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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
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Commission File No. 1-8461
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GULFSTREAM AEROSPACE CORPORATION
P. O. Box 2206
500 Gulfstream Road
Savannah, Georgia 31402-2206
Telephone: (912) 965-3000
State of incorporation: Delaware
IRS identification number: 13-3554834
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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
______ ---
As of May 1, 1998, there were 72,680,919 shares of Gulfstream
Aerospace Corporation Common Stock outstanding.
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GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Page No.
---------
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets
March 31, 1998 and December 31,
1997............................................ 3
Consolidated Statements of Income
Three months ended March 31, 1998 and
1997............................................ 4
Consolidated Statement of Stockholders' Equity
Three months ended March 31,
1998............................................ 5
Consolidated Statements of Cash Flows
Three months ended March 31, 1998 and
1997............................................ 6
Notes to Consolidated Financial
Statements..................................... 7-9
Item 2. Management's Discussion and Analysis of Financial 10-12
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................... 13
Item 2. Changes in Securities................................ 13
Item 3. Defaults upon Senior Securities....................... 13
Item 4. Submission of Matters to a Vote of Security
Holders.......................................... 13
Item 5. Other Information...................................... 13
Item 6. Exhibits and Reports on Form 8-K....................... 14
Signature.............................................. 14
GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
March 31, December 31,
1998 1997
----------- -----------
Assets
Cash and cash equivalents $ 183,214 $ 306,451
Accounts receivable (less allowance
for doubtful accounts:
$1,109 and $1,144) 141,445 177,228
Inventories 708,545 629,876
Deferred income taxes 19,372 33,795
Prepaids and other assets 7,466 11,318
---------- ----------
Total current assets 1,060,042 1,158,668
Property and equipment, net 133,744 134,611
Tooling, net of accumulated
amortization: $9,500 and $7,680 41,759 43,471
Goodwill, net of accumulated
amortization: $8,735 and $8,433 38,655 38,957
Other intangible assets, net 49,217 50,485
Deferred income taxes 31,700 32,950
Other assets and deferred charges 14,528 14,525
---------- ----------
Total Assets $1,369,645 $1,473,667
========== ==========
Liabilities and Stockholders' Equity
Current portion of long-term debt $ 75,000 $ 75,000
Accounts payable 164,854 147,618
Accrued liabilities 91,450 93,798
Customer deposits--current portion 471,538 546,441
------------- -------------
Total current liabilities 802,842 862,857
Long-term debt 286,250 305,000
Accrued postretirement benefit cost 116,885 115,405
Customer deposits--long-term 85,869 88,075
Other long-term liabilities 8,826 9,573
Commitments and contingencies
Stockholders' equity
Common stock; $.01 par value;
300,000,000 shares authorized;
87,133,546 shares issued
in 1998 and 86,522,089 share
issued in 1997 871 865
Additional paid-in capital 380,237 370,258
Accumulated deficit (185,479) (225,960)
Minimum pension liability (762) (762)
Unamortized stock plan expense (826) (1,155)
Less: Treasury stock:
14,463,439 shares in 1998 and
11,978,439 shares in 1997 (125,068) (50,489)
------------- -------------
Total stockholders' equity 68,973 92,757
------------- -------------
Total Liabilities and Stockholders'
Equity $ 1,369,645 $ 1,473,667
============= =============
See notes to consolidated financial statements
GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three months ended
March 31,
----------------------
1998 1997
---------- ----------
Net revenues $ 503,407 $ 375,626
Cost and expenses
Cost of sales 404,069 305,152
Selling and administrative 25,942 22,615
