<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarterly period ended January 30, 2000
----------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the transition period from ________ to ________
Commission file number 1-6711
OEA, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2362379
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 100488
Denver, Colorado 80250
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 693-1248
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
20,620,899 Shares of Common Stock at March 8, 2000.
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INDEX
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Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
<S> <C> <C>
Consolidated Condensed Balance Sheets
January 30, 2000 (unaudited)
and July 31, 1999............................................... 3
Consolidated Condensed Statements of Operations (unaudited)
Three Months and Six Months Ended January 30, 2000
and January 29, 1999............................................... 4
Consolidated Condensed Statements of Cash Flows (unaudited)
Six Months Ended January 30, 2000
and January 29, 1999............................................... 5
Notes to Consolidated Condensed Financial Statements (unaudited) 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 8
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk...... 13
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings............................................... 14
ITEM 2. Changes in Securities and Use of Proceeds....................... 14
ITEM 3. Defaults on Senior Securities................................... 14
ITEM 4. Submission of Matters to a Vote of Security Holders............. 14
ITEM 5. Other Information............................................... 15
ITEM 6. Exhibits and Reports on Form 8-K................................ 15
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2
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<TABLE>
<CAPTION>
OEA, INC.
---------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
(in thousands)
ASSETS
January 30, 2000 July 31, 1999
-------------------------- ------------------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 19,409 $ 2,445
Accounts Receivable, Net 37,694 35,236
Unbilled Costs and Accrued Earnings 5,022 6,302
Income Taxes Receivable 3,115 3,858
Inventories:
Raw Material and Component Parts 21,809 24,056
Work-in-Process 14,037 12,139
Finished Goods 9,404 7,399
---------------------- --------------------
Total Inventory 45,250 43,594
Prepaid Expenses and Other 5,782 4,440
Total Current Assets 116,272 95,875
Property, Plant and Equipment 294,423 287,624
Less: Accumulated Depreciation 104,448 90,907
---------------------- --------------------
Property, Plant and Equipment, Net 189,975 196,717
Long-term Receivable 1,000 2,000
Investment in Foreign Joint Venture 2,323 2,323
Other Assets 1,484 1,443
Total Assets $ 311,054 $ 298,358
====================== ====================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Short-term Bank Borrowings $ 115,000 $ 0
Accounts Payable 25,242 25,665
Interest Payable 820 2,137
Accrued Expenses 6,772 6,390
---------------------- --------------------
Total Current Liabilities 147,834 34,192
Long-term Bank Borrowings 0 91,000
Deferred Income Taxes 16,009 16,009
Other 439 583
---------------------- --------------------
Total Liabilities 164,282 141,784
Stockholders' Equity:
Common Stock - $.10 par value,
Authorized 50,000,000 Shares:
Issued - 22,019,700 Shares 2,202 2,202
Additional Paid-In Capital 13,450 13,376
Retained Earnings 139,208 146,333
Less: Cost of Treasury Shares, 1,399,911 and 1,408,379 (2,104) (2,117)
Equity Adjustment from Translation (5,982) (3,220)
Total Stockholders' Equity 146,773 156,574
Total Liabilities and Stockholders' Equity $ 311,054 $ 298,358
====================== ====================
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3
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<TABLE>
<CAPTION>
OEA, INC.
---------
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (Unaudited)
----------------------------------------------------------
(in thousands, except share data)
Three Months Ended Six Months Ended
January 30, 2000 January 29, 1999 January 30, 2000 January 29, 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net Sales $ 59,568 $ 59,434 $ 119,542 $ 116,227
Cost of Sales 59,420 56,563 116,998 111,847
------------- ------------- ------------- -------------
Gross Profit 148 2,871 2,544 4,380
Selling, General and Administrative Expenses 4,516 3,113 8,804 5,837
Research and Development Expenses 1,452 735 2,904 1,741
------------- ------------- ------------- -------------
Operating Profit (Loss) (5,820) (977) (9,164) (3,198)
Other Income (Expense):
Interest Income 265 104 317 138
Interest Expense (2,245) (2,082) (4,126) (3,998)
Royalty Income & Other, Net 853 1,531 1,648 1,643
------------- ------------- ------------- -------------
(1,126) (447) (2,161) (2,217)
------------- ------------- ------------- -------------
Earnings (Loss) Before Income Tax Benefit (6,947) (1,424) (11,325) (5,415)
Federal and State Income Tax Benefit (2,576) (423) (4,200) (1,697)
------------- ------------- ------------- -------------
Net Earnings (Loss) $ (4,371) $ (1,001) $ (7,125) $ (3,718)
============= ============= ============= =============
Earnings (Loss) Per Share - Basic & Diluted $ (0.21) $ (0.05) $ (0.35) $ (0.18)
============= ============= ============= =============
Weighted Average Number of Shares Outstanding :
Basic 20,617,273 20,599,574 20,614,702 20,597,779
============= ============= ============= =============
Weighted Average Number of Shares Outstanding :
Diluted 20,617,273 20,599,574 20,614,702 20,597,779
============= ============= ============= =============
</TABLE>
4
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<TABLE>
<CAPTION>
OEA, INC.
