreement occurring at least one year before the then-effective
Termination Date, request an extension of the Termination Date to
the date occurring one year after the then-applicable Termination
Date. A limit of two Extension Requests may be delivered to the
Administrative Agent during the term of this Agreement (including
any extensions hereof pursuant to the terms of this Section). No
such extension shall be effective with respect to any Bank which,
by a notice to the Company and the Administrative Agent given
within 30 days after the Administrative Agent's receipt of
such Extension Request (such 30-day period the "Consent Period"),
declines to consent to such extension or which has failed to
respond to the Company and the Administrative Agent during the
Consent Period (each such Bank hereinafter a "Withdrawing Bank").
Notwithstanding anything herein to the contrary, in the event
that the aggregate Commitments of Banks consenting to such
extension (each such Bank hereinafter a "Continuing Bank") is
less than the Minimum Extension Amount, such extension shall not
be effective with respect to any Bank and the Company's right to
request extensions shall terminate unless, within 60 days of the
last day of the applicable Consent Period, Continuing Banks, or
new Banks reasonably acceptable to the Agent consenting to the
proposed extension, have acquired sufficient Commitments to equal
or exceed the Minimum Extension Amount.
2.3.16. Withholding Tax Exemption. At least five Business
Days prior to the first date on which interest or fees are
payable hereunder for the account of any Bank, each Bank that is
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not incorporated under the laws of the United States of America,
or a state thereof, agrees that it will deliver to each of the
Company and the Administrative Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Bank is entitled to receive
payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes. Each Bank
which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Company and the Administrative Agent two
additional copies of such form (or a successor form) on or before
the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224)
or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms so delivered by it,
and such amendments thereto or extensions or renewals thereof as
may be reasonably requested by the Company or the Administrative
Agent, in each case certifying that such Bank is entitled to
receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent such Bank from
duly completing and delivering any such form with respect to it
and such Bank advises the Company and the Administrative Agent
that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
ARTICLE III
CHANGE IN CIRCUMSTANCES; INDEMNIFICATION
3.1. Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law) which becomes
effective after the date hereof, or any interpretation thereof,
or compliance of any Bank with such,
(i) subjects any Bank or any applicable Lending
Installation to any tax, duty, charge or withholding on
or from payments due from the Company (excluding
taxation of the overall net income of any Bank or
applicable Lending Installation), or changes the basis
of taxation of payments to any Bank in respect of its
Loans or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with or
for the account of, or credit extended by, any Bank or
any applicable Lending Installation (other than
reserves and assessments taken into account in
determining the interest rate applicable to Fixed Rate
Advances), or
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(iii) imposes any other condition the result of which is to
increase the cost to any Bank or any applicable Lending
Installation of making, funding or maintaining loans or
reduces any amount receivable by any Bank or any
applicable Lending Installation in connection with
loans, or requires any Bank or any applicable Lending
Installation to make any payment calculated by
reference to the amount of loans held or interest
received by it, by an amount deemed material by such
Bank,
then, within 15 days of demand by such Bank, the Company shall
pay such Bank that portion of such increased expense incurred or
reduction in an amount received which such Bank determines is
attributable to making, funding and maintaining its Loans and its
Commitment.
3.2. Changes in Capital Adequacy Regulations. If a Bank
determines the amount of capital required or expected to be
maintained by such Bank, any Lending Installation of such Bank or
any corporation controlling such Bank is increased as a result of
a Change, then, within 15 days of demand by such Bank, the
Company shall pay such Bank the amount necessary to compensate
for any shortfall in the rate of return on the portion of such
increased capital which such Bank determines is attributable to
this Agreement, its Loans or its obligation to make Loans
hereunder (after taking into account such Bank's policies as to
capital adequacy). No Bank shall be entitled to demand payment
under this Section 3.2 to the extent that such payment relates to
a period of time more than 90 days prior to the date upon which
such Bank first notified the Company of the occurrence of the
event entitling such Bank to such payment. "Change" means (i)
any change after the date of this Agreement in the Risk-Based
Capital Guidelines or (ii) any adoption of or change in any other
law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having
the force of law) after the date of this Agreement which affects
the amount of capital required or expected to be maintained by
any Bank or any Lending Installation or any corporation
controlling any Bank. "Risk-Based Capital Guidelines" means (i)
the risk-based capital guidelines in effect in the United States
on the date of this Agreement, including transition rules, and
(ii) the corresponding capital regulations promulgated by
regulatory authorities outside the United States implementing the
July 1988 report of the Basle Committee on Banking Regulation and
Supervisory Practices Entitled "International Convergence of
Capital Measurements and Capital Standards," including transition
rules, and any amendments to such regulations adopted prior to
the date of this Agreement.
3.3. Availability of Interest Rate. If any Bank
determines that maintenance of its Eurodollar Rate Loans or Bid
Eurodollar Loans at a suitable Lending Installation would violate
any applicable law, rule, regulation, or directive, whether or
not having the force of law, or if the Required Banks determine
that (i) deposits of a type and maturity appropriate to match
fund Fixed Rate Advances are not available or (ii) a Fixed Rate
does not accurately reflect the cost of making or maintaining a
Fixed Rate Advance, then the Administrative Agent shall (x)
suspend the availability of the affected Rate Option and require
any Fixed Rate Advances
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outstanding under an affected Rate Option to be converted to an
unaffected Rate Option and (y) suspend the ability of the Company
to request bids for Bid Eurodollar Loans and require that any
outstanding Bid Eurodollar Advances bear interest for the
Interest Period applicable thereto at the Floating Rate. Subject
to the provisions of Article II hereof, the Company may
select any unaffected Rate Option to apply to such affected
Advances other than Bid Eurodollar Advances. If the Company
fails to select a new Rate Option, the affected Advances shall be
Floating Rate Advances.
3.4. Failure to Pay or Borrow on Certain Dates. If any
payment of a Fixed Rate Advance occurs on a date which is not the
last day of the applicable Interest Period, whether because of
acceleration, prepayment or otherwise, or a Fixed Rate Advance is
not made on the date specified by the Company for any reason
other than default by the Banks, the Company will indemnify each
Bank for any loss or cost incurred by it resulting therefrom,
including, without limitation, any loss or cost in liquidating or
employing deposits acquired to fund or maintain the Fixed Rate
Advance.
3.5. Bank Certificates; Survival of Indemnity. To the
extent reasonably possible, each Bank shall designate an
alternate Lending Installation with respect to its Fixed Rate
Loans to reduce any liability of the Company to such Bank under
Sections 3.1 and 3.2 or to avoid the unavailability of a Rate
Option or Bid Eurodollar Loans under Section 3.3, so long as such
designation is not disadvantageous to such Bank as determined by
such Bank in its sole discretion. A certificate of a Bank as to
the amount due, if any, under Sections 3.1, 3.2, or 3.4 shall be
final, conclusive and binding on the Company in the absence of
manifest error. Such certificate shall set forth in reasonable
detail the basis of the determination of amounts due under such
Sections. Determination of amounts payable under such Sections
in connection with a Fixed Rate Loan shall be calculated as
though each Bank funded its Fixed Rate Loan through the purchase
of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Fixed Rate
applicable to such Loan, whether in fact that is the case or not.
Unless otherwise provided herein, the amount specified in the
certificate shall be payable on demand after receipt by the
Company of the certificate. The obligations of the Company under
Sections 3.1, 3.2, and 3.4 shall survive payment of the
Obligations and termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
4.1. Initial Advance. No Bank shall be required to make
its initial Loan hereunder unless the Company has furnished to
the Administrative Agent with sufficient copies for the Banks:
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(a) Copies of the Articles of Incorporation of the Company,
together with all amendments, and a certificate of good
standing, both certified on or within 15 days prior to
the Effective Date by the Secretary of State of Delaware.
(b) Copies, certified on the Effective Date by the Secretary
or Assistant Secretary of the Company, of its By-Laws and
of its Board of Directors' resolutions (and resolutions
of other bodies, if any are deemed necessary by counsel
for any Bank) authorizing the execution of the Loan
Documents.
(c) An incumbency certificate, certified on the Effective
Date by the Secretary or Assistant Secretary of the
Company, which shall identify by name and title and
bear the signature of the officers of the Company
authorized to sign the Loan Documents and to make
borrowings hereunder, upon which certificates the Banks
shall be entitled to rely until informed of any change in
writing by the Company.
(d) A written opinion of the counsel to the Company,
addressed to the Banks, in substantially the form of
Exhibit "F" hereto.
(e) A certificate, dated the Effective Date, signed by the
Chief Financial Officer of the Company, stating that on
the Effective Date (i) no Default or Unmatured Default
has occurred and is continuing and (ii) no Prepayment
Event has occurred.
(f) A Syndicated Note and a Bid Note payable to the order of
each of the Banks.
(g) Evidence satisfactory to the Administrative Agent of the
termination of the Prior Agreement and payment of all
obligations outstanding thereunder.
(h) Payment of all fees due and owing to the Administrative
Agent and the Banks as at the Effective Date.
(i) Written money transfer instructions, in substantially the
form of Exhibit "G" hereto, addressed to the
Administrative Agent and signed by an Authorized Officer,
together with such other related money transfer
authorizations as the Administrative Agent may have
reasonably requested.
(j) Such other documents as any Bank or its counsel may have
reasonably requested.
4.2. Each Advance. No Bank shall be required to make any
Advance unless on the applicable Borrowing Date:
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(a) There exists no Default or Unmatured Default or
Prepayment Event.
(b) The representations and warranties contained in Article
V, except, in the case of each such Advance other than
the initial Advance, the representation and warranty
contained in Section 5.5, are true and correct in all
material respects as of such Borrowing Date as if made on
such Borrowing Date except for changes in the Schedules
hereto reflecting transactions permitted by this
Agreement.
(c) No material adverse change in the financial condition of
the Company and the Consolidated Subsidiaries taken as a
whole as shown on the audited financial statements
referred to in Section 5.4 has occurred since the date of
such statements.
(d) All legal matters incident to the making of such Advance
shall be satisfactory to the Banks and their counsel.
Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Company that the
conditions contained in Sections 4.2(a), (b) and (c) have been
satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES.
-------------------------------
The Company represents and warrants to the Banks that:
5.1. Corporate Existence and Standing. Each of the
Company and the Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and each is duly qualified and in
good standing in each jurisdiction where, because of the nature
of its activities or properties, such qualification is required
and the failure so to qualify would materially and adversely
affect its business, assets, financial condition, operations or
prospects.
5.2. Authorization and Validity. The Company has the
corporate power and authority and legal right to execute and
deliver the Loan Documents and perform its obligations
thereunder. The execution and delivery by the Company of the
Loan Documents and the performance of its obligations thereunder
have been duly authorized by proper corporate proceedings and the
Loan Documents constitute legal, valid and binding obligations of
the Company enforceable against the Company in accordance with
their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally.
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5.3. Compliance with Laws and Contracts. Neither the
execution and delivery by the Company of the Loan Documents, the
consummation of the transactions therein contemplated, nor
compliance with the provisions thereof will violate any law,
rule, regulation, order, writ, judgment, injunction, decree or
award binding on the Company or any Subsidiary or the Company's
or any Subsidiary's charter, articles or certificate of
incorporation or by-laws or the provisions of any material
indenture, instrument or agreement to which the Company or any
Subsidiary is a party or is subject, or by which it, or its
property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien
pursuant to the terms of any such indenture, instrument or
agreement. No order, consent, approval, license, authorization,
or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority, or
any subdivision thereof, is required to authorize, or is required
as of the date hereof in connection with the execution, delivery
and performance of, or the legality, validity, binding effect or
enforceability of, any of the Loan Documents.
5.4. Financial Statements. The June 30, 1993 audited
consolidated financial statements of the Company and its
Subsidiaries heretofore delivered to the Banks were prepared in
accordance with GAAP in effect on the date such statements were
prepared and fairly present the consolidated financial condition
and operations of the Company and its Subsidiaries at such date
and the consolidated results of their operations for the periods
then ended.
5.5. Material Adverse Change. No material adverse change
in the business, condition (financial or otherwise), operations,
performance, or properties of the Company and the Consolidated
Subsidiaries taken as a whole has occurred since the date of the
audited financial statements referred to in Section 5.4.
5.6. Taxes. The Company and the Subsidiaries have filed
all United States federal tax returns and all other tax returns
which are required to be filed and have paid all taxes due
pursuant to said returns or pursuant to any assessment received
by the Company or any Subsidiary, except such taxes, if any, as
are being contested in good faith and as to which adequate
reserves have been provided. Except as provided in Section
6.2.6(a), no material tax liens have been filed and no claims are
being asserted with respect to any such taxes. The charges,
accruals and reserves on the books of the Company and the
Subsidiaries in respect of any taxes or other governmental
charges are adequate.
5.7. Litigation. Except as disclosed in the Company's
Form 10-K for the year ended June 30, 1993, there is no
litigation or proceeding pending or, to the knowledge of any of
their officers, threatened against the Company or any Subsidiary
which would reasonably be expected to have a material adverse
affect on the condition of the Company or the ability of the
Company to perform its obligations under the Loan Documents.