Stock option compensation expense 329 522
Research and development 1,945 (1,520)
Amortization of intangibles
and deferred charges 1,876 1,820
--------- ---------
Total costs and expenses $ 434,161 $ 328,589
--------- ---------
Income from operations 69,246 47,037
Interest income 2,522 3,123
Interest expense (6,999) (8,130)
--------- ---------
Income before income taxes 64,769 42,030
Income tax expense 24,288 2,000
Net income $ 40,481 $ 40,030
========= =========
Earnings per share:
Net income per share-basic $ .56 $ .54
========= =========
Net income per share-diluted $ .54 $ .51
========= =========
See notes to consolidated financial statements
GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Unamortized
Additional Minimum Stock Total
Common Paid-In Accumulated Pension Plan Treasury Stockholders'
Stock Capital Deficit Liability Expense Stock Equity
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS OF
DECEMBER 31, 1997 $865 $370,258 $(225,960) $(762) $(1,155) $(50,489) $92,757
Net income 40,481 40,481
Amortization of stock plan
expense 329 329
Tax benefit of exercised
common stock options 7,989 7,989
Exercise of common stock
options 6 1,990 1,996
Purchase of treasury stock (74,579) (74,579)
--------------------------------------------------------------------------
BALANCE AS OF
MARCH 31, 1998 $871 $380,237 $(185,479) $(762) $ (826) $(125,068) $68,973
==== ======== ========= ===== ====== ========= =======
</TABLE>
See notes to consolidated financial statements
GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended
March 31,
-----------------------
1998 1997
----------- ----------
Cash Flows from Operating Activities
Net income $ 40,481 $ 40,030
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 8,292 7,832
Postretirement benefit cost 1,480 1,799
Non-cash stock option compensation
expense 329 522
Deferred income tax benefit 23,662
Other, net 86 (1,595)
Change in assets and liabilities:
Accounts receivable 35,697 13,903
Inventories (78,669) 25,732
Prepaids, other assets, and deferred charges 3,543 (1,343)
Accounts payable and accrued liabilities 14,888 (22,217)
Customer deposits (77,109) (95,248)
Other long-term liabilities (747) (157)
-------- --------
Net Cash Used in Operating Activities (28,067) (30,742)
Cash Flows from Investing Activities
Expenditures for property and equipment (3,729) (2,267)
Expenditures for tooling (108) (160)
-------- --------
Net Cash Used in Investing Activities (3,837) (2,427)
Cash Flows from Financing Activities
Proceeds from exercise of stock options 1,996 507
Principal payment of long-term debt (18,750)
Purchase of treasury stock (74,579)
-------- --------
Net Cash Provided by (Used in)
Financing Activities (91,333) 507
-------- --------
Decrease in cash and cash equivalents (123,237) (32,662)
Cash and cash equivalents, beginning of period 306,451 233,172
------- -------
Cash and cash equivalents, end of period $183,214 $200,510
======= =======
See notes to consolidated financial statements
GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules of the Securities and
Exchange Commission ("SEC") and, in the opinion of the Company, include all
adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of financial position, results of operations and cash
flows. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules.
The operating results for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the entire year
ended December 31, 1998. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
for the year ended December 31, 1997 included in the Company's 1997 Annual
Report to Stockholders.
NOTE 2. Earnings per Share
Basic earnings per share were computed by dividing net income by
the weighted average common shares outstanding during the periods
presented. Diluted earnings per share were computed by dividing net income
by the weighted average common shares and potential common shares
outstanding. The Company adopted Financial Accounting Standards Board SFAS
No. 128, Earnings per Share, effective December 15, 1997. As a result, all
earnings per share information for prior periods have been restated to
conform to the requirements of SFAS No. 128.