---------
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
----------------------------------------------------------
(in thousands)
Six Months Ended
January 30, 2000 January 29, 1999
---------------------- --------------------
<S> <C> <C>
Operating Activities
Net Loss $ (7,125) $ (3,718)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and Amortization 14,238 11,692
Decrease in deferred compensation payable (1) (13)
Gain on disposal of property, plant, and equipment --- (5)
Changes in operating assets and liabilities:
Accounts receivable (1,709) 165
Unbilled costs and accrued earnings 1,280 379
Inventories (1,849) 6,315
Prepaid expenses and other (1,552) 692
Accounts payable and accrued expenses (910) (1,941)
Income taxes payable 692 3,006
---------------------- --------------------
Net cash provided by operating activities 3,064 16,572
Investing Activities:
Capital expenditures (9,989) (11,006)
Proceeds from sale of property, plant, and equipment 9 8
Decrease in cash value of life insurance 20 (82)
Increase in other assets, net (172) ---
---------------------- --------------------
Net cash used in investing activities (10,132) (11,080)
Financing Activities:
Proceeds from issuance of treasury stock 54 22
Capital contributions 32 33
Payment of Dividends --- (1,699)
Increase in borrowings, net 24,000 (3,000)
---------------------- --------------------
Net cash provided by (used in) financing activities 24,087 (4,644)
Effect of exchange rate changes on cash (54) 208
---------------------- --------------------
Net increase in cash and cash equivalents 17,019 1,056
Cash and cash equivalents at beginning of period 2,445 1,920
---------------------- --------------------
Cash and cash equivalents at end of period $ 19,409 $ 2,976
====================== ====================
</TABLE>
5
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Notes to Consolidated Condensed Financial Statements (Unaudited)
Note 1 - Basis of Presentation
The unaudited financial statements furnished above reflect all adjustments
(consisting of normal recurring accruals) which are, in the opinion of OEA's
management, necessary for a fair statement of the results of operations for the
three-month period ended January 30, 2000.
Refer to the Company's annual financial statements for the year ended July 31,
1999, for a description of the Company's accounting policies, which have been
continued without change. Also, refer to the footnotes with those financial
statements for additional details of the Company's financial condition, results
of operations, and changes in financial position at that time.
Note 2- Comprehensive Income
During the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standard No. 130, Reporting Comprehensive Income.
Comprehensive income generally represents all changes in stockholders' equity,
except those resulting from investments or contributions by stockholders. Total
comprehensive income (loss) for the first six months of fiscal 2000 and fiscal
1999 were:
<TABLE>
<CAPTION>
(in thousands) FY 2000 FY 1999
--------- ---------
<S> <C> <C>
Net Loss $(7,125) $(3,718)
Equity Adjustment from Translation (2,762) 916
--------- ---------
Total Comprehensive Loss $(9,887) $(2,802)
========= =========
Note 3 - Segment Information
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In June 1997, the FASB issued Statement of Financial Accounting Standard No.
131, Disclosures about Segments of an Enterprise and Related Information. The
Statement requires public companies to report certain information about
operating segments in complete sets of financial statements and in condensed
financial statements of interim periods issued to shareholders. Under Statement
No. 131, operating segments are to be determined based on how management
measures performance and makes decisions about allocating resources. It also
requires that public companies report certain information about their products
and services, the geographic areas in which they operate, and their major
customers. Statement No. 131 is effective for fiscal years beginning after
December 15, 1997. The Company adopted Statement No. 131 in the fourth quarter
of fiscal 1999.
<TABLE>
<CAPTION>
Six Months Ended
(in thousands)
January 30, 2000 January 29, 1999
----------------------- ----------------------
<S> <C> <C>
Sales to Unaffiliated Customers
-------------------------------
Automotive $ 103,913 $ 94,874
Aerospace 15,628 21,353
---------------------- ---------------------
TOTAL $ 119,542 $ 116,227
====================== =====================
Operating Profit (Loss)
-----------------------
Automotive $ (7,167) $ (4,860)
Aerospace (1,997) 1,662
---------------------- ---------------------
TOTAL $ (9,164) $ (3,198)
====================== =====================
</TABLE>
6
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Note 4 - Bank Borrowings
On April 10, 1998, the Company entered into a $180 million Amended and Restated
Revolving Credit Agreement with a group of seven banks. This agreement was
amended on June 11, 1998, December 10, 1998, and December 9, 1999. The credit
facility was reduced to $115 million and is secured by substantially all of the
Company's assets. At the Company's request, this agreement was again amended on
February 17, 2000 to waive compliance with the tangible net worth, debt to
EBITDA, and minimum interest coverage covenants for the second quarter of fiscal
2000. The Company's principal bank is acting as agent for the banks under this
agreement. At January 30, 2000, the Company had $115.0 million of debt
outstanding on this credit facility. The Company's debt, net of cash, was $95.6
million at January 30, 2000. All outstanding debt at January 30, 2000 is
classified as short-term as the credit facility expires on December 18, 2000.