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5.8. ERISA. The Unfunded Liabilities of all Plans do not
in the aggregate exceed an amount equal to 3 percent of the value
(as of any date of determination) of all Plan assets allocable to
Plan benefits guaranteed under ERISA. Each Plan complies in all
material respects with all applicable requirements of law and
regulations, neither the Company nor any of its Subsidiaries has
withdrawn from any Plan or initiated steps to do so, no steps
have been taken to terminate any Plan, and no Reportable Event
has occurred with respect to any Plan.
5.9. Defaults and Prepayment Event. No Default or
Unmatured Default has occurred and is continuing. No Prepayment
Event has occurred.
5.10. Accuracy of Information. No information, exhibit or
report furnished by the Company or any Subsidiary in writing to
the Administrative Agent or to any Bank in connection with the
negotiation of the Loan Documents contained any material
misstatement of fact or omitted to state any fact necessary to
make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
5.11. Regulation U. Neither the Company nor any Subsidiary
is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or
carrying "margin stock" (as defined in Regulation U). No part of
the proceeds of any Loan will be used in a manner which would
violate, or result in a violation of, Regulation U. No part of
the proceeds of any Loan will be used for "purchasing" or
"carrying" "margin stock" (each as defined in Regulation U).
5.12. Pari Passu. All the payment obligations of the
Company arising under or pursuant to the Loan Documents will at
all times rank pari passu with all other unsecured and
unsubordinated payment obligations and liabilities (including
contingent obligations and liabilities) of the Company
(other than those which are mandatorily preferred by laws
or regulations of general application).
5.13. Investment Company. The Company is not, and after
giving effect to any Advance will not be, an "investment company"
within the meaning of the United States Investment Company Act of
1940, as amended.
5.14. Material Laws. Neither the Company nor any
Subsidiary has received any notice to the effect that its
operations are not in material compliance with any of the
requirements of applicable federal, state and local
environmental, health and safety statutes and regulations with
respect to, or the subject of any federal or state investigation
evaluating whether any remedial action is needed to respond to a
release into the environment of, any toxic or hazardous waste or
physical substance, which non-compliance or remedial action could
have a material adverse effect on the business, operations,
properties, assets or conditions (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole.
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5.15. Material Agreements. Neither the Company nor any
Subsidiary is a party to any agreement or instrument or subject
to any charter or other corporate restriction materially and
adversely affecting its business, properties or assets,
operations or condition (financial or otherwise). Neither the
Company nor any Subsidiary is in default in the performance,
observance of fulfillment or any of the obligations, covenants or
conditions contained in any agreement to which it is a party or
any agreement or instrument evidencing or governing Indebtedness,
which default might have a material adverse effect on the
business, properties, financial condition, or results of
operations, of the Company and its Subsidiaries, taken as a
whole.
5.16. Subsidiaries. Schedule "1" hereto contains an
accurate list of all of the presently existing Subsidiaries of
the Company, setting forth their respective jurisdictions of
incorporation and the percentage of their respective capital
stock owned by the Company or other Subsidiaries. All of the
issued and outstanding shares of capital stock of such
Subsidiaries have been duly authorized and issued and are fully
paid and non-assessable. Schedule "2" hereto accurately
describes all Indebtedness of the Subsidiaries existing on the
date of this Agreement.
5.17. Ownership of Properties. Except as permitted by
Section 6.2.6., on the date of this Agreement, the Company and
its Subsidiaries will have good title, free of all Liens, to all
of the properties and assets reflected in the financial
statements referred to in Section 5.4 as owned by the Company and
its Subsidiaries.
ARTICLE VI
COVENANTS
---------
During the term of this Agreement, unless the Required Banks
shall otherwise consent in writing:
6.1. Affirmative Covenants.
6.1.1. Financial Reporting. The Company will maintain,
for itself and the Consolidated Subsidiaries, a system of
accounting established and administered in accordance with GAAP,
and furnish to the Banks:
(a) Within 90 days after the close of each of its fiscal
years, an unqualified audit report certified by
independent certified public accountants of recognized
national standing, acceptable to the Banks, prepared in
accordance with generally accepted accounting principles
on a consolidated basis for itself and the Consolidated
Subsidiaries, including balance sheets as of the end of
such period, related profit and loss statements, a
statement of shareholders' equity,
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and a statement of cash flow, accompanied by any
management letter prepared by said accountants.
(b) Within 45 days after the close of the first three
quarterly periods of each of its fiscal years, for itself
and the Consolidated Subsidiaries, consolidated unaudited
balance sheets as at the close of each such period and
consolidated profit and loss statements, a statement of
shareholders' equity, and a statement of cash flow for
the period from the beginning of such fiscal year to the
end of such quarter (subject to normal year-end audit
adjustments), all certified by its Chief Financial
Officer or Treasurer.
(c) Together with the financial statements required
hereunder, a certificate signed by its Chief Financial
Officer or Treasurer (i) stating that no Default or
Unmatured Default exists, or if any Default or Unmatured
Default exists, stating the nature and status thereof,
and stating the steps the Company is taking to cure such
Default or Unmatured Default and (ii) stating that no
Prepayment Event has occurred.
(d) As soon as available, and in any event within 45 calendar
days after the end of each of the first three quarters of
each fiscal year of the Company and within 90 calendar
days after the end of the fourth quarter of each fiscal
year of the Company, a schedule, certified as being
accurate by the Company's Chief Financial Officer,
Treasurer or Controller, showing, as of the end of each
such quarter, the Company's calculation, in form and
detail satisfactory to the Administrative Agent, of the
calculations required to be made to determine
compliance with Sections 6.2.7 and 6.2.8.
(e) Promptly upon becoming available, copies of:
(i) All financial statements, reports, notices and
proxy statements sent by the Company or any
Consolidated Subsidiary to the stockholders of
the Company.
(ii) All prospectuses of the Company or any
Consolidated Subsidiary filed with the
Securities and Exchange Commission or any other
governmental agency succeeding to the
jurisdiction thereof.
(iii) All regular and periodic reports filed by the
Company or any Consolidated Subsidiary with any
securities exchange or with the Securities and
Exchange Commission or any other governmental
agency succeeding to the jurisdiction thereof.
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(f) As soon as possible and in any event within 10 days after
receipt by the Company, a copy of (i) any notice or claim
to the effect that the Company or any Subsidiary is or
may be liable to any Person as a result of the release by
the Company, any of its Subsidiaries, or any other Person
of any toxic or hazardous waste or physical substance
into the environment, and (ii) any notice alleging
any violation of any federal, state or local
environmental, health or safety law or regulation with
respect to any toxic or hazardous waste or physical
substance by the Company or any Subsidiary, which would,
in either case, have a material adverse effect upon the
operations of the Company and the Subsidiaries, taken
as a whole.
(g) As to each Plan, within 270 days after the close of each
Plan Year of such Plan, a statement of the Unfunded
Liabilities of such Plan, certified as correct by an
actuary enrolled under ERISA.
(h) As soon as possible and in any event within 10 days after
the Company knows that any Reportable Event has occurred
with respect to any Plan, a statement, signed by the
chief financial officer of the Company, describing said
Reportable Event and the action which the Company
proposes to take with respect thereto.
(i) Together with the financial statements required under
Section 6.1.1(a) hereinabove, a copy of the Company's
annual operating plan.
(j) Such other information (including non-financial
information) as the Administrative Agent or any Bank may
from time to time reasonably request.
6.1.2. Use of Proceeds. The Company will, and will cause each
Subsidiary to, use the proceeds of the Advances for working capital,
capital expenditures and other general corporate purposes or to repay
outstanding Advances in accordance with the terms of Section 2. The
Company shall use the proceeds of Advances in compliance with all
applicable legal and regulatory requirements and any use shall not
result in a violation of any such applicable regulatory requirements,
including, without limitation, Regulation U, and the Securities Act of
1933 and the Securities Exchange Act of 1934 and the regulations
thereunder. If the Company uses the proceeds of Advances to acquire a
majority (in number of votes) of the securities of a corporation which
have ordinary voting power for the election of directors or a majority
(by percentage or voting power) of the outstanding partnership
interests of a partnership (in either case an "Acquisition"), the
Company will make only such an Acquisition as shall have been
consented to by the board of directors or similar governing entity of
the Person being acquired.
6.1.3. Notice of Default and Prepayment Event. The Company
will, and will cause each Subsidiary to, give prompt notice in writing
to the Banks of the occurrence of any Default or Unmatured Default and
of any other development related specifically to the
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business, properties or affairs of the Company, financial or
otherwise, which would be reasonably likely to materially adversely
affect the Company's business, properties or affairs or the ability of
the Company to repay the Obligations. The Company will give written
notice to the Banks of any Prepayment Event no later than five
Business Days following the occurrence of such Prepayment Event.
6.1.4. Conduct of Business. The Company will, and will cause
each Subsidiary to, carry on and conduct its business in substantially
the same manner and in substantially the same fields of enterprise as
it is presently conducted; and do all things necessary to remain duly
incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation, and maintain all
requisite authority to conduct its business in each jurisdiction
where, because of the nature of its activities or properties, such
authority is required and the failure to maintain such authority would
materially and adversely affect it business, assets, financial
condition, operations or prospects.
6.1.5. Payment of Taxes. The Company will, and will cause each
Subsidiary to, pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits, or upon any property belonging to it, and all lawful claims
which, if unpaid, would become a Lien, provided that neither the
Company nor a Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim the payment of which is being
contested in good faith and by appropriate proceedings; the Company
will, and will cause each Subsidiary to, make monthly accruals of all
of the estimated liability of the Company and the Subsidiaries for
such taxes, assessments, charges and levies, determined in accordance
with GAAP, and establish adequate reserves determined in accordance
with GAAP, for such thereof as may be contested, and reflect such
accruals and reserves in all financial statements furnished hereunder.
6.1.6. Insurance. The Company will, and will cause each
Subsidiary to, maintain insurance in such amounts and covering such
risks as is consistent with sound business practice.
6.1.7. Compliance with Laws. The Company will, and will cause
each Subsidiary to, comply in all material respects with all laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject.
6.1.8. Maintenance of Properties. The Company will, and will
cause each Subsidiary to, do all things necessary to maintain,
preserve, protect and keep its properties in good repair, working
order and condition, and make all necessary and proper repairs,
renewals and replacements.
6.1.9. Inspection. Except with respect to any information or
activities which are classified by the United States Government or
disclosure of which the Company reasonably believes would compromise
matters of national security, the Company will, and will cause
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each Subsidiary to, permit the Banks, by their respective
representatives and agents and without cost to the Company, to inspect
any of the properties, corporate books and financial records of the
Company and each Subsidiary, to examine and make copies of the books
of accounts and other financial records of the Company and each
Subsidiary, and to discuss the affairs, finances and accounts of the
Company and each Subsidiary with, and to be advised as to the same by,
their respective officers at such reasonable times and intervals as
the Banks may designate.
6.2. Negative Covenants.
6.2.1. Dividends. The Company will not, nor will it permit any
Subsidiary to, declare or pay any dividends on its capital stock or
redeem, repurchase or otherwise acquire or retire any of its capital
stock at any time outstanding, if a Default or Unmatured Default
(except any Default or Unmatured Default described in Section 7.5
hereof) or Prepayment Event exists or would exist as a result of such
declaration, payment or redemption.
6.2.2. Indebtedness of Subsidiaries. The Company will not
permit any Subsidiary to create, incur or suffer to exist any
Indebtedness, except (i) Indebtedness to the Company and (ii) other
Indebtedness which at any time does not exceed in the aggregate 20% of
the Company's Consolidated Tangible Net Worth.
6.2.3. Merger. The Company will not, nor will it permit any
Subsidiary to, merge or consolidate with or into any other Person,
except:
(a) any Subsidiary may merge or consolidate with or into the
Company or any Wholly-Owned Subsidiary so long as in any
merger or consolidation involving the Company, the
Company shall be the surviving or continuing corporation;
and
(b) the Company may consolidate or merge with any other
corporation if (i) the corporation which results from
such merger or consolidation (the "surviving
corporation") is organized under the laws of the United
States or a jurisdiction thereof, (ii) the due and
punctual payment of the principal of and interest on all
of the Notes and the due and punctual performance and
observance of all of the covenants in the Notes and this
Agreement to be performed or observed by the Company are
expressly assumed in writing by the surviving corporation
and the surviving corporation shall furnish to the Banks
an opinion of counsel satisfactory to the Banks to the
effect that the instrument of assumption has been
duly authorized, executed and delivered and constitutes
the legal, valid and binding contract and agreement of
the surviving corporation enforceable in accordance with
its terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable
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principles, and (iii) at the time of such consolidation
or merger and immediately after giving effect thereto, no
Default or Unmatured Default or Prepayment Event would
exist.
6.2.4. Sale of Assets. The Company will not, nor will it
permit any Subsidiary to, lease, sell or otherwise dispose of all, or
a substantial portion of, its property, assets or business to any
other Person except for sales of inventory in the ordinary course of
business. For purposes of this Section, "substantial portion" means
assets (valued at the higher of book or fair market value) having a
value in excess of 10% of the consolidated assets of the Company and
the Subsidiaries. The Company will not, nor will it permit any
Subsidiary to, sell or otherwise dispose of any notes receivable or
accounts receivable.