The following table sets forth the reconciliation of per share
data as of:
Three months ended
March 31,
---------------------
1998 1997
---------- ---------
Net Income $40,481 $40,030
======= =======
Basic EPS
Weighted average common shares outstanding 72,533 73,920
------- -------
Diluted EPS
Incremental shares from stock options 2,818 4,637
------- -------
Weighted average common and common
equivalent shares outstanding 75,351 78,557
======= =======
Earnings Per Share:
Net income per share - basic $ .56 $ .54
======= =======
Net income per share - diluted $ .54 $ .51
======= =======
On a pro forma basis, assuming an effective tax rate of 37.5%,
the Company's basic and diluted earnings per share is as follows:
Three months ended
March 31,
----------------------
1998 1997
---------- -----------
Pro forma Earnings Per Share:
Net income per share - basic $.56 $ .36
==== =======
Net income per share - diluted $.54 $ .33
==== =======
GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. Inventories
Inventories consisted of the following at:
March 31, December 31,
1998 1997
----------- ------------
(In thousands)
Work in process $352,626 $330,155
Raw materials 142,581 134,973
Vendor progress payments 74,876 60,606
Pre-owned aircraft 138,462 104,142
$708,545 $629,876
======== ========
NOTE 4. Income Taxes
The Company recorded an income tax provision of $24.3 million in
the first quarter of 1998 based on an estimated effective tax rate of 37.5%
compared with a provision of income taxes of $2.0 million, representing
alternative minimum taxes, in the first quarter 1997. Prior to September
30, 1997, the Company recorded no provision for income taxes, other than
alternative minimum taxes, principally as a result of utilization of net
operating loss carryforwards. The Company had available at March 31, 1998 a
net operating loss carryforward for regular federal income tax purposes of
approximately $11.7 million, which will begin expiring in 2006.
NOTE 5. Commitments and Contingencies
In the normal course of business, lawsuits, claims and
proceedings have been or may be instituted or asserted against the Company
relating to various matters, including products liability. Although the
outcome of litigation cannot be predicted with certainty and some lawsuits,
claims or proceedings may be disposed of unfavorably to the Company,
management has made provision for all known probable losses related to
lawsuits and claims and believes that the disposition of all matters which
are pending or asserted will not have a material adverse effect on the
financial statements of the Company.
The Company is involved in tax audits by the Internal Revenue
Service covering the years 1990 through 1994. The revenue agent's reports
include several proposed adjustments involving the deductibility of certain
compensation expense, items relating to the initial capitalization of the
Company, the allocation of the original purchase price for the acquisition
by the Company of the Gulfstream business, including the treatment of
advance payments with respect to and the cost of aircraft that were in
backlog at the time of the acquisition, and the amortization of amounts
allocated to intangible assets. The Company believes that the ultimate
resolution of these issues will not have a material adverse effect on its
financial statements because the financial statements already reflect what
the Company currently believes is the expected loss of benefit arising from
the resolution of these issues.
The Company is currently engaged in the monitoring and cleanup of
certain ground water at its Savannah facility under the oversight of the
Georgia Department of Natural Resources. Expenses incurred for cleanup have
not been significant. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be
reasonably estimated. The Company believes the remainder of the Savannah
facility, as well as other Gulfstream properties, are being carefully
monitored and are in substantial compliance with current federal, state and
local environmental regulations. The Company believes the liabilities, if
any, that will result from the above environmental matters will not have a
material adverse effect on its financial statements.
GULFSTREAM AEROSPACE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. Common Stock Repurchases
During January 1998, the Company began the repurchase of up to
$200 million of its common stock. The repurchase will be funded from the
Company's available cash. As of March 31, 1998, the Company had repurchased
approximately 2.5 million shares, at an average price of $30.01 per share,
for an aggregate amount of $74.6 million.
NOTE 7. Change in Accounting Principles
Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income.
This Statement requires disclosure of total nonowner changes in
stockholders' equity, which is defined as net income plus certain direct
adjustments to stockholders' equity such as pension liability adjustments.
For the first quarter of 1998 and 1997, the Company had no such
adjustments.
NOTE 8. New Accounting Standard
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which is effective no later than for the Company's 1998 fiscal
year-end. Management believes that the adoption of this statement will not
have a material effect on the Company's consolidated financial statements.
NOTE 9. Subsequent Event
On April 21, 1998, the Company filed a registration statement on
Form S-3 with the Securities and Exchange Commission for the sale of
18,000,000 shares of common stock in a secondary offering (the "Offering").