Please refer to Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources for further information
regarding this credit facility.
7
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OEA, Inc., together with its subsidiaries, is referred to herein as "OEA" or
the "Company." This report contains certain forward-looking statements within
the meaning of Section 27E of the Securities Exchange Act of 1934, as amended,
including statements regarding Company strategy, its soundness, the inflator
and initiator market, inflator prices, inflator and initiator demand, sales
volume increases, the utilization rate of the Company's inflator manufacturing
facility, the timing and benefits of cost reduction programs and improved
manufacturing processes, aerospace sales following the development phase of new
programs, as well as other statements or implications regarding future events.
Actual results or events may differ materially from these forward-looking
statements depending on a variety of factors. Reference is made to the
cautionary statements under the caption "Disclosure Regarding Forward-Looking
Statements" in OEA's Annual Report on Form 10-K for the year ended July 31,
1999 and Form 8-K filed on June 4, 1998 for a description of various factors
that might cause OEA's actual results to differ materially from those
contemplated by such forward-looking statements.
A summary of the principal items included in the consolidated statements of
earnings, on a percent of sales basis, is shown below:
<TABLE>
<CAPTION>
Comparison of
-------------
Three Months Ended
------------------
January 30, 2000 January 29, 1999
---------------- ----------------
Dollars Dollars
(in thousands) % of Sales (in thousands) % of Sales
--------------------- ----------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Net Sales $59,568 100.0% $59,434 100.0%
Cost of Sales 59,420 99.8% 56,563 95.2%
--------------------- ----------------- --------------------- -----------------
Gross Margin 148 0.2% 2,871 4.8%
Selling, General and 4,516 7.6% 3,113 5.2%
Administrative Expenses
Research and 1,452 2.4% 735 1.2%
Development Expenses
--------------------- ----------------- --------------------- -----------------
Operating Profit (Loss) (5,820) (9.8%) (977) (1.6%)
Other Expense, Net (1,126) (1.9%) (447) (0.8%)
--------------------- ----------------- --------------------- -----------------
Earnings (Loss) Before Tax (6,947) (11.7%) (1,424) (2.4%)
Income Tax Benefit (2,576) (4.3%) (423) (0.7%)
--------------------- ----------------- --------------------- -----------------
Net Earnings (Loss) $(4,371) (7.3%) $(1,001) (1.7%)
===================== ================= ===================== =================
</TABLE>
8
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<TABLE>
<CAPTION>
Comparison of
-------------
Six Months Ended
----------------
January 30, 2000 January 29, 1999
---------------- ----------------
Dollars Dollars
(in thousands) % of Sales (in thousands) % of Sales
--------------------- ----------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Net Sales $119,542 100.0% $116,227 100.0%
Cost of Sales 116,998 97.9% 111,847 96.2%
--------------------- ----------------- --------------------- -----------------
Gross Margin 2,544 2.1% 4,380 3.8%
Selling, General and 8,804 7.4% 5,837 5.0%
Administrative Expenses
Research and 2,904 2.4% 1,741 1.5%
Development Expenses
--------------------- ----------------- --------------------- -----------------
Operating Profit (Loss) (9,164) (7.7%) (3,198) (2.8%)
Other Expense, Net (2,161) (1.8%) (2,217) (1.9%)
--------------------- ----------------- --------------------- -----------------
Earnings (Loss) Before Tax (11,325) (9.5%) (5,415) (4.7%)
Income Tax Benefit (4,200) (3.5%) (1,697) (1.5%)
--------------------- ----------------- --------------------- -----------------
Net Earnings (Loss) $ (7,125) (6.0%) $ (3,718) (3.2%)
===================== ================= ===================== =================
</TABLE>
RECENT DEVELOPMENTS
- -------------------
The Company's Board of Directors announced on March 13, 2000 that it had entered
into an Agreement and Plan of Merger with Autoliv, Inc. which contemplates a
tender offer by Autoliv for all outstanding shares of our common stock for a
purchase price of $10.00 per share in cash. Autoliv is the worldwide leader in
automotive safety systems.
The tender offer contains a minimum condition of acceptance by a majority of the
common stock outstanding, along with customary conditions, and the agreement
contemplates a second step merger in which untendered shares would be converted
into the right to receive $10.00 per share in cash. It is expected that Autoliv
will commence the tender offer shortly.