6.2.5. Sale and Leaseback. The Company will not, nor will it
permit any Subsidiary to, sell or transfer any property, the aggregate
fair market value of which at any time exceeds 10% of the Company's
Consolidated Tangible Net Worth, in order to concurrently or
subsequently lease as lessee such or similar property. The fair
market value of any property sold or transferred pursuant to this
Section 6.2.5 shall be determined as of the date of such sale or
transfer.
6.2.6. Liens. The Company will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any Lien in, of or on
the property of the Company or any Subsidiary, except:
(a) Liens for taxes, assessments or governmental charges or
levies on its property if the same shall not at the time
be delinquent or thereafter can be paid without penalty,
or are being contested in good faith and by appropriate
proceedings.
(b) Liens imposed by law, such as carriers', warehousemen's
and mechanics' liens, interests of bailors, bailees,
consignors and consignees, and other similar liens
arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due.
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age
pensions, or other social security or retirement
benefits, or similar legislation.
(d) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of
a nature generally existing with respect to properties of
a similar character and which do not in any material way
affect the marketability of the same or interfere with
the use thereof in the business of the Company or the
Subsidiaries.
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(e) Liens created in favor of the United States government or
any other Person who has purchased or contracted to
purchase goods or services from the Company or any
subsidiary with advance or progress payments.
(f) Liens existing on the date hereof and described in
Schedule "3" hereto.
(g) Liens of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which
shall not have expired, or in respect of which the
Company or a Subsidiary shall at any time in good faith
be prosecuting an appeal or proceeding for a review and
in respect of which a stay of execution pending such
appeal or proceeding for review shall have been secured;
(h) Liens to secure statutory obligations, surety or appeal
bonds or other liens of like general nature incurred in
the ordinary course of business and not in connection
with the borrowing of money, provided, in each case, the
obligation secured is not overdue or, if overdue, is
being contested in good faith by appropriate actions or
proceedings;
(i) Liens of lessors under Capitalized Leases.
(j) Liens, in addition to those described in subsections (a)
through (i) hereof, to secure Indebtedness of the Company
or any Subsidiary in an aggregate amount not to exceed at
any time 10% of the Company's Consolidated Tangible Net
Worth.
6.2.7. Consolidated Funded Debt to Consolidated Tangible Net
Worth Ratio. The Company will not permit the ratio of Consolidated
Funded Debt to Consolidated Tangible Net Worth at any time to exceed
1.25 to 1.0.
6.2.8. Interest Coverage Ratio. The Company will not permit
the ratio of Consolidated Earnings Before Interest and Taxes to
Consolidated Interest Expense to be, as of the end of any fiscal
quarter of the Company, less than 2.5 to 1.0.
ARTICLE VII
DEFAULTS
--------
The occurrence of any one or more of the following events shall
constitute a Default:
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7.1. Any representation or warranty made by or on behalf of the
Company or any Subsidiary to the Banks under or in connection with any
Loan Document shall be materially false as of the date on which made.
7.2. Nonpayment of principal of the Notes when due.
7.3. Nonpayment of interest upon the Notes or of any facility
fee or other obligations under any of the Loan Documents within five
days after the same becomes due.
7.4. The breach by the Company of any of the terms or
provisions of Sections 6.1.3 or 6.2.
7.5. The breach by the Company (other than a breach which
constitutes a Default under Section 7.1, 7.2, 7.3 or 7.4) of any of
the terms or provisions of this Agreement which is not remedied or
waived within ten days after written notice from the Administrative
Agent or any Bank.
7.6. Failure of the Company or any Consolidated Subsidiary to
pay any Indebtedness in an aggregate principal amount in excess of
$10,000,000 (or the equivalent thereof in any other currency), when
due, or the default by the Company or any Consolidated Subsidiary in
the performance of any other term, provision or condition contained in
any agreement or agreements under which Indebtedness in an aggregate
principal amount in excess of $10,000,000 (or the equivalent thereof
in any other currency) was created or is governed, the effect of
which, in either case, is to cause, or to permit the holder or holders
of such Indebtedness to cause, such Indebtedness to become due prior
to its stated maturity; or Indebtedness in an aggregate principal
amount in excess of $10,000,000 (or the equivalent thereof in any
other currency) shall be declared to be due and payable or required to
be prepaid (other than by a regularly scheduled payment), prior to the
stated maturity thereof; or the Company or any Consolidated Subsidiary
shall not pay, or admit in writing its inability to pay, its debts
generally as they become due.
7.7. The Company or any Consolidated Subsidiary shall (a) have
an order for relief entered with respect to it under the Bankruptcy
Code, (b) make an assignment for the benefit of creditors, (c) apply
for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or
any substantial part of its property, (d) institute any proceeding
seeking an order for relief under the Bankruptcy Code or seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding
up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors or fail to file an
answer or other pleading denying the material allegations of any such
proceeding filed against it, (e) take any corporate action to
authorize or effect any of the foregoing actions set forth in this
Section 7.7 or (f) fail to contest in good faith any appointment or
proceeding described in Section 7.8.
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7.8. Without the application, approval or consent of the
Company or any Consolidated Subsidiary, a receiver, trustee, examiner,
liquidator or similar official shall be appointed for the Company or
any Consolidated Subsidiary or any substantial part of its property,
or a proceeding described in Section 7.7(d) shall be instituted
against the Company or any Consolidated Subsidiary and such
appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of 60 consecutive days.
7.9. The Company or any Consolidated Subsidiary shall fail
within 30 days to pay, bond or otherwise discharge any judgment or
order for the payment of money in excess of $l,000,000, which is not
stayed on appeal or otherwise being appropriately contested in good
faith.
7.10. The Unfunded Liabilities of all Plans shall exceed in the
aggregate an amount equal to 3 percent of the value (as of any date of
determination) of all Plan assets allocable to Plan benefits
guaranteed under ERISA or any Reportable Event shall occur in
connection with any Plan that results in Unfunded Liabilities to the
Company or any Subsidiary in an amount exceeding 2 percent of the
value (as of any date of determination) of all Plan assets allocable
to Plan benefits guaranteed under ERISA.
7.11. An administrator, custodian or other representative, by or
pursuant to any legislative act, resolution or rule (other than the
Bankruptcy Code or any similar law, state or federal, whether now or
hereafter existing) or any order or decree of any court or any
governmental board or agency (other than any order or decree issued
pursuant to the Bankruptcy Code or any similar law, state or federal,
whether now or hereafter existing) shall take possession or control of
all or such portions of the property of any one or more of the Company
and the Consolidated Subsidiaries as would, in the sole opinion of the
Required Banks, materially interfere with the operation of the
business of the Company and the Consolidated Subsidiaries, on a
consolidated basis, and such possession or control shall continue for
30 calendar days.
7.12. The Company or any Subsidiary shall be the subject of any
proceeding or investigation pertaining to the release by the Company
or any of its Subsidiaries, or any other Person of any toxic or
hazardous waste or physical substance into the environment, or any
violation of any federal, state or local environmental, health or
safety law or regulation with respect to any toxic or hazardous waste
or physical substance, which would, in either case, have a material
adverse effect upon the operations of the Company and the
Subsidiaries, taken as a whole.
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ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
----------------------------------------------
8.1. Acceleration; Allocation of Payments after Default or
Prepayment Event. (a) If any Default described in Section 7.7 or 7.8
occurs, the commitments of the Banks to make Advances hereunder shall
automatically terminate and the Obligations shall immediately
become due and payable without any election or action on the part of
the Administrative Agent or any Bank. If any other Default or
Prepayment Event occurs, the Required Banks may terminate the
commitments of the Banks to make Advances hereunder, or declare the
Obligations to be due and payable, whereupon the Obligations shall
become immediately due and payable, or both, without presentment,
demand, protest or notice of any kind, all of which the Company hereby
expressly waives.
If, within 14 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Banks to make
Loans hereunder as a result of any Default (other than any Default as
described in Section 7.7 or 7.8 with respect to the Company) and
before any judgment or decree for the payment of the Obligations due
shall have been obtained or entered, the Required Banks (in their sole
discretion) shall so direct, the Administrative Agent shall, by notice
to the Company, rescind and annul such acceleration and/or
termination.
(b) Upon the occurrence of (i) any Unmatured Default as to which
the Required Banks shall have notified the Administrative Agent that
the provisions of this Section 8.1(b) shall apply, (ii) any Default or
(iii) any Prepayment Event, the Banks shall share all collections and
recoveries of the Obligations on a pro rata basis, based on the
respective amounts of Obligations (whether or not mature and currently
payable) owing to each Bank in respect of principal and unpaid accrued
interest, fees and indemnities hereunder as of the date of occurrence
of such Default, Unmatured Default or Prepayment Event, as the case may be.
8.2. Amendments. Subject to the provisions of this Section,
the Required Banks (or the Administrative Agent with the consent in
writing of the Required Banks) and the Company may enter into
agreements supplemental hereto for the purpose of adding any
provisions to the Loan Documents or changing in any manner the rights
of the Banks or the Company hereunder or waiving any Default
hereunder; provided, however, that no such supplemental agreement
shall, without the consent of all of the Banks:
(a) Modify any of the provisions of this Agreement with
respect to the amount of or the time for the payment of
the principal of or any interest on any of the
Obligations or any of the fees due hereunder,
(b) Reduce the percentage specified in the definition of
Required Banks.
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(c) Change the amount of the Commitment of any Bank hereunder
or the Termination Date (except as provided in Section
2.3.15).
(d) Amend Section 2.3.15 or this Section 8.2.
No amendment of any provision of this Agreement relating to the
Administrative Agent shall be effective without the written
consent of the Administrative Agent.
8.3. Preservation of Rights. No delay or omission of the
Banks or the Administrative Agent to exercise any right under the
Loan Documents shall impair such right or be construed to be a
waiver of any Default or an acquiescence therein, and any single
or partial exercise of any such right shall not preclude other or
further exercise thereof or the exercise of any other right, and
no waiver, amendment or other variation of the terms, conditions
or provisions of the Loan Documents whatsoever shall be valid
unless in writing signed by the Banks required pursuant to
Section 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan
Documents or by law afforded shall be cumulative and all shall be
available to the Administrative Agent and the Banks until the
Obligations have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
------------------
9.1. Benefit of Agreement; Assignments; Participations.
The terms and provisions of the Loan Documents shall be binding
upon and inure to the benefit of the Company and the Banks and
their respective successors. Neither the Company nor any Bank
shall have the right to assign its rights or obligations under
this Agreement or the Notes. Notwithstanding the preceding
sentence, any Bank may at any time, without the consent of the
Company or the Administrative Agent, assign all or any portion of
its rights under this Agreement and its Notes to a Federal
Reserve Bank; provided, however, that no such assignment shall
release the transferor Bank from its obligations hereunder. Any
Bank may at any time sell participations in all or any part of
its Commitment or any Loan or Loans made by it to another bank or
other entity. In the event of any such sale by any Bank, such
Bank's obligations under this Agreement shall remain unchanged,
such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of each of its Notes
for all purposes under this Agreement and the Company and the
Administrative Agent shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and
obligations under this Agreement. Each agreement pursuant to
which any Bank may sell such a participation shall provide that
such Bank shall retain the sole right and responsibility to
enforce the obligations of the Company hereunder including,
without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement;
provided that such participation agreement may provide that such
Bank will not agree to any modification,
69
<PAGE>
amendment or waiver of this Agreement described in Sections 8.2
(a), (c) and (d) without the consent of the participant. The
Company agrees that any Bank which sells a participation in any
part of or all of its Commitment or its Loans may deliver to the
participant (including any prospective participant) any financial
or other information with respect to the Company or any of the
Subsidiaries which is delivered to the Banks hereunder; provided,
however, that if such information is non-public and confidential,
such Bank shall obtain the consent of the Company (which shall
not be unreasonably withheld) prior to delivering such
information to such participant.
9.2. Survival of Representations. All representations and
warranties of the Company contained in this Agreement shall
survive delivery of the Notes and the making of the Loans herein
contemplated.
9.3. Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, no Bank shall be
obligated to extend credit to the Company in violation of any
limitation or prohibition provided by any applicable statute or
regulation.
9.4. Taxes. Any taxes (excluding income taxes whether or
not such taxes are actually called "income taxes") payable or
ruled payable by Federal or State authority in respect of the
Loan Documents shall be paid by the Company, together with
interest and penalties, if any.
9.5. CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF
CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO
APPLICABLE FEDERAL
LAWS.
9.6. CONSENT TO JURISDICTION. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
LOAN DOCUMENTS AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT
OF THE ADMINISTRATIVE AGENT OR ANY BANK TO BRING PROCEEDINGS
AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY THE COMPANY AGAINST THE ADMINISTRATIVE
AGENT OR ANY BANK OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR
ANY BANK INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT
SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
70
<PAGE>
9.7. WAIVER OF JURY TRIAL. THE COMPANY, THE
ADMINISTRATIVE AGENT AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
9.8. Headings. Section headings in the Loan Documents are
for convenience of reference only, and shall not govern the
interpretation of any of the provisions of the Loan Documents.
9.9. Entire Agreement. The Loan Documents embody the
entire agreement and understanding among the Company, the
Administrative Agent and the Banks and supersede all prior
agreements and understandings among the Company, the
Administrative Agent and the Banks relating to the subject matter
thereof.