The Company will not receive any of the proceeds from the sale of shares in
the Offering. In connection with the Offering, certain current and former
directors and employees of, and advisors to, the Company are expected to
exercise stock options to purchase, in the aggregate, approximately 2.9
million shares of common stock from the Company for an aggregate exercise
price of approximately $28.7 million; all of such shares are expected to be
sold in the Offering.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Notes to Consolidated Financial Statements beginning on page 7 and with
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) and the audited consolidated financial statements and
notes to consolidated financial statements appearing in the Company's 1997
Annual Report to Stockholders.
COMPARISON OF RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1998
AND 1997
Net Revenues. Total net revenues increased by $127.8 million, or
34.0%, to $503.4 million in the first quarter of 1998 from $375.6 million
in the first quarter of 1997. The significant increase resulted primarily
from an increase in revenues from green aircraft of $62.8 million as the
Company delivered 13 aircraft, seven Gulfstream Vs and six Gulfstream
IV-SPs, as compared with 11 aircraft, six Gulfstream Vs and five Gulfstream
IV-SPs, in the first quarter of 1997. In addition, revenues associated with
the sale of pre-owned aircraft increased by $47.6 million as two additional
units were delivered in 1998. Also contributing to the increase in revenues
was an increase in completion revenues of $13.9 million, resulting from
Gulfstream V completion deliveries.
Cost of Sales. Total cost of sales increased to $404.1 million in
the first quarter of 1998 from $305.2 million in the first quarter of 1997.
The increase was a result of the higher number of green, pre-owned and
completion aircraft deliveries discussed above. Excluding pre-owned
aircraft, which generally are sold at break-even levels, the gross profit
percentage for the first quarter of 1998 was 22.1% compared to 20.0% for
the first quarter of 1997. This increase is primarily attributable to
reductions in Gulfstream V aircraft production costs.
Selling and Administrative Expense. Selling and administrative
expense increased by $3.3 million, or 14.7% to $25.9 million in the first
quarter of 1998 from $22.6 million in the first quarter of 1997, and as a
percentage of net revenues, decreased to 5.2% in the first quarter of 1998
from 6.0% in the first quarter of 1997 due to the higher level of revenues.
Research and Development Expense. Research and development
expense was $1.9 million in the first quarter of 1998, as compared to
$(1.5) million in the first quarter of 1997. Research and development
expense for 1997 is net of a $10.0 million credit for launch assistance
funds received from vendors participating in the development of the
Gulfstream V. Research and development expenditures in 1998 and the
near-term future are expected to stem principally from product improvements
and enhancements, rather than new aircraft development.
Interest Income and Expense. Interest income decreased by $0.6
million to $2.5 million in the first quarter of 1998 from $3.1 million in
the first quarter of 1997 as a result of lower average cash balances the
Company had invested during 1998 compared to the same period of 1997.
Interest expense decreased by $1.1 million to $7.0 million for the first
quarter of 1998. This decrease is attributable to both a decrease in
average borrowings and lower weighted average interest rates.
Income Taxes. The Company recorded an income tax provision of
$24.3 million in the first quarter of 1998 based on an estimated annual
effective tax rate of 37.5% compared with a provision of income taxes of
$2.0 million, representing alternative minimum taxes, in the first quarter
1997. Prior to September 30, 1997, the Company recorded no provision for
income taxes, other than alternative minimum taxes, principally as a result
of utilization of net operating loss carryforwards. The Company had
available at March 31, 1998 a net operating loss carryforward for regular
federal income tax purposes of approximately $11.7 million which will begin
expiring in 2006.
Earnings Per Share. The Company reported diluted earnings per
share of $0.54 for the first quarter of 1998, up from $0.51 for the first
quarter of 1997. On a pro forma fully - taxed basis, assuming an effective
tax rate of 37.5%, comparable diluted earnings per share would have been
$0.33 for the first quarter of 1997.
Liquidity and Capital Resources
The Company's liquidity needs arise from working capital
requirements, capital expenditures, principal and interest payments on
long-term debt and the Company's share repurchase program described below.
During the first quarter of 1998 the Company relied on its available cash
balances to fund these needs.
The Company had cash and cash equivalents totaling $183.2 million
at March 31, 1998 down from $306.4 million at December 31, 1997. During the
first quarter of 1998, net cash used in operating activities was $28.1
million compared with the first quarter of 1997 when the Company used $30.7
million in cash from operations.