NET SALES
- ---------
Net sales were $59.6 million for the quarter ended January 30, 2000, as compared
to prior-year second quarter net sales of $59.4 million. Net sales for the six
months ended January 30, 2000 increased $3.3 million (2.9%) to $119.5 million as
compared to the prior-year period.
Automotive segment sales increased $4.4 million (9.1%) to $52.8 million in the
second quarter and $9.0 million (9.5%) to $103.9 million for the first half of
fiscal 2000, as compared to prior-year periods, driven by increased inflator
demand. Inflator unit shipments increased by 37.0% and 38.7% in the second
quarter and first half of fiscal 2000, respectively, as compared to the same
periods of the prior year. This was driven by significantly increased demand
for our side-impact, driver and second-generation passenger inflators, partially
offset by a reduction in our first generation passenger inflator sales to Asian
customers. The reduction was due to the current economic conditions in Asia and
is expected to partially rebound in subsequent quarters. The dollar value of
inflator sales increased $6.9 million (20.0%) in the second quarter and $13.7
million (20.4%) in the first half of fiscal 2000, as compared to the prior year
periods, reflecting higher unit
9
<PAGE>
sales partially offset by a shift in product mix towards lower priced side-
impact inflators. Initiator unit sales decreased 13.2% and 12.1% in the second
quarter and first half of fiscal 2000 respectively, as compared to the prior
year periods. The unit volume decrease, coupled with a shift in product mix,
resulted in decreased initiator net sales of $2.5 million (17.4%) in the second
quarter and $4.7 million (16.8%) in the first half of fiscal 2000, as compared
to the prior-year periods. Management believes the decrease in initiator sales
resulted from inventory balancing by major customers.
Aerospace segment sales were $6.7 million in the second quarter of fiscal 2000,
a decline of $4.3 million (38.9%) from the prior year period. The decline in
revenue resulted primarily from reduced sales to Boeing, our largest aerospace
customer. Sixty percent of the decline in sales to Boeing resulted from the
Delta launcher program which had one of its major customers file for bankruptcy
protection, and a slow down due to the transition from the Boeing Delta II/III
launch vehicle to the Delta IV launch vehicle. Sales declines to Boeing on the
K-36D ejection seat, Atlas Igniter, GBI, F-18, and SLAM ER programs comprised
the majority of the remaining sales decline.
COST OF SALES
- -------------
Cost of sales for the quarter ended January 30, 2000 was $59.4 million as
compared to $56.6 million for the comparable prior-year period. Cost of sales
for the six months ended January 30, 2000 was $117.0 as compared to $111.8
million for the comparable period last year, primarily due to increased volume
in the automotive segment.
Automotive cost of sales increased 7.6% ($3.6 million) to $51.1 million in the
second quarter, and increased 8.0% ($7.5 million) to $101.2 million in the first
half of fiscal 2000, as compared to the prior-year periods. As a percentage of
segment sales, cost of sales decreased from 98.1% in fiscal 1999 second quarter
to 96.8% in the current period, and from 98.7% in the first half of fiscal 1999
to 97.4% in the first half of fiscal 2000. This improvement reflects
significant productivity gains made as a result of our cost reduction
initiatives, substantially offset by a shift in product mix to lower margin side
impact and driver inflators. Additional costs were also incurred in order to
ramp up production to meet sharply higher customer demand for our side impact,
second generation passenger and driver inflators. These costs are not expected
to continue in subsequent quarters as operational efficiencies are now being
realized. Further improvement is also expected as a result of additional cost
reduction initiatives currently being implemented on these relatively new
products.
Production from our new inflator production facility represents 10 million of
our 15 million unit annual inflator capacity. In fiscal 1999, this facility was
operating significantly below capacity, averaging 29% utilization for the year.
We have made significant progress by improving utilization to 58.5% in the
second quarter. We expect continued improvement throughout fiscal 2000.
Aerospace segment cost of sales decreased 8.5% to $8.3 million in the second
quarter of fiscal 2000, as compared to the prior year. This decrease was
primarily due to reduced sales as discussed above, however, the percentage
decrease in cost of sales was significantly less than the decrease in sales due
to higher than anticipated costs on the V-22, F-22, JASSM, and KEPD-350
development programs. These programs are strategically important in that there
are significant potential new production orders following the development phase.
We believe that upon successful completion of the development programs, we will
be well positioned to secure future production orders. In accordance with
generally accepted accounting principles, anticipated future losses of $1.3
million on these key programs were recognized in the current quarter.
10
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GROSS MARGIN
- ------------
Gross margin for the second quarter ended January 30, 2000 was $0.1 million
(0.2% of net sales), as compared to $2.9 million (4.8% of net sales) for the
prior year period. Gross margin for the six months ended January 30, 2000 was
$2.5 million (2.1% of net sales), as compared to $4.4 million (3.8% of net
sales) for the prior year period.