9.10. Several Obligations. The respective obligations of
the Banks hereunder are several and not joint and no Bank shall
be the partner or agent of any other (except to the extent to
which the Administrative Agent is authorized to act as such).
The failure of any Bank to perform any of its obligations
hereunder shall not relieve any other Bank from any of its
obligations hereunder.
9.11. Expenses. The Company shall reimburse the
Administrative Agent for any and all costs and out-of-pocket
expenses (including attorneys' fees and time charges of attorneys
for the Administrative Agent, which attorneys may be employees of
the Administrative Agent,) paid or incurred by the Administrative
Agent in connection with the preparation, review, execution,
delivery, amendment and modification of the Loan Documents;
provided, however, that such attorney's fees and time charges to
be reimbursed by the Company in connection with the preparation,
review, execution and delivery of the Loan Documents shall
not exceed the amount provided for in a letter agreement dated
August 13, 1993 between the Company and the Administrative Agent.
The Company shall reimburse the Administrative Agent and the
Banks for any and all costs, internal charges and out-of-pocket
expenses (including attorneys' fees and time charges of attorneys
for the Administrative Agent and the Banks, which attorneys may
be employees of the Administrative Agent or the Banks) paid or
incurred by the Administrative Agent or any Bank in connection
with the collection and enforcement of the Loan Documents. The
Company further agrees to indemnify the Administrative Agent and
each Bank, its directors, officers and employees against all
losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all expenses of
litigation or preparation therefor whether or not the
Administrative Agent or any Bank is a party thereto) which any of
them may pay or incur in connection with or arising out of or
relating to this Agreement, the other Loan Documents, the
transactions contemplated hereby or the direct or indirect
application or proposed application of the proceeds of any Loan
hereunder; provided, however, that the Company shall not be
liable for any of the foregoing to
71
<PAGE>
the extent that they arise from a violation of law by, or the
gross negligence or willful misconduct of, the Administrative
Agent or such Bank, as the case may be. The obligations of the
Company under this Section shall survive the termination of this
Agreement.
9.12. Numbers of Documents. All closing documents, notices
and requests hereunder shall be furnished to the Administrative
Agent with sufficient counterparts so that the Administrative
Agent may furnish one to each of the Banks.
ARTICLE X
THE ADMINISTRATIVE AGENT
------------------------
10.1. Appointment. The First National Bank of Chicago is
hereby appointed Administrative Agent hereunder, and each of the
Banks irrevocably authorizes the Administrative Agent to act as
the agent of such Bank. The Administrative Agent agrees to act
as such upon the express conditions contained in this Article X.
The duties of the Administrative Agent shall be administrative in
nature and the Administrative Agent shall not have a fiduciary
relationship in respect of any Bank by reason of this Agreement.
10.2. Powers. The Administrative Agent shall have and may
exercise such powers hereunder as are specifically delegated to
the Administrative Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. The Administrative
Agent shall have no implied duties to the Banks, or any obligation to
the Banks to take any action hereunder except any action
specifically provided by this Agreement to be taken by the
Administrative Agent.
10.3. General Immunity. Neither the Administrative Agent
nor any of its directors, officers, agents or employees shall be
liable to the Banks or any Bank for any action taken or omitted
to be taken by it or them hereunder or in connection herewith
except for its or their own gross negligence or wilful
misconduct.
10.4. No Responsibility for Loans, Recitals, etc. The
Administrative Agent shall not be responsible to the Banks for
any recitals, reports, statements, warranties or representations
herein or any Loans hereunder or be bound to ascertain or inquire
as to the performance or observance of any of the terms of this
Agreement.
10.5. Right to Indemnity. The Administrative Agent shall
be fully justified in failing or refusing to take any action
hereunder unless it shall first be indemnified to its
satisfaction by the Banks pro rata against any and all liability
and expense which may be incurred by it by reason of taking or
continuing to take any such action.
72
<PAGE>
10.6. Action on Instructions of Banks. The Administrative
Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with written
instructions signed by the Required Banks, and such instructions
and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks and on all holders of Notes.
10.7. Employment of Agents and Counsel. The Administrative
Agent may execute any of its duties as Administrative Agent
hereunder by or through employees, agents, and attorneys-in-fact
and shall not be answerable to the Banks, except as to money or
securities received by it or its authorized agents, for the
default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Administrative Agent
shall be entitled to advice of counsel concerning all matters
pertaining to the agency hereby created and its duties hereunder.
10.8. Reliance on Documents; Counsel. The Administrative
Agent shall be entitled to rely upon any Note, notice, consent,
certificate, affidavit, letter, telegram, statement, paper or
document believed by it to be genuine and correct and to have
been signed or sent by the proper person or persons, and, in
respect to legal matters, upon the opinion of counsel selected by
the Administrative Agent.
10.9. Administrative Agent's Reimbursement. Each Bank
agrees to reimburse the Administrative Agent in the amount of
such Bank's ratable share of the Commitments for any expenses not
reimbursed by the Company (i) for which the Administrative Agent
is entitled to reimbursement by the Company under the Loan
Documents and (ii) for any other expenses, liabilities,
obligations, losses, damages, penalties, costs, or disbursements
of any kind incurred by the Administrative Agent on behalf of the
Banks, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents; provided,
however, that no Bank shall be required to reimburse the
Administrative Agent for any such expenses to the extent that
they arise from a violation of law by, or the gross negligence or
willful misconduct of, the Administrative Agent. The obligations
of the Banks under this Section 10.9 shall survive payment of the
Obligations and termination of this Agreement.
10.10. Rights as a Bank. With respect to its Commitment,
Loans made by it and the Note issued to it, the Administrative
Agent shall have the same rights and powers hereunder as any Bank
and may exercise the same as though it were not the
Administrative Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. The
Administrative Agent may accept deposits from, lend money to, and
generally engage in any kind of banking or trust business with
the Company as if it were not the Administrative Agent.
10.11. Bank Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon the
Administrative Agent or any other Bank and based on the financial
statements referred to in Section 5.4 and such other documents
and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement.
73
<PAGE>
Each Bank also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Bank
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement.
10.12. Successor Administrative Agent. The Administrative
Agent may resign at any time by giving thirty days' written
notice thereof to the Banks and the Company and may be removed at
any time with or without cause by the Required Banks. Upon any
such resignation or removal, the Required Banks shall have the
right to appoint, on behalf of the Banks but with the consent of
the Company (which consent shall not be unreasonably withheld), a
successor Administrative Agent. If no successor Administrative
Agent shall have been so appointed by the Required Banks and
shall have accepted such appointment within thirty days after the
retiring Administrative Agent's giving notice of resignation,
then the retiring Administrative Agent may appoint, on behalf of
the Banks but with the consent of the Company (which consent
shall not be unreasonably withheld), a successor Administrative
Agent. Such successor Administrative Agent shall be a commercial
bank having capital and retained earnings of at least
$500,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its
duties and obligations hereunder. After any retiring
Administrative Agent's resignation hereunder as Administrative
Agent, the provisions of this Article X shall continue in effect
for its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as the Administrative Agent
hereunder.
10.13. Distribution of Information. The Company authorizes
the Administrative Agent, as the Administrative Agent may elect
in its sole discretion, to discuss with and furnish to the Banks
or to any other Person having an interest in the Obligations
(whether as a guarantor, pledgor of collateral, participant,
purchaser or otherwise) all financial statements, audit reports
and other information pertaining to the Company and its
Subsidiaries whether such information was provided by the Company
or prepared or obtained by the Administrative Agent; provided,
however, that if such information is non-public and confidential,
the Administrative Agent shall obtain the consent of the Company
(which shall not be unreasonably withheld) prior to delivering
such information to any such Person. Neither the Administrative
Agent nor any of its employees, officers, directors or agents
makes any representation or warranty regarding any audit reports
or other analyses of the Company's and its Subsidiaries condition
which the Administrative Agent may elect to distribute, whether
such information was provided by the Company or prepared or
obtained by the Administrative Agent, nor shall the
Administrative Agent or any of its employees, officers, directors
or agents be liable to any person or entity receiving a copy of
such reports or analyses for any inaccuracy or omission contained
in or relating thereto.
74
<PAGE>
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of,
any rights of the Banks under applicable law, if the Company
becomes insolvent, however evidenced, or any Default or
Prepayment Event occurs, any indebtedness from any Bank to the
Company may be offset and applied toward the payment of the
Obligations owing to such Bank, whether or not the Obligations,
or any part thereof, shall then be due.
11.2. Ratable Payments. In case at any time any Bank,
whether by setoff or otherwise, has payment (other than a payment
made on a Bid Loan when there exists no Default or Prepayment
Event) made to it upon its Loans in a greater proportion than
received by any other Bank, such Bank so receiving such greater
proportionate payment agrees to purchase a portion of the Loans
held by the other Banks so that after such purchase each Bank
will hold its ratable proportion of Loans. In case any such
payment is disturbed by legal process, or otherwise, appropriate
further adjustments shall be made. The Company agrees that any
Bank purchasing a participation hereunder may, to the fullest
extent permitted by law, exercise all its rights of payment with
respect to such participation as if such Bank were the direct
creditor of the Company in the amount of the participation.
ARTICLE XII
NOTICES
-------
12.1. Giving Notice. Any notice required or permitted to
be given under this Agreement may be given by (a) actual delivery
to the Company, the Administrative Agent or the Banks at the
addresses indicated below their signatures to this Agreement, or
(b) United States mail, postage prepaid, or telecopy or
telefacsimile addressed to the Company, the Banks or the
Administrative Agent at the addresses indicated below their
signatures to this Agreement. Each such notice shall be
effective (a) if given by mail, 72 hours after such notice is
deposited in the mails with first class postage prepaid,
addressed as aforesaid, and (b) if given by any other means, when
delivered at the address specified in accordance with this
Article XII.
12.2. Change of Address. The Company and the Banks may
each change the address for service of notice upon it by a notice
in writing to the other parties hereto.
75
<PAGE>
ARTICLE XIII
COUNTERPARTS
------------
This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this
Agreement by signing any such counterpart. This Agreement shall
be effective when it has been executed by the Company, the
Administrative Agent and the Banks and each party has notified
the Administrative Agent by telecopy or telefacsimile or by
telephone, confirmed in writing, that it has taken such action.
IN WITNESS WHEREOF, the Company, the Banks and the
Administrative Agent have executed this Agreement as of the date
first above written.
THIOKOL CORPORATION
By: __________________________________
James R. Wilson
Executive Vice President, Chief
Financial Officer and Treasurer
All Notices: Thiokol Corporation
2475 Washington Boulevard
Ogden, Utah 84405
Attn: Treasury Department, 4th Floor
Telephone: (801) 629-2000
Telecopy: (801) 629-2242
76
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Year Ended June 30
--------------------------------
(in millions, except per share data) 1994 1993 1992
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,043.9 $1,201.7 $1,311.7
Interest and other income 13.7 7.8 10.5
-------------------------------------
1,057.6 1,209.5 1,322.2
Deductions from income:
Cost of sales 860.4 996.4 1,122.4
General and administrative expense 69.6 70.2 59.6
Research and development expense 15.4 15.7 14.2
Interest expense 14.4 25.5 24.2
-------------------------------------
959.8 1,107.8 1,220.4
Income before income taxes and cumulative
effect of accounting changes 97.8 101.7 101.8
Income taxes 37.5 37.9 38.8
-------------------------------------
Income before cumulative effect
of accounting changes 60.3 63.8 63.0
Cumulative effect of accounting changes (63.8)
-------------------------------------
Net (loss) income $ (3.5) $ 63.8 $ 63.0
=====================================
Net (loss) income per share:
Income before cumulative effect
of accounting changes $ 3.02 $ 3.13 $ 3.12
Cumulative effect of accounting changes (3.20)
-------------------------------------
Net (loss) income $ (.18) $ 3.13 $ 3.12
=====================================
- - ----------------------------------------------------------------------------------------
See notes to consolidated financial statements.
77
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
June 30
-----------------
(in millions) 1994 1993
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 40.1 $ 31.4
Receivables 195.4 225.8
Inventories 121.9 118.4
Deferred income tax assets 21.4
Prepaid expenses 4.5 2.9
-------------------
Total Current Assets 361.9 399.9
Property, Plant & Equipment
Land 17.3 17.3
Buildings and improvements 242.5 239.2
Machinery and equipment 342.5 327.4
Construction in progress 21.8 20.5
-------------------
624.1 604.4
Less allowances for depreciation (302.0) (275.1)
-------------------
322.1 329.3
Other Assets
Costs in excess of net assets of businesses acquired,
less amortization 54.0 55.9
Patents and other intangible assets 19.6 21.9
Other noncurrent assets 42.9 27.2
-------------------
116.5 105.0
-------------------
$800.5 $834.2
===================
Liabilities and Stockholders' Equity
Current Liabilities
Short-term debt $ 27.1 $ 27.0
Accounts payable 40.3 33.2
Accrued compensation 46.4 48.0
Other accrued expenses 28.9 26.5
Income taxes 2.6 12.8
Current portion of long-term debt .1 34.7
-------------------
Total Current Liabilities 145.4 182.2
Noncurrent Liabilities
Long-term debt 87.9 87.9
Accrued retiree benefits other than pensions 76.0
Deferred income taxes 16.9 62.7
Accrued interest and other 89.8 58.2
-------------------
Total Noncurrent Liabilities 270.6 208.8
Commitments and Contingent Liabilities
Stockholders' Equity
Common stock (par value $1.00 per share)
Authorized - 200.0 shares
Issued - 20.5 shares including shares in treasury 20.5 20.5
Additional paid-in capital 46.2 48.7
Retained earnings 364.3 381.1
-------------------
431.0 450.3
Less common stock in treasury, at cost
(1.8 shares and .3 shares at June 30, 1994 and 1993) (46.5) (7.1)
-------------------
Total Stockholders' Equity 384.5 443.2
-------------------
$800.5 $834.2
===================
- - ----------------------------------------------------------------------------------------
See notes to consolidated financial statements.