During the first quarter of 1998, additions to property and
equipment amounted to $3.7 million. At March 31, 1998, the Company was not
committed to the purchase of any significant amount of property and
equipment. As a result of the Company's strategic initiative to increase
its annual production rate to approximately 60 aircraft by 1999, the
Company's capital expenditures increased $15 million in 1997, and in 1998
are expected to increase by approximately another $20 million above
previously planned annual levels of approximately $15 million. During the
first quarter of 1998, the Company completed a new $8.5 million paint
facility located at its Long Beach, California facility. This facility is
part of the Company's 60 aircraft plan and will allow the Company to double
its present volume of painting new, pre-owned and customer aircraft. The
Company continually monitors its capital spending in relation to current
and anticipated business needs. As circumstances dictate, facilities are
added, consolidated or modernized.
In January 1998, the Company established a program to repurchase
up to $200 million of its common stock. The purchases will be made from
time to time in the open market or through negotiated transactions as
market conditions warrant. The Company expects to fund the stock purchases
from cash on hand. As of March 31, 1998, approximately 2.5 million shares,
at an average price of $30.01 per share, had been repurchased under this
plan for an aggregate amount of $74.6 million.
At March 31, 1998, borrowings under the Company's credit
facilities were $361.3 million, with available borrowings of $172.6 million
under a revolving credit facility. Scheduled repayments under the term
facility are $75.0 million in each of the years 1998 through 2001, and
$80.0 million in 2002. The Credit Agreement contains customary affirmative
and negative covenants including restrictions on the ability of the Company
and its subsidiaries to pay cash dividends, as well as financial covenants
under which the Company must operate. As of March 31, 1998, the Company was
in compliance with the covenants of its existing credit agreement.
The Company's principal source of liquidity both on a short-term
and long-term basis is cash flow provided by operations, including customer
progress payments and deposits on new aircraft orders. Occasionally,
however, the Company may borrow against the credit agreement to supplement
cash flow from operations. The Company believes that based upon its
analysis of its consolidated financial position, its cash flow during the
past 12 months and the expected results of operations in the future,
operating cash flow and available borrowings under the credit agreement
will be adequate to fund operations, capital expenditures and debt service
for at least the next 12 months. The Company intends to repay its remaining
indebtedness primarily with cash flow from operations. There can be no
assurance, however, that future industry specific developments or general
economic trends will not adversely affect the Company's operations or its
ability to meet its cash requirements.
As of March 31, 1998, in connection with orders for 24 Gulfstream
V aircraft in the backlog, the Company has offered customers trade-in
options (which may or may not be exercised by the customer) under which the
Company will accept trade-in aircraft (primarily Gulfstream IVs and IV-SPs)
at a guaranteed minimum trade-in price. Additionally, in connection with
recorded sales of new aircraft, the Company has agreed to accept pre-owned
aircraft with trade-in values totaling $203.7 million as of March 31, 1998.
Of this amount, $47.1 million is under contract for resale to pre-owned
aircraft customers. Management believes that the fair market value of all
such aircraft exceeds the specified trade-in value.
On December 24, 1997, the Company executed final documents with
the Pension Benefit Guaranty Corporation (the "PBGC") concerning funding of
the Company's defined benefit pension plans. The terms were essentially the
same as those set out in the agreement in principle reached between the
PBGC and the Company during October 1996. Pursuant to this agreement, the
Company contributed $25.0 million in 1997, and has agreed to contribute a
total of $25.0 million annually (to be paid quarterly in equal
installments) from 1998 through 2000 to its pension plans which payments
are expected to result in such plans being fully funded. The payments to be
made under this agreement were already part of the Company's overall
financial planning, and therefore, are not expected to have a material
adverse effect on the Company's financial statements. The funding required
under this agreement will not result in any increase in the Company's
annual pension expense.