Automotive segment gross margin improved by $.8 million (87.5%) to $1.7 million
in the second quarter of fiscal 2000, and by $1.5 million (129.4%) to $2.7
million for the first half of fiscal 2000, as compared to the prior-year
periods. This improvement in gross margin is primarily due to our cost reduction
initiatives partially offset by less favorable product mix as discussed above.
Aerospace segment gross margin was -$1.5 million (-23% of segment sales) for
the second quarter of fiscal 2000, as compared to $2.0 million (17.9%) for the
prior year period. The current quarter decrease in gross margin was primarily
the result of reduced sales and higher than anticipated development costs as
discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, general and administrative expenses for the second quarter and first
half ended January 30, 2000 were $4.5 million (7.6% of net sales) and $8.8
million (7.4% of net sales) respectively, as compared to $3.1 million (5.2% of
net sales) and $5.8 million (5.0% of net sales) for the prior year periods. The
current year increase was primarily due to premium freight costs incurred to
meet customer delivery schedules as a result of higher than expected demand for
products manufactured in our new inflator production facility.
RESEARCH AND DEVELOPMENT EXPENSES
- ---------------------------------
Research and development costs for the second quarter and first half ended
January 30, 2000 were $1.5 million (2.4% of net sales) and $2.9 million (2.4% of
net sales), respectively, as compared to $0.7 million (1.2% of net sales) and
$1.7 million (1.5% of net sales) for the prior year periods. This increased R&D
effort reflects continued work on our "smart" (dual-stage) inflators, curtain
inflators, micro-gas generators for seat belt pretensioning systems, and other
new products in various stages of development.
OPERATING PROFIT (LOSS)
- -----------------------
We recorded operating losses for the second quarter and first half of fiscal
2000 of $5.8 million (-9.8% of net sales) and $9.2 million (-7.7% of net sales),
respectively, as compared to losses of $1.0 million (-1.6% of net sales) and
$3.2 million (-2.8% of net sales) for the prior year periods. Operating losses
were extended as a result of the downturn in our aerospace segment, and
increased SG&A and R&D expenses as discussed above.
11
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OTHER INCOME (EXPENSE)
- ----------------------
Other expenses for the second quarter and first half of fiscal 2000 were $1.1
million (1.9% of net sales) and $2.2 million (1.8% of net sales), respectively,
as compared to $0.4 million (0.8% of net sales) and $2.2 million (1.9% of net
sales) for the prior-year periods. Royalty income from our Asian licensee,
Daicel Chemical Industries, is earned throughout the year, with payment received
annually in the fiscal fourth quarter. We began accruing this income on a
quarterly basis in the second quarter of fiscal 1999 to reflect quarterly earned
income and improve comparisons between quarters. As a result, the second
quarter of 1999 has substantially lower expenses because it includes recognition
of six month's royalty income of $1.5 million as compared with three months of
recognition of $.8 million in the current quarter. Interest expense remained
flat compared to the prior year due to our lower debt level being offset by
higher effective interest rates.
NET EARNINGS
- ------------
We recorded net losses for the second quarter and first half of fiscal 2000 of
$4.4 million (-7.3% of net sales) and $7.1 million (-6.0% of net sales),
respectively, as compared to net losses of $1.0 million (-1.7% of net sales) and
$3.7 million (-3.2% of net sales) for the prior year periods. Basic and diluted
losses per share for the second quarter and first half of fiscal 2000 were $0.21
and $0.35, respectively, as compared to losses of $0.05 and $0.18 for the prior-
year periods.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Because it is due within the next 12 months (specifically December 18, 2000), we
reclassified our entire $115 million revolving credit facility from long term
debt to short term debt. As a result, our working capital decreased during the
quarter to ($31.6) million from $61.7 million as of July 31, 1999. Exclusive of
the effect of classifying our debt as current, our working capital increased to
$83.4 million primarily resulting from the accumulation of cash, which would
otherwise have been used to pay down debt. During the six months ended January
30, 2000, we made capital expenditures totaling approximately $10.0 million,
which were funded from cash flows from operations and bank borrowings. On April
10, 1998, we entered into a four-year, $180 million Amended and Restated
Revolving Credit Agreement with a group of seven banks. This agreement was
amended on June 11, 1998, December 10, 1998, and December 9, 1999. The
available amount under the credit facility has been reduced by agreement to $115
million. The amounts outstanding under the facility are secured by
substantially all of our assets. At our request, this agreement was again
amended on February 17, 2000 to, among other things, waive compliance with the
tangible net worth, debt to EBITDA, and minimum interest coverage covenants for
the second quarter of fiscal 2000, and to add an additional covenant compliance
period as of March 31, 2000 to the regular quarterly compliance period (April
30, 2000). There can be no assurance that we will achieve compliance at either
of these dates, therefore, we may be required to seek additional waivers from
the bank group. Our principal bank is acting as agent for the banks under this
agreement. At January 30, 2000, the applicable interest rate was 8.08%, and we
had $115.0 million of debt outstanding under this credit facility. Our debt,
net of cash, was $95.6 million at January 30, 2000. This credit facility
expires on December 18, 2000, and we are currently assessing our alternatives
with respect to refinancing this indebtedness. Anticipated working capital
requirements, capital expenditures, and facility expansions are expected to be
met from internally generated funds.