78
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30
--------------------------
(in millions) 1994 1993 1992
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net (loss) income $ (3.5) $ 63.8 $ 63.0
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Cumulative effect of accounting changes 63.8
Depreciation and amortization 41.0 43.8 43.7
Changes in operating assets and liabilities:
Receivables 31.1 (29.6) 23.1
Inventories and prepaid expenses (.1) 45.4 (11.2)
Accounts payable and accrued expenses 2.6 (28.1) (9.8)
Accrued income taxes 1.6 9.5 5.6
Other - net (5.2) 11.7 .8
Deferred income taxes 1.4 (94.9) (2.0)
----------------------------
Net cash provided by operating activities 132.7 21.6 113.2
Investing Activities
Acquisitions, net of acquired cash (12.1) (6.0) (149.3)
Purchase of property, plant and equipment (21.2) (19.8) (37.4)
Proceeds from disposal of assets 1.2 .1 6.3
-------------------------------
Net cash used for investing activities (32.1) (25.7) (180.4)
Financing Activities
Net change in short-term debt (2.0) 10.4 8.3
Long-term borrowings 1.0
Repayment of long-term debt (34.7) (102.8) (2.4)
Purchase of common stock for treasury (51.7) (11.6) (.1)
Stock option transactions 9.8 13.1 5.9
Dividends paid (13.3) (9.4) (7.2)
----------------------------
Net cash (used for) provided (91.9) (100.3) 5.5
by financing activities ----------------------------
Increase (decrease) in cash and cash equivalents 8.7 (104.4) (61.7)
Cash and cash equivalents at beginning of year 31.4 135.8 197.5
----------------------------
Cash and cash equivalents at end of year $ 40.1 $ 31.4 $135.8
============================
- - ------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
79
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Additional Treasury Stock Total
-------------- Paid-In Retained -------------- Stockholders'
Shares Amount Capital Earnings Shares Amount Equity
(in millions)
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1991 20.5 $20.5 $85.0 $270.9 (.9) $(50.7) $325.7
Net income 63.0 63.0
Dividends paid (7.2) (7.2)
Purchase of common stock for treasury (.1) (.1)
Exercise of stock options and
related income tax benefits (16.1) .4 22.0 5.9
----------------------------------------------------------------
Balance, June 30, 1992 20.5 20.5 68.9 326.7 (.5) (28.8) 387.3
----------------------------------------------------------------
Net income 63.8 63.8
Dividends paid (9.4) (9.4)
Purchase of common stock for treasury (.6) (11.6) (11.6)
Exercise of stock options and
related income tax benefits (20.2) .8 33.3 13.1
----------------------------------------------------------------
Balance, June 30, 1993 20.5 20.5 48.7 381.1 (.3) (7.1) 443.2
----------------------------------------------------------------
Net loss (3.5) (3.5)
Dividends paid (13.3) (13.3)
Purchase of common stock for treasury (2.0) (51.7) (51.7)
Exercise of stock options and
related income tax benefits (2.5) .5 12.3 9.8
----------------------------------------------------------------
Balance, June 30, 1994 20.5 $20.5 $46.2 $364.3 (1.8) $(46.5) $384.5
================================================================
- - ------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
80
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation: The consolidated financial
statements include the accounts of Thiokol Corporation and its
wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated from the consolidated
financial statements.
Accounting Changes: Effective July 1, 1993, the Company
adopted Statement of Financial Accounting Standards (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits Other
than Pensions," and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," as described in Notes I and J.
Revenue Recognition Under Long-Term Contracts: Propulsion
systems segment sales encompass propulsion and ordnance products
and services performed principally under contracts and
subcontracts with various U.S. Government agencies and aerospace
prime contractors. Sales under cost-type contracts are
recognized as costs are incurred and include a portion of the
total estimated earnings to be realized in the ratio that costs
incurred relate to estimated total costs. Sales under
fixed-price-type contracts are recognized generally when
deliveries are made or upon completion of specified tasks. Cost
or performance incentives are incorporated into certain contracts
and are generally recognized when awards are earned, or when
realization is reasonably assured and amounts can be estimated.
Adjustments in estimates which can affect both revenues and
earnings are made in the period in which the information
necessary to make the adjustment becomes available. Provisions
for estimated losses on contracts are recorded when identified.
Cash and Cash Equivalents: Cash and cash equivalents
consist of cash and short-term investments in highly liquid
investments with maturities of less than three months.
Inventories: Inventories are stated at the lower of cost or
market. Propulsion systems segment inventories represent
estimated recoverable costs related to long-term fixed price
contracts and include direct production costs and allocable
indirect costs, less related progress payments received. In
accordance with industry practice, such costs include amounts
which are not expected to be realized within one year. Under the
provisions of certain contracts, the U.S. Government acquires
title to, or a security interest in, certain inventories as a
result of progress payments made on contracts and programs.
Inventories for the fastening systems segment are determined by
the first in, first out (FIFO) method.
Property, Plant and Equipment: Property, plant and
equipment is carried at cost and depreciated over the estimated
useful lives of the various classes of properties, using either
the straight-line or accelerated methods.
Intangibles: Costs in excess of the net assets acquired,
patents, and other intangible assets are being amortized on a
straight-line basis over periods between 10 and 40 years.
Accumulated amortization amounted to $29.7 and $25.3 million at
June 30, 1994 and 1993, respectively.
Contingent Matters: A liability for contingent matters is
recorded when the Company has determined that a liability exists
and the amount is reasonably determinable. At the time a
liability is recognized, a receivable is recorded for the
estimated future recovery of the costs from third parties,
insurance carriers, or from the U.S. Government. Except for
current amounts receivable and payable, the amounts are included
in other assets and in noncurrent liabilities. Any costs
estimated to be allocated to commercial business or not otherwise
recoverable from third parties are charged to cost of sales at
the time the liability is recorded. For environmental matters,
the Company will recover a substantial portion of any costs not
recovered from its insurance carriers or other third parties
through the establishment of prices of the Company's products and
services to the U.S. Government.
Translation of Foreign Currencies: The financial statements
of the Company's foreign operations are translated into U.S.
dollars in accordance with SFAS No. 52, "Foreign Currency
Translation." Foreign exchange gains and losses incurred on
foreign currency transactions are included in net income. The
Company enters into forward foreign exchange contracts to hedge
identifiable foreign currency commitments and any resulting gain
or loss is deferred and accounted for as part of the transaction.
Foreign currency exchange contracts are not significant.
Income Taxes: Provisions for federal, state, local, and
foreign income taxes are calculated based on current tax laws.
The provision for income taxes includes, in the current period,
the cumulative effect of any changes in tax rates from those used
previously in determining deferred tax assets and liabilities.
Deferred taxes are
81
<PAGE>
provided to recognize the income tax effects of amounts which are
included in different reporting periods for financial statement
and tax purposes. As discussed in Note F, in 1992 the Company
adopted SFAS No. 109, "Accounting for Income Taxes."
Income Per Share: Income per share is calculated based on
the average number of common and common equivalent shares
outstanding. The equivalent shares, in thousands, for 1994,
1993, and 1992 were 19,973, 20,384, and 20,151, respectively.
Reclassification: Certain reclassifications were made to
the 1993 and 1992 financial statements to conform with the 1994
presentation.
NOTE B. ACQUISITION OF HUCK INTERNATIONAL, INC.
On November 1, 1991, the Company purchased certain assets
and assumed certain liabilities of Huck Manufacturing Company for
$152.6 million in cash and the assumption of $19.0 million in
debt and $20.6 million in other liabilities. The fair value of
assets acquired was $192.2 million. The name was subsequently
changed to Huck International, Inc. (Huck). The unaudited
consolidated pro forma results of operations assuming
consummation of the purchase as of July 1, 1990, are as follows:
<TABLE>
<CAPTION>
ProForma
(in millions except per share data) 1992
- - ----------------------------------------------------------------
<S> <C>
Net sales $1,364.4
Net income 61.7
Net income per share 3.06
- - ----------------------------------------------------------------
</TABLE>
The unaudited pro forma financial information is not
necessarily indicative of the results that would have occurred
had the two companies been combined for the year presented nor of
the future results of operations.
NOTE C. RECEIVABLES
The components of receivables are as follows:
<TABLE>
<CAPTION>
June 30
----------------
(in millions) 1994 1993
- - ----------------------------------------------------------------
<S> <C> <C>
Receivables under U.S. Government
contracts and subcontracts:
Amounts billed $ 57.6 $ 89.2
Unbilled costs and accrued profits 91.5 92.9
-----------------
Total receivables under U.S. Government
contracts and subcontracts 149.1 182.1
Accounts receivable 44.6 42.0
Other current receivables 1.7 1.7
-----------------
$195.4 $225.8
=================
- - ----------------------------------------------------------------
</TABLE>
Unbilled costs and accrued profits consist principally of
revenues recognized on U.S. Government contracts for which
billings have not been presented. Such amounts are billed on the
basis of contract terms and delivery schedules. It is expected
that $51.2 million of the unbilled amount at June 30, 1994, will
be billed within 90 days. The remaining $40.3 million primarily
relates to amounts subject to final negotiations of contract
terms and rates and is expected to be collected within two years.
Cost and incentive-type contracts and subcontracts are
subject to Government audit and review. It is anticipated that
adjustments, if any, will not have a material effect on the
Company's results of operations or financial condition.
Cost management award fees of $15.6 million have been
recognized on the current Space Shuttle Redesigned Solid Rocket
Motor (RSRM) contract. Realization of such fees is reasonably
assured based on actual and anticipated contract cost
performance. However, all of the cost management award fees
remain at risk until completion of the current contract and final
NASA review. Unanticipated problems which erode cost management
performance could cause a reversal of some or all of the
recognized cost management award fees and would be offset against
receivable amounts from the U.S. Government or be directly
reimbursed.
NOTE D. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
June 30
--------------
(in millions) 1994 1993
- - ---------------------------------------------------------------
<S> <C> <C>
Finished goods $ 56.1 $ 46.6
Raw materials and work-in-process 47.3 47.9
Inventoried costs related to
U.S. Government and other
long-term contracts 36.7 46.2
Progress payments received on
long-term contracts (18.2) (22.3)
-----------------
$121.9 $118.4
- - ---------------------------------------------------------------
</TABLE>
NOTE E. FINANCING ARRANGEMENTS
The Company has credit commitments from a group of banks
totaling $100 million under a Revolving Credit Agreement. The
funds available under the credit facility may be used for any
corporate purpose and are available through September 1997. At
June 30, 1994, the Company had not drawn upon these credit
facilities.
Short-term debt consisted of foreign subsidiary borrowings
with various domestic and foreign banks with interest rates
varying from 2.9 to 6.7 percent.
82
<PAGE>
Long-term debt consisted of the following:
<TABLE>
June 30
----------------
(in millions) 1994 1993
- - -------------------------------------------------------------
<S> <C> <C>
Private Placement Notes:
10.34% notes, due June 30, 1994 $ 34.5
10.45% notes, due June 30, 1996 $ 37.0 37.0
10.48% notes, due June 30, 1999 48.5 48.5
Other 2.5 2.6
-----------------
88.0 122.6
Less current maturities .1 34.7
-----------------
$ 87.9 $ 87.9
=================
- - -------------------------------------------------------------
</TABLE>
The note agreements contain covenants restricting, among
other things, the Company's ability to incur funded debt in
excess of 60 percent of consolidated net tangible assets,
limitations on sale and leaseback transactions, and the sale of
assets during each 12-month period which account for more than 10
percent of revenues, earnings or book value of the Company's
total assets. The agreements also contain restrictions with
respect to the amount of retained earnings available for the
payment of cash dividends and the purchase of Company stock. At
June 30, 1994, approximately $225 million of retained earnings
was available for the payment of dividends and the purchase of
Company stock. Interest paid on borrowings was $14.4, $25.5, and
$24.2 million in 1994, 1993, and 1992, respectively.