Contractual Backlog
At March 31, 1998, Gulfstream had a firm contract backlog of
approximately $2.8 billion of revenues, representing a total of 88
aircraft. The Company includes an order in backlog only if the Company has
entered into a purchase contract (with no contingencies) with the customer
and has received a significant (generally non-refundable) deposit from the
customer.
During the quarter ended March 31, 1998, the Company also signed
a contract for 12 Gulfstream IV-SPs to expand its highly successful
Gulfstream Shares fractional ownership program to the Middle East region.
This contract is valued at approximately $335 million and is not included
in the Company's backlog. In 1993, the Company established very stringent
deposit requirements for recording aircraft into its backlog. The contract
for the Middle East Shares expansion includes modestly different deposit
requirements early in the program. The Company has decided for the initial
phase of the program to record these orders when the aircraft are
delivered. Including the Middle East contract, the Company has a total of
100 aircraft, valued at approximately $3.1 billion of potential future
revenues, under contract.
The Company continually monitors the condition of its backlog and
believes, based on the nature of its customers and its historical
experience, that there will not be a significant number of cancellations.
However, to the extent that there is a lengthy period of time between a
customer's aircraft order and its delivery date, there may be increased
uncertainty as to changes in business and economic conditions which may
affect customer cancellations.
Outlook
The Company plans to deliver 58 green aircraft in fiscal 1998 and
64 in fiscal 1999. Completions are expected to nearly double in 1998. The
gross margins are expected to improve from 20% in 1997 to the mid-20s by
the end of 1998. Based on projections of increasing aircraft production and
improving margins, Gulfstream expects 1998 diluted earnings per share of
approximately $2.85. The Company also expects diluted earnings per share to
increase 15% per year in 1999 and 2000.
Forward-Looking Information Is Subject to Risk and Uncertainty
Certain statements contained in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations", including the
statements under the heading "Outlook", as well as other statements
elsewhere in this Form 10-Q, contain forward-looking information. These
forward-looking statements are subject to risks and uncertainties. Actual
results might differ materially from those projected in the forward-looking
statements. Additional information concerning factors that could cause
actual results to materially differ from those in the forward-looking
statements is contained in Exhibit 99.1 to the Company's Form 10-K for the
year ended December 31, 1997, incorporated herein by reference.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to security holders during the quarter
ended March 31, 1998.
Item 5. Other Information
Certain statements contained in or incorporated by reference in this
Form 10-K contain forward-looking information. These forward-looking
statements are subject to risks and uncertainties. Actual results
might differ materially from those projected in the forward-looking
statements. Additional information concerning factors that could
cause actual results to materially differ from those contained in
the forward-looking statements is contained in Exhibit 99,
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995 to the
Company's previously filed Form 10-K for the year ended December 31,
1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.31 Amendment dated February 26, 1998 to
Credit Agreement among Gulfstream Delaware
Corporation, The Chase Manhattan Bank, and
the banks and other financial institutions
parties thereto.
Exhibit 27.1 Financial Data Schedule.
(b) Report on Form 8-K
On February 10, 1998 the Company filed a report on Form 8-K,
reporting under Items 5 and 7, disclosing the Company's
Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act
of 1995, and the Press Release issued February 10, 1998
pertaining to the Company's fiscal 1997 financial results.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 8, 1998
GULFSTREAM AEROSPACE CORPORATION
/s/ Chris A. Davis
----------------------------------
Chris A. Davis
Executive Vice President,
Chief Financial Officer and
Secretary
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
Exhibits
Exhibit 10.31 Amendment dated February 26, 1998 to Credit
Agreement among Gulfstream Delaware
Corporation, The Chase Manhattan Bank,
and the banks and other financial institutions
parties thereto.
Exhibit 27.1 Financial Data Schedule.