12
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
13
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual shareholders' meeting held on January 11, 2000,
nine directors were elected. No other matters were submitted to a vote
by security holders.
<TABLE>
<CAPTION>
Results of Shareholders' Voting at Annual Meeting
Votes Cast
-----------------------------------------------
Directors Elected: For Against Withheld No Proxy Total Shares
Received Outstanding
-------------- ------------ --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert J. Schultz, 16,162,549 --- 466,457 3,987,258 20,616,264
Chairman
Charles B. Kafadar 16,146,365 --- 482,641 3,987,258 20,616,264
George S. Ansell 16,151,838 --- 477,168 3,987,258 20,616,264
Erwin H. Billig 16,151,267 --- 477,739 3,987,258 20,616,264
James R. Burnett 16,165,311 --- 463,695 3,987,258 20,616,264
Richard L. Corbin 16,153,197 --- 475,809 3,987,258 20,616,264
Philip E. Johnson 16,169,577 --- 459,429 3,987,258 20,616,264
Donald E. Miller 16,154,688 --- 474,318 3,987,258 20,616,264
Lewis W. Watson 16,153,482 --- 475,524 3,987,258 20,616,264
</TABLE>
14
<PAGE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.2 Fourth Amendment and Waiver to Amended and Restated
Revolving Credit Agreement
10.3 Agreement and Plan of Merger (incorporated by reference
from Exhibit 2.1 to the Company's Report on Form 8-K filed
on March 13, 2000).
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K filed March 13, 2000. Items 2 and 7 reported.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OEA, INC.
-----------------------------
(Registrant)
March 15, 2000 /S/ J. Thompson McConathy
- --------------------- -----------------------------
Date J. Thompson McConathy
Vice President Finance
(Principal Financial and Accounting Officer)
March 15, 2000 /S/ Charles B. Kafadar
- --------------------- -------------------------
Date Charles B. Kafadar
Chief Executive Officer
(Principal Executive Officer)
16
<PAGE>
EXHIBIT 10.2
FOURTH AMENDMENT AND WAIVER TO AMENDED
AND RESTATED REVOLVING CREDIT AGREEMENT
---------------------------------------
FOURTH AMENDMENT AND WAIVER TO AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT dated as of January 31, 2000 (this "Amendment") among OEA, INC., a
Delaware corporation (the "Company"), each of the banks named under the caption
"Banks" on the signature pages hereof (individually, a "Bank" and, collectively,
the "Banks"), BANQUE NATIONALE DE PARIS, U.S. BANK NATIONAL ASSOCIATION and
UNION BANK OF CALIFORNIA, N.A., as Co-Agents and THE NORTHERN TRUST COMPANY, as
agent for the Banks (in such capacity, together with its successors in such
capacity, the "Agent").
WHEREAS, the Company, the Agent, the Co-Agents and the Banks have entered
into an Amended and Restated Revolving Credit Agreement dated as of April 10,
1998, as amended by a First Amendment thereto dated as of June 11, 1998, a
Second Amendment thereto dated December 10, 1998, and a Third Amendment and
Waiver thereto dated as of December 9, 1999 (as amended the "Existing
Agreement"), pursuant to which the Banks agreed to make Loans (as defined in the
Existing Agreement) to the Company in an aggregate principal amount not to
exceed $115,000,000 at any time outstanding, on and subject to the terms and
conditions thereof; and
WHEREAS, the parties wish to amend the Existing Agreement to (a) modify
certain covenants, and (b) waive certain Events of Default.
NOW, THEREFORE, the parties agree as follows:
Section 1. Definitions. Terms defined in the introductory paragraphs hereof
shall have their respective defined meanings when used in this Amendment and,
except as otherwise expressly provided herein, terms defined in the Existing
Agreement shall have their respective defined meanings when used in this
Amendment. In addition, the following terms shall have the following meanings
(terms defined in the introductory paragraphs or this Section 1 in the singular
to have correlative meanings when used in the plural and vice versa):
"Effective Date" shall mean as of January 31, 2000, which will be
deemed to occur upon the first date, if any, which occurs before the
termination of this Amendment pursuant to Section 6 hereof and on which the
conditions precedent in Section 4 shall have been satisfied.