NOTE F. INCOME TAXES
On June 30, 1992, the Company adopted SFAS No. 109,
"Accounting for Income Taxes," effective July 1, 1991. There was
no cumulative effect from adoption of SFAS 109 as deferred tax
assets remained unchanged from SFAS No. 96. The provisions for
income taxes applicable to both domestic and foreign operations
are as follows:
<TABLE>
<CAPTION>
(in millions) 1994 1993 1992
- - ---------------------------------------------------------------
<S> <C> <C> <C>
Current Taxes:
Federal $31.6 $116.2 $35.0
Foreign .4 .2 .6
State 4.1 16.4 5.2
---------------------------
36.1 132.8 40.8
Deferred Taxes:
Federal 1.7 (81.8) (1.5)
Foreign (.5) (1.6) (.3)
State .2 (11.5) (.2)
---------------------------
1.4 (94.9) (2.0)
---------------------------
$37.5 $ 37.9 $38.8
===========================
- - ---------------------------------------------------------------
</TABLE>
A reconciliation of the United States statutory rate to the
effective income tax rate applicable to income before the
cumulative effect of accounting changes follows:
<TABLE>
1994 1993 1992
- - -----------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 34.0% 34.0%
Effect of:
State taxes, net of
federal benefit 3.1 3.2 3.3
R&D credit (.8)
(1.2)
Impact of retroactive
federal tax increase 1.5
Other (.5) .1 2.0
--------------------------
Effective rate 38.3% 37.3% 38.1%
==========================
- - -----------------------------------------------------------------
</TABLE>
Deferred income taxes arise because of differences in the
treatment of income and expense items for financial reporting and
income tax purposes. Deferred income taxes are not provided on
certain unremitted earnings of international subsidiaries as the
earnings are deemed to be indefinitely reinvested and the effect
of such taxes would not be significant after foreign tax credits.
The effect of the temporary differences that give rise to
deferred tax balances at June 30 are as follows:
<TABLE>
<CAPTION>
(in millions) 1994 1993
- - ----------------------------------------------------------------
<S> <C> <C>
Recognition of income on contracts
reported on different methods for tax
purposes than for financial reporting $ 45.3 $42.0
Depreciation expense 53.0 51.3
Employee benefit expenses 11.9 9.8
Other 3.5 .1
--------------
Gross deferred tax liabilities 113.7 103.2
Provision for estimated expenses (41.3) (45.9)
Employee benefit expenses (48.0) (9.9)
Other (7.5) (6.1)
--------------
Gross deferred tax assets (96.8) (61.9)
---------------
Net deferred tax liabilities 16.9 41.3
Net current deferred tax assets (21.4)
---------------
Net non-current deferred tax liabilities $ 16.9 $ 62.7
===============
- - ---------------------------------------------------------------
</TABLE>
The increase in the "employee benefit expenses" deferred tax
asset resulted from the adoption of SFAS No. 106 and SFAS No.
112.
Total income tax payments were $36.0, $121.1, and $35.4
million during 1994, 1993, and 1992, respectively.
In connection with the transfer on July 1, 1989, of certain
assets and liabilities to Morton International, Inc., the Company
and Morton entered into a Tax Sharing Agreement which generally
provides that each entity will retain federal, state and local
income tax liabilities applicable to their pre July 1, 1989,
operations.
The Internal Revenue Service (IRS) has completed its
examination of federal income tax returns through fiscal year
1985. Based upon preliminary understandings, substantial tax
refunds and interest payments may
83
<PAGE>
be received by the Company. Such interest and a portion of the
taxes refunded will be recognized as income as audits are
finalized. Tax refunds which relate to timing issues will be
utilized to pay the corresponding deferred tax liabilities as
amounts come due.
NOTE G. PREFERRED STOCK PURCHASE RIGHTS
The Company has declared a dividend distribution of one
Preferred Share Purchase Right for each outstanding common share.
Each Right entitles its holder to buy one one-hundredth of a
share of a new series of the Company's preferred stock at an
exercise price of $60. The Rights will only become exercisable
if a person or group acquires or makes an offer to acquire 15
percent or more of the Company's common stock. If the Company is
acquired in a merger or other business combination, each Right
will entitle the holder to purchase common stock of the acquiring
company having a market value of twice the exercise price of the
Right. If any person acquires 15 percent or more of the
Company's common stock, each Right will entitle the holder (other
than such acquirer) to purchase common stock of the Company
having a market value of twice the exercise price of the Right.
The Rights may be redeemed by the Company at the price of $.01
per Right prior to the acquisition of 15 percent or more of the
outstanding shares of the Company's common stock. The Rights
expire on February 28, 1999.
NOTE H. RETIREMENT PLANS
The Company has noncontributory defined benefit pension
plans covering most of its employees. The benefits for most
employees are based on an average of the employee's highest five
consecutive years' earnings during the ten years preceding
retirement and on credited service. Certain supplemental
unfunded plan arrangements also provide retirement benefits to
specified groups of participants.
The Company's funding policy for the plans is to contribute
amounts sufficient to meet the minimum funding requirements of
the Employee Retirement Income Security Act of 1974, plus any
additional amounts which the Company may determine to be
appropriate.
The annual cost for all Company-sponsored defined benefit
pension plans includes the following components:
<TABLE>
<CAPTION>
(in millions) 1994 1993 1992
- - ----------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 14.8 $ 15.9 $ 13.6
Interest cost 36.2 34.3 31.3
Actual gain on plan assets (22.4) (59.9) (57.3)
Net amortization and deferral (19.9) 20.7 20.5
----------------------------
Net pension cost 8.7 $ 11.0 $ 8.1
============================
- - ----------------------------------------------------------------
</TABLE>
The reconciliation of the funded status of all defined
benefit pension plans at June 30 is as follows:
<TABLE>
<CAPTION>
(in millions) 1994 1993 1992
- - ----------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefits:
Vested benefits $391.8 $362.1 $309.1
Nonvested benefits 2.5 6.2 7.7
----------------------------
Accumulated benefit
obligation 394.3 368.3 316.8
Effect of projected future
compensation increases 85.7 94.6 97.3
----------------------------
Projected benefit obligation 480.0 462.9 414.1
Fair value of plan assets 494.9 487.2 428.8
----------------------------
Plan assets in excess of
projected benefit obligation 14.9 24.3 14.7
Unrecognized net losses 47.9 29.5 30.0
Unrecognized transition obligation (27.3) (30.6) (33.9)
Unrecognized prior service cost 1.3 7.4 7.5
----------------------------
Pension asset $ 36.8 $ 30.6 $ 18.3
============================
- - ----------------------------------------------------------------
</TABLE>
The assumptions used in the determination of the net pension
cost for all defined benefit pension plans are shown below:
<TABLE>
1994 1993 1992
- - ----------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 8.0% 8.0% 8.5%
Rate of increase in compensation
levels 5.5 5.5 5.5
Expected long-term rate of return
on assets 9.0 9.0 9.0
- - -----------------------------------------------------------------
</TABLE>
The assets of the Company-sponsored plans are invested
primarily in equities and bonds. Certain pension plans contain
restrictions on the use of excess pension plan assets in the
event of a change in control of the Company.
The Company sponsors a defined contribution money purchase
plan covering certain employees. The Company makes contributions
on behalf of each participant at a specified percentage of base
pay. The annual cost of the defined contribution plan was $.8,
$.8, and $.9 million in 1994, 1993, and 1992, respectively.
The Company has matching and nonmatching savings plans for
eligible employees. Company contributions to the savings plans,
which are based on a limited percentage of participant
contributions, were $7.6, $8.2, and $8.9 million in 1994, 1993,
and 1992, respectively.
84
<PAGE>
NOTE I. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the Company
provides certain health care and life insurance benefits for
substantially all of its retirees and eligible dependents.
During 1992, the plan for providing these benefits was revised
for employees retiring after February 1, 1993. The current plan
is contributory, with retiree contribution levels adjusted
annually, and contains other cost-sharing features including
deductibles and coinsurance. Under the revised plan, the
Company's cost for retiree medical is limited to a 4 percent
annual increase. Current eligibility requirements include ten
years of credited service after attaining age forty-five.
Effective July 1, 1993, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than
Pensions." The standard requires the Company to accrue the
expected cost of postretirement benefits during the period of
employee eligible service rather than the prior policy of
charging the costs against earnings as the amounts were paid.
The Company recognized the transition obligation as a one-time
charge to earnings. At July 1, 1993, the accumulated
postretirement obligation recognized was $81.9 million. The
effect on 1994 earnings and shareholders' equity was $51.6
million ($2.59 per share) after a deferred income tax benefit of
$30.3 million. A significant portion of the charge is expected
to be recovered in future years as amounts are funded and
allocated to Government contracts. The Company's policy is to
fund the cost of retiree medical benefits at management's
discretion. Voluntary Employees' Beneficiary Association (VEBA)
trusts and other trusts under IRS regulations were established in
1994 for funding purposes. The amounts funded are tax deductible
in the year of contribution under current IRS regulations.
Retiree medical and life insurance costs for the year ended
June 30, 1994, are as follows:
<TABLE>
(in millions)
- - ---------------------------------------------------------
<S> <C>
Service cost - attributed to service
during the period $ 2.4
Interest cost on accumulated postretirement
benefit obligation 6.5
------
Retiree medical and life insurance costs $ 8.9
======
- - ---------------------------------------------------------
</TABLE>
The following table reconciles the plan's funded status to
the amount included in the Company's balance sheet at June 30,
1994:
<TABLE>
(in millions)
- - ---------------------------------------------------------------
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ 71.8
Fully eligible active plan participants 10.6
Other active plan participants 12.7
------
Total accumulated postretirement benefit obligation 95.1
Plan assets at fair value, primarily listed stocks
and bonds (5.3)
-------
Accumulated postretirement benefit obligation
in excess of plan assets 89.8
Unrecognized net experience loss (13.8)
-------
Accrued retiree benefits other than pensions $ 76.0
=======
- - ---------------------------------------------------------------
Assumptions Used for 1994:
- - ---------------------------------------------------------------
Discount rate 8.0%
Health care cost trend rate decreasing to
9% in 1995 and to 6% by 2001 10.0%
- - ---------------------------------------------------------------
</TABLE>
Increasing the assumed health care cost trend rate by one
percentage point would increase the accumulated postretirement
benefit obligation at June 30, 1994, by approximately $4.5
million and increase retiree medical costs by approximately $.3
million in 1994.
Amounts paid for retiree medical and life insurance costs
were $6.5 and $4.8 million in 1993 and 1992, respectively.
NOTE J. POSTEMPLOYMENT BENEFITS
Effective July 1, 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." This
accounting standard requires the Company to accrue the expected
cost of postemployment benefits provided to former employees or
their beneficiaries rather than the prior policy of charging the
costs against earnings as the amounts were paid. The liability,
which relates to long-term disability benefits and medical
benefits recognized at July 1, 1993, was $19.3 million. The
cumulative effect on earnings and shareholders' equity was $12.2
million ($.61 per share) after a deferred income tax benefit of
$7.1 million.
NOTE K. CONTINGENT MATTERS
The Company is currently involved in a number of lawsuits
and other contingencies. The Company provides for costs related
to contingencies when a loss is probable and the amount is
reasonably determinable. It is the opinion of management, based
on advice of counsel, that the ultimate resolution of these
contingencies, to the extent not previously provided for, will
not have a material adverse effect on the financial condition of
the Company. However, depending on the amount and
85
<PAGE>
timing of an unfavorable resolution of these contingencies, it is
possible that the Company's future results of operations or cash
flows could be materially affected in a particular period.
NOTE L. ENVIRONMENTAL MATTERS
The Company is presently involved with two Environmental
Protection Agency (EPA) superfund sites in Morris County, New
Jersey formerly operated by the Company for government contract
work. The Company has not incurred any material costs relating
to these environmental matters. The Company has negotiated a
consent decree with the EPA on the Rockaway Borough Well Field
("Klockner") site. The decree is subject to final approval of
the Federal District Court of New Jersey. With respect to the
Company's liability for response costs, site remediation, and
future operation maintenance costs of the Klockner site, the
Company has recorded an $8.5 million liability. The Company is a
"potentially responsible party" at the Rockaway Township Well
Field ("Denville") site. The Company has agreed to replace a
water treatment system at the Denville site at an estimated cost
of $.25 million. The total estimated cost for remediation and
future operations and maintenance at this site is $4.9 million
which the Company has accrued.
In addition to the above sites the Company is involved with
other locations involving environmental issues. The Company has
recorded an estimated total liability for all of its
environmental remediation of $20 million. The Company has
recorded an $11 million receivable that it expects to recover
from third parties and the U.S. Government as amounts are
expended. The Company estimates it will spend approximately
$10.8 million of the total liability equally over the next three
years.
NOTE M. LEASE COMMITMENTS
The Company has operating leases, which are principally
short-term, and primarily for building and office space and other
real estate. Rental expense charged was $9.9, $11.9, and $14.5
million in 1994, 1993, and 1992, respectively. Renewal and
purchase options are available on certain of these leases.
Future minimum rental commitments under non-cancelable operating
leases as of June 30, 1994, were not material. Certain plant
facilities and equipment are provided for use by the U.S.
Government under short-term or cancelable arrangements.
NOTE N. STOCK OPTION AND PERFORMANCE UNIT PLANS
The Company's Stock Option Plans provide that grants may be
made to key employees of (a) stock options, (b) stock options
with alternative appreciation rights, (c) appreciation rights,
not related to any option, and (d) shares of restricted stock and
other awards as deemed appropriate by the Compensation Committee
of the Board of Directors. In addition, options granted prior to
fiscal year 1992 may provide for supplemental cash payments to
optionees upon exercise for the purpose of reimbursing them for
income tax liabilities incurred as a result of such exercises.