SECOND AMENDMENT
SECOND AMENDMENT, dated as of February 26, 1998 (this
"Amendment"), to the Credit Agreement, dated as of October 16, 1996 (as the
same may be further amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among GULFSTREAM DELAWARE CORPORATION, a
Delaware corporation (the "Company"), the several lenders from time to time
parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York
banking corporation, as administrative agent for the Lenders (in such
capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Company, the Lenders and the Administrative Agent
are parties to the Credit Agreement;
WHEREAS, the Company has requested that the Administrative Agent,
with the consent of the Required Lenders, amend certain provisions of the
Credit Agreement; and
WHEREAS, the Administrative Agent, with the consent of the
Required Lenders, is agreeable to the requested amendments, but only on the
terms and subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the premises herein contained
and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein which are defined in the Credit Agreement are used herein
as therein defined.
2. Amendments to Subsection 8.6. (a) Subsection 8.6(g) of the
Credit Agreement is hereby amended by deleting the word "and" at the end of
such subsection.
(b) Subsection 8.6(h) of the Credit Agreement is hereby amended
by deleting the period at the end of such subsection and substituting in
lieu thereof "; and".
(c) Subsection 8.6 of the Credit Agreement is hereby amended by
adding the following new paragraph (i) to the end of such subsection:
"(i) the Company or any of its Subsidiaries may make loans
and advances to, and investments in, a limited liability company
formed with GATX Capital Corporation as the initial majority
equity investor for the purpose of acquiring, leasing and selling
airplanes manufactured by the Company and its Subsidiaries,
provided that the aggregate amount of such loans, advances and
investments at any one time outstanding shall not exceed (after
giving effect to repayments, distributions, dividends and other
payments in respect thereof) $40,000,000."
3. Amendment to Subsection 8.12. Subsection 8.12 of the Credit
Agreement is hereby amended by deleting clause (b) thereof and substituting
in lieu of the deleted clause (b) the following clause (b):
"(b) as permitted under subsections 8.1(e), 8.3(f), 8.6(a),
and 8.6(i), or"
4. Effectiveness. This Amendment shall become effective as of the
date the Administrative Agent shall have received counterparts hereof duly
executed by the Company, the Administrative Agent and the Required Lenders.
5. Representations and Warranties. The Company hereby represents
and warrants that each of the representations and warranties in or pursuant
to Section 5 of the Credit Agreement or which are contained in any other
Credit Document or in any certificate, document or financial or other
statement furnished by or on behalf of Holdings, the Company or any
Subsidiary thereof shall be, after giving effect to this Amendment, true
and correct in all material respects as if made on and as of the date
hereof (unless such representations and warranties are stated to relate to
a specific earlier date, in which case such representations and warranties
shall be true and correct in all material respects as of such earlier
date).
6. Continuing Effect of Credit Agreement. This Amendment shall
not be construed as a waiver or consent to any further or future action on
the part of the Company that would require a waiver or consent of the
Administrative Agent and/or the Lenders. Except as amended hereby, the
provisions of the Credit Agreement are and shall remain in full force and
effect.
7. Counterparts. This Amendment may be executed in counterparts
and all of the said counterparts taken together shall be deemed to
constitute one and the same instrument.
8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
9. Expenses. The Company agrees to pay or reimburse the
Administrative Agent for all of its out-of-pocket costs and expenses
incurred in connection with the preparation, negotiation and execution of
this Amendment, including, without limitation, the fees and disbursements
of counsel to the Administrative Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed and delivered by their duly authorized officers as
of the date first written above.
GULFSTREAM DELAWARE CORPORATION
By: /s/ Robert L. Williams
------------------------------------
Title: Vice President and Treasurer
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender
By: /s/ William J. Caggiano
-------------------------------------
Title: Managing Director
ARAB BANKING CORP.
By: /s/ Sheldon Tilney
-------------------------------------
Title: Deputy General Manager
BANK OF AMERICA
By: /s/ Debra Seiter
-------------------------------------
Title: Vice President
BANK OF NEW YORK
By: /s/
--------------------------------------
Title:
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ (illegible signature)
---------------------------------------
Title:
CAPTIVA FINANCE LTD.
By: /s/ (illegible signature)
--------------------------------------
Title:
CERES FINANCE, LTD.
By: /s/ (illegible signature)
--------------------------------------
Title:
MEDICAL LIABILITY MUTUAL INSURANCE CO.