Section 2. Amendments to Existing Agreement. The following amendments are
hereby made to the Existing Agreement with effect from and after the Effective
Date:
(a) Section 8.3(f) of the Existing Agreement. Section 8.3(f) of the
Existing Agreement is hereby amended by adding the following before the period:
"and grant access to, and the Company hereby grants access to the Agent and
each Bank and their respective representatives to, any and all third party
consultants or advisors now or hereafter retained by the Company in order
to discuss such
<PAGE>
matters and obtain such information as any Bank or the
Agent may reasonably request."
(b) Section 8.5 of the Existing Agreement. Section 8.5 of the Existing
Agreement is hereby amended by (i) adding the phrase "or any substantial part
of" after the phrase "dispose of all" appearing in the introductory clause
thereof and (ii) deleting clause (c) thereof in its entirety.
(c) Section 8.8 of the Existing Agreement. Section 8.8 of the Existing
Agreement is hereby amended by putting a period after clause (i) of the proviso
therein and deleting everything appearing thereafter in such Section.
(d) Sections 8.10, 8.11, 8.12 and 8.13 of the Existing Agreement.
Sections 8.10, 8.11, 8.12 and 8.13 of the Existing Agreement are each hereby
amended as of the date hereof by adding the following at the end of each
thereof:
"In addition, the foregoing financial test shall be measured as of March
31, 2000 and the Company shall be in compliance therewith on March 31,
2000. On or before April 7, 2000, the Company shall furnish to each Bank a
certificate of a senior financial officer of the Company (i) to the effect
that no Default has occurred and is continuing (or, if any Default has
occurred and is continuing, describing the same in reasonable detail and
describing the action that the Company has taken and proposes to take with
respect thereto) and (ii) setting forth in reasonable detail the
computation necessary to determine whether the Company is in compliance
with this financial covenant as of March 31, 2000."
(e) Section 8.18 of the Existing Agreement. Section 8.18 of the
Existing Agreement is hereby amended and restated in its entirety as follows:
"8.18 Big Five Accounting Firm. Upon written request of the Agent,
the Company agrees to promptly, and in any event within ten (10) days of
such written notice, hire, for its own account and expense, any one of the
"Big Five" accounting firms in the Untied States, to determine, among other
things, the enterprise value of the Company and its Subsidiaries, the on-
going value of the Collateral and the on-going value of the Company's and
its Subsidiaries' business systems; to prepare a written report of its
findings addressed to the Company with a copy to the Agent and the Banks;
and to cooperate with the Agent and the Banks with respect to such matters
as the Agent or any Bank may reasonably request."
(f) Section 9(d) of the Existing Agreement. Section 9(d) of the
Existing Agreement is hereby amended by adding "or 8.18" immediately after
"8.17" appearing therein.
Section 3. Waiver. The Company has advised the Agent and the Banks that it
is not or has not been in compliance with Section 8.10 (Tangible Net Worth),
Section 8.11 (Indebtedness to EBITDA) and Section 8.13 (Minimum Interest
Coverage) of the Existing Agreement for its fiscal quarter ended January 31,
2000. On the Effective Date, as of and
-2-
<PAGE>
through January 31, 2000, the Agent and the Majority Banks waive compliance by
the Company with Sections 8.10, 8.11 and 8.13. The Agent's and Majority Banks'
waiver of non-compliance with Sections 8.10, 8.11 and 8.13 of the Existing
Agreement is limited to the specific instance of failure to comply which is
described above and shall not be deemed a waiver of or consent to any other
failure to comply with the terms of Section 8.10, 8.11 or 8.13 of the Existing
Agreement or any other provisions of the Existing Agreement. Such waiver shall
not prejudice or constitute a waiver of any right or remedies which the Agent or
Banks may have or be entitled to with respect to any other breach of Section
8.10, 8.11 or 8.13 or any other provisions of the Existing Agreement.
Section 4. Conditions to Effective Date. The occurrence of the Effective
Date shall be subject to the satisfaction, on and as of the Effective Date, of
the following conditions precedent:
(a) Amendment. The Company, the Agent and the Majority Banks shall
have executed and delivered this Amendment.
(b) No Default. After giving effect to the waiver in Section 3
hereof, no Default or Event of Default shall have occurred and be continuing
under the Existing Agreement and the representations and warranties of the
Company in Section 7 of the Existing Agreement, as amended hereby, and in
Section 8 hereof shall be true and correct on and as of the Effective Date
(except to the extent such representations and warranties state that they relate
solely to a specified date, then as of such specified date) and the Company
shall have provided to the Agent a certificate of a senior officer of the
Company to that effect.
(c) Certificate of Incorporation. The Company shall have delivered
to the Agent, in form and substance satisfactory to the Agent, a certificate of
the secretary or assistant secretary of the Company (i) confirming that the
certificate of incorporation and by-laws of the Company have not been amended
since December 9, 1999 or (ii) setting forth a true and correct copy of any
amendment to the certificate of incorporation or by-laws of the Company adopted
on or after December 9, 1999.