Stock option activity during fiscal year 1994 is summarized as
follows:
<TABLE>
Shares Per Share
- - ----------------------------------------------------------------
<S> <C> <C>
Options outstanding at
June 30, 1993 1,224,196 $10.86 to $15.81
Granted 221,100 $21.63 to $26.13
Lapsed (40,000) $21.63
Exercised (587,261) $11.25 to $15.81
-----------------------------
Options outstanding at
June 30, 1994 (648,935
exercisable shares) 818,035 $10.86 to $26.13
=============================
- - -----------------------------------------------------------------
</TABLE>
Options outstanding at June 30, 1994, have expiration dates
ranging from June 1996 to May 2004.
In addition, limited appreciation rights were outstanding
covering 182,972 option shares. Limited appreciation rights are
paid automatically in cash in lieu of other related options upon
a change in control of the Company. As of June 30, 1994,
supplemental cash payment rights were outstanding with respect to
80,447 option shares, payable upon exercise of options or limited
appreciation rights.
Shares of common stock reserved for both outstanding and
future grants of options and payment of appreciation
rights and other stock-based awards at June 30, 1994 and 1993
were 1,557,185 and 2,144,446 shares, respectively.
NOTE O. FAIR VALUE OF FINANCIAL INSTRUMENTS
Under SFAS No. 107, "Fair Value Disclosures about Financial
Instruments," the Company is required to disclose the fair value
of financial instruments, including off-balance-sheet financial
instruments, when fair value can be reasonably estimated. The
values provided are representative of fair values only as of June
30, 1994 and 1993, and do not reflect subsequent changes in the
economy, interest and tax rates, and other variables that
may impact determination of fair value. The following methods
and assumptions were used in estimating fair values:
Cash and cash equivalents: The carrying amount approximates
fair values.
Receivables: The fair value of receivables, due to the
collection of certain receivables over an extended period, is
based on the discounted value of expected future cash flows.
86
<PAGE>
Short-term and long-term debt: The carrying value of
short-term debt approximates fair value. The fair value of
long-term debt is estimated based on the current borrowing rates
for similar issues.
Off-balance-sheet instruments: Foreign currency exchange
contracts are not significant.
The carrying amounts and estimated fair values of the
Company's financial instruments at June 30 were as
follows:
<TABLE>
<CAPTION>
1994 1993
---------------------------------------
Carrying Fair Carrying Fair
(in millions) Amount Value Amount Value
- - -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash
equivalents $ 40.1 $ 40.1 $ 31.4 $ 31.4
Receivables 195.4 192.3 225.8 220.7
Short-term debt 27.1 27.1 27.0 27.0
Long-term debt 88.0 95.3 122.6 135.9
- - -------------------------------------------------------------------
</TABLE>
NOTE P. OPERATIONS BY INDUSTRY SEGMENT
The Company and its subsidiaries design, develop,
manufacture, and sell products classified in two principal
industry segments.
The propulsion systems segment consists of propulsion, gas
generator and ordnance products, metal and composite components,
and services relating to such systems, principally under
contracts and subcontracts with the Department of Defense, the
National Aeronautical and Space Administration (NASA) and
aerospace prime contractors, for use primarily in space and
defense applications.
The fastening systems segment consists of high technology,
specialty fastening systems for a broad range of aerospace and
industrial applications worldwide.
<TABLE>
<CAPTION>
Year Ended June 30
---------------------------
(in millions) 1994 1993 1992
- - ----------------------------------------------------------------
<S> <C> <C> <C>
Net Sales
Propulsion Systems $ 868.2 $1,042.8 $1,204.8
Fastening Systems 175.7 158.9 106.9
-----------------------------
Consolidated net sales $1,043.9 $1,201.7 $1,311.7
=============================
- - ----------------------------------------------------------------
Operating Profit
Propulsion Systems $ 86.8 $ 117.8 $ 119.7
Fastening Systems 16.9 7.8 8.7
-----------------------------
Operating profit 103.7 125.6 128.4
Interest and other income 12.9 6.6 9.2
Interest expense (14.4) (25.5) (24.2)
Unallocated corporate
expense (4.4) (5.0) (11.6)
-----------------------------
Consolidated income
before income taxes and
cumulative effect of
accounting changes $ 97.8 $ 101.7 $ 101.8
=============================
- - ----------------------------------------------------------------
Total Assets
Propulsion Systems $ 506.6 $ 573.5 $ 607.8
Fastening Systems 238.3 207.9 208.7
Corporate 55.6 52.8 139.6
------------------------------
Consolidated assets $ 800.5 $ 834.2 $ 956.1
==============================
- - -----------------------------------------------------------------
Depreciation Expense
Propulsion Systems $ 29.4 $ 32.9 $ 34.7
Fastening Systems 6.0 5.0 3.8
Corporate .6 .7 .5
------------------------------
Consolidated depreciation
expense $ 36.0 $ 38.6 $ 39.0
==============================
- - -----------------------------------------------------------------
Amortization Expense
Propulsion Systems $ 2.5 $ 2.7 $ 3.0
Fastening Systems 2.5 2.5 1.7
------------------------------
Consolidated amortization
expense $ 5.0 $ 5.2 $ 4.7
==============================
- - -----------------------------------------------------------------
Capital Expenditures
Propulsion Systems $ 13.0 $ 12.9 $ 26.3
Fastening Systems 7.8 6.7 10.5
Corporate .4 .2 .6
------------------------------
Consolidated capital
expenditures $ 21.2 $ 19.8 $ 37.4
===============================
- - -----------------------------------------------------------------
</TABLE>
A proportionate share of Corporate general and
administrative expense is allocated and reimbursed through
propulsion systems contracts.
The fastening systems segment for 1992 represents operating
results for an eight-month period beginning November 1, 1991.
Intersegment, foreign operations, and export sales are
insignificant.
Net sales under U.S. Government contracts and subcontracts
amounted to $813.4, $975.7, and $1,134 million for 1994, 1993,
and 1992, respectively.
Corporate assets consist principally of cash and cash
equivalents, deferred income tax assets, property, plant and
equipment, and other noncurrent assets.
87
<PAGE>
Management's Report on Financial Statements
Management has prepared, and is responsible for, the
consolidated financial statements and all related financial
information contained in the Annual Report. The consolidated
financial statements, which include amounts based on estimates
and judgments, were prepared in accordance with generally
accepted accounting principles appropriate in the circumstances
and applied on a consistent basis. Other financial information
in this report is consistent with that in the consolidated
financial statements.
Management maintains an accounting system and related
internal controls which it believes provide reasonable assurance,
at appropriate cost, that transactions are properly executed and
recorded, that assets are safeguarded, and that accountability
for assets is maintained. An environment that provides an
appropriate level of control is maintained and monitored and
includes examinations by an internal audit staff.
Management recognizes its responsibilities for conducting
the Company's affairs in an ethical and socially responsible
manner. The Company has written standards of business conduct,
including its business code of ethics which emphasize the
importance of personal and corporate conduct, that demands
compliance with federal and state laws governing the Company.
The importance of ethical behavior is regularly communicated to
all employees through ongoing education and review programs
designed to create a strong compliance environment.
The Audit Committee of the Board of Directors is composed of
five outside directors. This Committee meets periodically and
also meets separately with representatives of the independent
auditors, Company officers, and the internal auditors to review
their activities.
The consolidated financial statements have been examined by
Ernst & Young LLP, independent auditors, whose report follows.
Richard L. Corbin
Senior Vice President and
Chief Financial Officer
Report of Ernst & Young LLP, Independent Auditors
To the Stockholders and Board of Directors
Thiokol Corporation:
We have audited the accompanying consolidated balance sheets
of Thiokol Corporation as of June 30, 1994 and 1993, and the
related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended
June 30, 1994. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Thiokol Corporation at June 30, 1994 and
1993, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended June 30,
1994 in conformity with generally accepted accounting principles.
As discussed in Notes I and J, the Company changed its
method of accounting for postretirement benefits other than
pensions and postemployment benefits.
ERNST & YOUNG LLP
Salt Lake City, Utah
August 2, 1994
88
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Fiscal Year 1994 Compared to Fiscal Year 1993
Net income for 1994 before the cumulative effect of
accounting changes was $60.3 million or $3.02 per share, a
decrease of 5 percent compared to $63.8 million or $3.13 for the
prior year. The decrease in net income was caused primarily by
lower defense sales in 1994 and higher 1993 propulsion systems
income due to the nonrecurring recovery of $13 million in U.S.
Government reimbursement of tax-related costs recognized in prior
years. Net income for the year was favorably affected by receipt
of $10.5 million of interest from income tax refunds, higher
fastening systems income, and lower interest expense.
The cumulative effect of accounting changes resulted from
the July 1, 1993, adoption of Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions," and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." The
one-time after-tax charge of $63.8 million or $3.20 per share
reflects the after-tax liability recognized at July 1, 1993, due
to the adoption of SFAS Nos. 106 and 112 of $51.6 and $12.2
million, respectively. Net loss for the twelve months ended June
30, 1994, after the charge for the accounting changes, was $3.5
million or $.18 per share.
Sales for the year of $1,043.9 million decreased 13 percent
compared to $1,201.7 million last year. Propulsion systems sales
of $868.2 million decreased 17 percent primarily as the result of
completion of Peacekeeper motor deliveries in the first quarter
and lower operating levels at the government-owned,
company-operated ammunition plants. Fastening systems sales of
$175.7 million increased 11 percent or $16.9 million as a result
of higher domestic industrial sales and a small acquisition.
Space sales in 1994 of $500.8 million decreased 4 percent or
$18.5 million compared to 1993 and related operating income
decreased 16 percent to $51.5 million from prior year's $61.5
million. Sales and income derived from production of the Space
Shuttle Redesigned Solid Rocket Motor (RSRM), which represents
the majority of Space operations, were flat in comparison to
1993. The decline in revenues resulted primarily from
cancellation of the Advanced Solid Rocket Motor (ASRM) nozzle
work during the second quarter and fewer Castor and STAR motor
deliveries. Income was lower due to the nonrecurring recovery in
Government reimbursement in 1993 of tax-related costs recognized
in prior years and Castor 120TM motor development costs.
Strategic sales decreased $110.6 million or 41 percent to
$156.5 million while operating income of $27.4 million decreased
$18.4 million or 40 percent from $45.8 million in 1993. The
sales and income decrease was caused primarily by completion of
Peacekeeper motor deliveries during the first quarter of 1994,
and was partially offset by higher Trident incentive fees.
Tactical sales declined 3 percent to $89.5 million from $92
million last year. Tactical income of $1.3 million increased $.9
million over 1993. The continuing low operating margins reflect
reduced unit volumes and a competitive pricing environment.
Ordnance sales decreased 26 percent to $121.4 million
compared to $164.4 million last year and operating income of $6.6
million decreased $3.6 million from the prior year. The decrease
in sales and income resulted from lower operating levels at the
government-owned, company-operated ammunition plants combined
with lower operating margins.
Fastening systems segment sales of $175.7 million increased
11 percent for the year while operating income of $16.9 million
increased $6.8 million or 67 percent over last year's $10.1
million, excluding a $2.3 million charge in 1993 for severance
and restructuring costs. Higher domestic industrial sales
combined with lower costs and improved efficiency contributed to
the increase in income. Sales and income from international
operations continue to be negatively affected by the recession in
Europe.
General and administrative expense for the year of $69.6
million decreased slightly from $70.2 million in 1993. The $11.1
million decrease in interest expense resulted primarily from the
repayment of $100 million long-term debt at the end of last year.
The tax provision for income taxes reflects effective rates
of 38.3 percent in 1994 and 37.3 percent in 1993.
Results of Operations
Fiscal Year 1993 Compared to Fiscal Year 1992
Net income for 1993 of $63.8 million or $3.13 per share
increased 1 percent over $63 million or $3.12 per share for 1992.
Operating results for 1993 were favorably affected by certain
tax-related items.
Annual sales were $1,201.7 million, an 8 percent decrease
from $1,311.7 million in 1992. A $162 million or 13 percent
decline in aerospace sales was partially offset by a $52 million
increase in Huck fastening systems sales due to the inclusion of
twelve months of sales in 1993 compared to eight months of sales
in fiscal year 1992. Huck was purchased on November 1, 1991.
Space sales of $519.3 million were 7 percent lower than in
1992, resulting primarily from slightly lower production on the
Space Shuttle RSRM and reduced ASRM
89
<PAGE>
nozzle development activity. Operating income increased 5
percent to $61.5 million as a result of higher margins on the
Space Shuttle RSRM program.
Strategic sales declined 11 percent to $267.1 million from
$300.6 million in 1992; however, operating income increased 17
percent to $45.8 million. The sales decrease was attributed to a
cost underrun on the Peacekeeper program, reduced Peacekeeper
component deliveries, and reduced sales on the SICBM and Trident
programs. The SICBM program was terminated during the third
quarter of the prior fiscal year. Higher operating margins
realized on the Peacekeeper and Trident programs offset the
effect of the sales decrease.
Tactical sales of $92 million declined 29 percent from 1992
while operating income of $.4 million compares to income of $8.2
million in 1992. The sales decline was caused principally by a
decrease in HARM and Mark 70 deliveries. Reduced program
operating margins also contributed to the decrease in operating
income.