By: Chancellor LGT Senior Secured
Management, Inc., as Investment Manager
By: /s/ (illegible signature)
--------------------------------------
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By: /s/ Ridgely Cromwell
--------------------------------------
Title: Associate
By: /s/ Clifford L. Wells
--------------------------------------
Title: Vice President
CITIBANK, N.A.
By: /s/ Charles Foster
--------------------------------------
Title: Attorney-in-Fact
CREDIT LYONNAIS
By: /s/ Philippe Soustra
--------------------------------------
Title: Senior Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ (illegible signature)
--------------------------------------
Title: Vice President and Group Leader
BANKBOSTON, N.A.
By: /s/ Gregory R.D. Clark
--------------------------------------
Title: Managing Director
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Gregory J. Sjullie
--------------------------------------
Title: President
INDUSTRIAL BANK OF JAPAN, LTD.
By: /s/ Takuya Honjo
--------------------------------------
Title: Senior Vice President
KREDIETBANK
By:
--------------------------------------
Title:
LTCB TRUST COMPANY
By: /s/ (illegible signature)
--------------------------------------
Title: Senior Vice President
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Michele Swanson
--------------------------------------
Title: Authorized Signatory
MARINE MIDLAND BANK, N.A.
By: /s/ (illegible signature)
--------------------------------------
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By: /s/ Gilles Marchand, CFA
--------------------------------------
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Gilles Marchand, CFA
--------------------------------------
Title: Authorized Signatory
MITSUBISHI TRUST & BANKING CORP.
By:
--------------------------------------
Title:
NATIONSBANK N.A.
By: /s/ Kathryn W. Robinson
--------------------------------------
Title: Senior Vice President
PNC BANK, N.A.
By: /s/ Robert Mitchell
--------------------------------------
Title: Vice President
SOCIETE GENERALE
By: /s/ (illegible signature)
--------------------------------------
Title: Vice President, Manager
U.S. BANK NATIONAL ASSOCIATION
By:
--------------------------------------
Title:
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By: /s/ Jeffrey W. Maillet
--------------------------------------
Title: Senior Vice President
and Director
The undersigned guarantors hereby
consent to the foregoing Amendment:
GULFSTREAM AEROSPACE CORPORATION, a
Delaware Corporation
By: /s/ Chris A. Davis
--------------------------------------
Title: Executive Vice President
and Chief Financial Officer
GULFSTREAM AEROSPACE CORPORATION, a
Georgia Corporation
GULFSTREAM AEROSPACE CORPORATION, D/B/A
GULFSTREAM AEROSPACE TECHNOLOGIES, an
Oklahoma Corporation
GULFSTREAM AEROSPACE CORPORATION, a
California Corporation
By: /s/ Chris A. Davis
--------------------------------------
Title: Executive Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 183
<SECURITIES> 0
<RECEIVABLES> 141<F1>
<ALLOWANCES> 1<F1>
<INVENTORY> 709
<CURRENT-ASSETS> 1,060
<PP&E> 134<F2>
<DEPRECIATION> 115<F2>
<TOTAL-ASSETS> 1,370
<CURRENT-LIABILITIES> 803
<BONDS> 286
0
0
<COMMON> 1
<OTHER-SE> 68
<TOTAL-LIABILITY-AND-EQUITY> 1,370
<SALES> 503
<TOTAL-REVENUES> 511
<CGS> 404
<TOTAL-COSTS> 434
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 65
<INCOME-TAX> 24
<INCOME-CONTINUING> 40
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40
<EPS-PRIMARY> .56
<EPS-DILUTED> .54
<FN>
Amounts inapplicable or not disclosed as a separate line on the Statement
of Financial Position or Results of Operations are reported as 0 herein.
<F1> Notes and accounts receivable - trade are reported net of allowances for
doubtful accounts in the Consolidated Balance Sheet.
<F2> Property, plant and equipment are reported net of accumulated
depreciation in the Consolidated Balance Sheet.
</FN>
</TABLE>