Ordnance sales of $164.4 million decreased 25 percent and
related operating income decreased 27 percent to $10.1 million.
The decline in sales and income resulted from lower operating
levels at the Louisiana plant and significantly reduced flare
deliveries.
The Company's results in each of its propulsion systems
businesses were favorably affected during 1993 by recoveries in
U.S. Government revenues of approximately $13 million of
tax-related costs expensed in prior years.
Huck's fastening systems sales of $158.9 million for the
twelve-month period ended June 30, 1993, compares to sales of
$106.9 million for the eight-month period ended June 30, 1992.
Fastening systems income for the current twelve-month period of
$7.8 million, after deducting a $2.3 million charge for severance
and restructuring costs, decreased in comparison to income of
$8.7 million for the eight-month period in 1992. Fastening
systems income does not include an allocation of Corporate
expense. Significantly higher industrial sales offset reduced
aerospace sales. Income from international operations continues
to be negatively affected by the recession in Europe.
General and administrative expense for the year of $70.2
million increased $10.6 million, all of which was due to the
inclusion of twelve months of Huck general and administrative
expense versus eight months of Huck expense in fiscal year 1992.
For comparative purposes, general and administrative expense for
1993, excluding Huck, was $32.5 million, a 6 percent decrease
from 1992. Increases in interest expense and research and
development costs are attributed to Huck operations. Interest
income declined $2.8 million during 1993 as a result of lower
interest rates.
The provision for income taxes reflects effective rates of
37.3 percent in 1993 and 38.1 percent in 1992.
Future Operations/Business Environment
The Company's major business is the production of
high-technology solid propellant motors for space and defense
applications. Production of and services for the RSRM
represented 44 percent of 1994 total Company sales and 49 percent
of operating income. The current contract with NASA extends the
Company's production of the RSRM through fiscal year 2000.
NASA's continued emphasis on cost containment should produce a
slight decrease in RSRM sales in 1995. However, the opportunity
under contract incentives to reduce costs over the life of the
program provides for higher margin opportunities in the future.
The level of U.S. Government funding of Space programs may impact
the Space Shuttle launch schedule. Management believes that its
production rate will stay at the current planned level of eight
per year. A significant reduction in the launch schedule could
lower the Company's production rates and would reduce related
revenue and profits to the Company. The Company believes there
are long-term growth opportunities in the expendable launch
vehicle area and is developing new solid rocket motors, including
the Castor 120TM motor, for this market.
The ASRM program, which was being developed by a competitor
to replace Thiokol's current RSRM, was canceled by the U.S.
Government during 1994. The Company's contract for the ASRM
nozzle development generated approximately $1 million in sales
this year and $11 million in sales in 1993. The cancellation of
the ASRM will have a minor impact on sales and income over the
next few years.
Due to reductions in U.S. Government defense spending, the
Company expects its defense sales and income to continue to
decline in fiscal year 1995 and 1996. The Peacekeeper program
was completed during the first quarter of 1994. Trident sales
will likely decrease as missile production is reduced in future
years. Decreased defense spending has created a highly
competitive pricing environment for tactical programs and a
decline in new program opportunities. The propulsion industry is
characterized by overcapacity and continued industry
consolidation. Management believes it is well positioned to be a
strong competitor in this environment. Sales from the
company-operated U.S. Army ordnance plants will decline
significantly in 1995. Both of the company-operated plants are
on the Army's closure list but will be maintained in an inactive
status for an indefinite period. All U.S. Army directed
production is expected to be completed during fiscal year 1995.
The Company has negotiated long-term contracts for maintaining
the plants, managing inventory and performing other non-
90
<PAGE>
production related projects. The Company has been successful in
competing for a small number of Army production contracts which
will be manufactured at the Longhorn plant. In response to this
current environment, the Company continues to downsize operations
to match current and projected operating conditions by reductions
in employment, consolidation of facilities, and related spending
reductions.
The Company is pursuing demilitarization opportunities in
the United States and internationally. In addition, the Company
was awarded a contract to develop a propulsion replacement
program for Minuteman solid rocket motors beginning in fiscal
year 1995.
Huck International, Inc., the Company's fastening systems
segment, continues to improve its position in both industrial and
aerospace fastening systems markets. Huck's industrial fasteners
recorded record sales in 1994 and that trend is expected to
continue. The aerospace segment is influenced by build schedules
of commercial aircraft which have flattened out but are
anticipated to increase over the next several years. Military
aircraft spending is expected to continue at a low production
level. The addition of the Deutsch Fastener Manufacturing
Company in January, 1994, provides Huck a broader product line
for the commercial aircraft business.
The IRS has completed its examination of federal income tax
returns through fiscal year 1985. Based upon preliminary
understandings, substantial tax refunds and interest payments may
be received by the Company. Such interest and a portion of the
taxes refunded will be recognized as income as audits are
finalized.
Other Matters
The Company has operating leases, the majority of which are
short-term and real estate related. Rental expense amounted to
$9.9 million in 1994. Renewal and purchase options are available
on certain of these leases. Future minimum rental commitments
under non-cancelable operating leases are not significant.
The Company is involved in various legal proceedings and
uncertainties including those related to environmental matters as
discussed in Notes K and L to the consolidated financial
statements.
Liquidity and Capital Resources
Cash flow provided by operations was $132.7 million compared
to $21.6 million in 1993. The increase resulted principally
from: 1) an $85.0 million decrease in income tax payments from
1993, 2) a $31.1 decrease in receivables this year compared to a
$29.6 million increase in receivables in 1993, and 3) a $2.6
million increase in accounts payable and accrued expenses
compared to a $28.1 million decrease last year. Cash flow
decreased from the prior year as a result of a $45.4 million
decrease in inventories and prepaid expenses in 1993 compared to
a $.1 million increase this year.
Investing activities, which consumed approximately $32.1
million in cash this year, include purchases of property, plant
and equipment and a small acquisition. During 1994 the Company
acquired certain assets of Deutsch Fastener Manufacturing Company
of Lakewood, California. Deutsch Fastener, with annual sales of
approximately $15 million, produces a broad line of high
performance fasteners.
During 1994 the Company repurchased 2,034,238 shares ($51.7
million) of common stock compared to 574,800 shares ($11.6
million) in 1993. Earnings per share increased 4.7 percent
compared to 1993 due to the reduction in outstanding shares. In
June 1994 the Board of Directors authorized the repurchase of up
to 1.5 million additional shares of common stock. Repayment of
long-term debt declined from $102.8 million in 1993 to $34.7
million in 1994.
Thiokol's current ratio at June 30, 1994, of 2.5 represented
an increase from 2.2 at June 30, 1993. Working capital at June
30, 1994, of $216.5 million decreased $1.2 million since June 30,
1993.
As a result of the ASRM cancellation, the Company has agreed
to transfer its RSRM nozzle manufacturing operation in Utah to a
new facility at NASA's Yellow Creek, Mississippi complex. The
unfinished Yellow Creek facility was being constructed to
manufacture the ASRM. The use of the new Yellow Creek nozzle
facility will allow the Company to enhance its nozzle
manufacturing process and strengthen its position in the solid
propulsion industry. An estimated $80 million of capital
investment will be expended to complete the nozzle facility over
the next few years. The Company has current outstanding
authorizations for capital expenditures of approximately $100
million.
Future estimated cash flow from operations, current
financial resources, and available credit facilities are expected
to be adequate to fund the Company's anticipated working capital
requirements, debt repayment, capital expenditures, dividend
payments, and stock repurchase program for fiscal year 1995.
During 1994 the Company negotiated a new $100 million
revolving credit facility with a group of banks which expires in
September 1997. As of June 30, 1994, no funds had been drawn on
this credit facility.
Dividends and Recent Market Prices
Dividends paid were 68 cents, 47 cents, and 36 cents per
share for 1994, 1993, and 1992, respectively.
The high and low market prices of Thiokol common stock for
fiscal year 1994 were $29.00 per share and $21.13 per share,
respectively. The principal market for the Company's common
stock is the New York Stock Exchange and prices are based on the
Composite Tape (ticker symbol TKC).
91
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL HIGHLIGHTS
Fiscal Year 1994 Fiscal Year 1993
Three Months Ended Three Months Ended
------------------------------ ----------------------------
(in millions, except
per share data) Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $279.4 $266.1 $240.7 $257.7 $327.3 $277.9 $307.5 $289.0
Gross profit 51.7 45.6 41.9 44.3 58.9 49.2 49.5 47.7
Income (loss) before cumulative
effect of accounting changes 16.1 15.4 14.8 14.0 20.3 15.4 14.6 13.5
Net income (loss) (1) 16.1 15.4 14.8 (49.8) 20.3 15.4 14.6 13.5
Income (loss) per share
before cumulative effect
of accounting changes .84 .77 .73 .68 .98 .76 .72 .67
Net income (loss) per
share (1)(2) .84 .77 .73 (2.42) .98 .76 .72 .67
Cash dividends paid per share .17 .17 .17 .17 .17 .10 .10 .10
Market price
High 27.00 29.00 26.75 24.38 22.25 19.00 17.63 17.75
Low 22.88 25.50 21.13 21.13 18.25 16.00 14.88 14.13
- - ------------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
(dollars in millions,
except per share data) 1994 1993 1992 1991 1990
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales by industry segment
Propulsion Systems $ 868.2 $1,042.8 $1,204.8 $1,255.4 $1,181.4
Fastening Systems (3) 175.7 158.9 106.9
-------------------------------------------------------
Consolidated net sales 1,043.9 1,201.7 1,311.7 1,255.4 1,181.4
Interest and other income 13.7 7.8 10.5 14.4 10.2
Cost of sales and other expenses 945.4 1,082.3 1,196.2 1,159.5 1,101.1
Interest expense 14.4 25.5 24.2 22.3 22.3
Income before cumulative effect of
accounting changes 60.3 63.8 63.0 53.4 41.4
FINANCIAL
Total assets $ 800.5 $ 834.2 $ 956.1 $ 849.1 $ 816.2
Working capital 216.5 217.7 138.8 356.2 317.1
Current ratio 2.5 2.2 1.4 3.7 3.1
Short-term and long-term debt $ 115.1 $ 149.6 $ 245.8 $ 220.0 $ 220.0
Debt-to-equity 29.9% 33.8% 63.5% 67.5% 80.3%
Stockholders' equity $ 384.5 $ 443.2 $ 387.3 $ 325.7 $ 274.0
Stockholders' equity per share 20.52 21.94 19.44 16.69 14.26
Return on stockholders' equity (4) 13.6% 16.5% 19.3% 19.5% 17.4%
Capital expenditures $ 21.2 $ 19.8 $ 37.4 $ 40.9 $ 29.4
Provision for depreciation 36.0 38.6 39.0 36.7 39.3
Cash dividends paid 13.3 9.4 7.2 5.7 5.7
Cash dividends declared per share .68 .47 .36 .30 .30
(LOSS) INCOME PER SHARE
Income before cumulative effect
of accounting changes $ 3.02 $ 3.13 $ 3.12 $ 2.75 $ 2.15
Cumulative effect of accounting
changes (3.20)
----------------------------------------------------
Net (loss) income $ (.18) $ 3.13 $ 3.12 $ 2.75 $ 2.15
GENERAL
Average number of common
and common equivalent
shares outstanding (in thousands) 19,973 20,384 20,151 19,412 19,277
Approximate number of stockholders
of record 7,100 8,533 9,107 9,700 10,430
Approximate number of employees 8,000 9,300 11,200 11,500 11,500
- - ------------------------------------------------------------------------------------------
1) The first quarter of 1994 includes the cumulative effect of accounting changes of $63.8
million or $3.10 per share.
2) The sum of the 1994 quarterly net income or loss per share does not equal the annual
net loss per share due to the significant impact on the first quarter net loss
resulting from the adoption of SFAS No. 106 and SFAS No. 112 concurrent with decreasing
shares outstanding during the year.
3) Represents net sales for an eight-month period in 1992.
4) Based on income before the cumulative effect of accounting changes and calculated on
beginning of year stockholders' equity.
92
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIOKOL
CORPORATION FINANCIAL STATEMENTS INCORPORATED BY REFERENCE AS EXHIBIT 13 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<CASH> 40,129
<SECURITIES> 0
<RECEIVABLES> 196,194
<ALLOWANCES> 780
<INVENTORY> 121,863
<CURRENT-ASSETS> 361,902
<PP&E> 624,129
<DEPRECIATION> 302,059
<TOTAL-ASSETS> 800,486
<CURRENT-LIABILITIES> 145,395
<BONDS> 88,052
<COMMON> 20,538
0
0
<OTHER-SE> 363,997
<TOTAL-LIABILITY-AND-EQUITY> 800,486
<SALES> 1,043,893
<TOTAL-REVENUES> 1,057,568
<CGS> 860,403
<TOTAL-COSTS> 879,253
<OTHER-EXPENSES> 66,200
<LOSS-PROVISION> 312
<INTEREST-EXPENSE> 14,347
<INCOME-PRETAX> 97,768
<INCOME-TAX> 37,445
<INCOME-CONTINUING> 60,323
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 63,838
<NET-INCOME> (3,515)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