(d) Company Resolutions. The Company shall have delivered to the
Agent a copy, duly certified by the secretary or an assistant secretary of the
Company, of (i) resolutions of the Company's Board of Directors authorizing or
ratifying the execution and delivery of this Amendment, and authorizing the
borrowings under the Existing Agreement, as amended hereby, (ii) all documents
evidencing other necessary corporate action, and (iii) all approvals or
consents, if any, with respect to this Amendment.
(e) Company Incumbency Certificate. The Company shall have delivered
to the Agent a certificate of the secretary or an assistant secretary of the
Company certifying the names of the Company's officers authorized to sign this
Amendment and all other documents or certificates to be delivered hereunder and
thereunder, together with the true signatures of such officers.
-3-
<PAGE>
(f) Legal Opinion. The Company shall have delivered to the Agent an
opinion of the Company's counsel, in the form and substance satisfactory to the
Agent.
(g) Amendment Fee. The Company shall have paid to the Agent, for the
account of the Banks who have approved in writing the transactions contemplated
by this Amendment on or before the close of business, Chicago time, on February
17, 2000, a fee equal to the product of 10 basis points times the Commitment of
such approving Bank in effect on the Effective Date. Such fee shall be non-
refundable after February 17, 2000 unless the Majority Banks fail to sign this
Amendment.
(h) Other. The Company shall have delivered such other documents as
the Agent may reasonably request.
Section 5. Effective Date Notice. Promptly following the occurrence of the
Effective Date, the Agent shall give notice to the parties hereto of the
occurrence of the Effective Date, which notice shall be conclusive, and all
parties may rely thereon; provided, that such notice shall not waive or
otherwise limit any right or remedy of the Agent or any Bank arising out of any
failure of any condition precedent set forth in Section 4 to be satisfied.
Section 6. Termination. If the Effective Date shall not have occurred on or
before February 17, 2000, the Agent on instructions of the Majority Banks may
terminate this Amendment by notice in writing to the Company at any time before
the occurrence of the Effective Date; provided, that the obligations of the
Company under Section 13 shall survive such termination.
Section 7. Ratification. The parties agree that the Existing Agreement, as
amended hereby, the OEA Pledge Agreement, as heretofore amended, the other
Security Documents and the Notes have not lapsed or terminated, are in full
force and effect, and are and from and after the Effective Date shall remain
binding in accordance with their terms, as amended hereby.
Section 8. Representations and Warranties. The Company represents and
warrants to the Agent and the Banks that:
(a) No Breach. The execution, delivery and performance by the
Company of this Amendment and the Existing Agreement, as amended hereby, do not
and will not conflict with or result in a breach of, or cause the creation of a
Lien (other than as contemplated by the Security Documents) or require any
consent under, the certificate of incorporation or by-laws of the Company, or
any applicable law or regulation, or any order, injunction or decree of any
court or governmental authority or agency, or any agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound.
(b) Incorporation, Corporate Power and Action, Binding Effect. The
Company has been duly incorporated and is validly existing in good standing
under the laws of the State of Delaware and has all necessary corporate power
and authority to execute, deliver and perform its obligations under this
Amendment and the Existing Agreement, as amended hereby; the execution, delivery
and performance by the Company of this Amendment and the Existing
-4-
<PAGE>
Agreement, as amended hereby, have been duly authorized by all necessary
corporate action on its part; and this Amendment has been duly and validly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation, enforceable in accordance with its terms.
(c) Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Company
of this Amendment, the Existing Agreement as amended hereby, or for the validity
or enforceability thereof.
Section 9. Certain Usages. From and after the Effective Date, each
reference to the Existing Agreement in the Existing Agreement or in any other
agreements, documents or instruments referred to or provided for in or delivered
under the Existing Agreement shall be deemed to refer to the Existing Agreement,
as amended hereby.
Section 10. Successors and Assigns. This Amendment and the Pledge Amendment
shall be binding upon and inure to the benefit of the Company, the Agent, the
Banks and their respective successors and assigns, except that the Company may
not transfer or assign any of its rights or interest hereunder or thereunder.
Section 11. Governing Law. This Amendment shall be governed by, and
construed interpreted in accordance with, the internal laws of the State of
Illinois.
Section 12. Counterparts. This Amendment may be executed in any number of
counterparts and any party hereto may execute any one or more of such
counterparts, all of which shall constitute one and the same instrument.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be as effective as delivery of a manually executed counterpart
of this Amendment.
Section 13. Expenses. Whether or not the Effective Date shall occur,
without limiting the obligations of the Company under the Existing Agreement,
the Company agrees to pay, or to reimburse on demand, all reasonable costs and
expenses incurred by (i) the Agent in connection with the negotiation,
preparation, execution, delivery, modification, amendment or enforcement of this
Amendment and the other agreements, documents and instruments referred to herein
or therein, including the reasonable fees and expenses of Gardner, Carton &
Douglas, special counsel to the Agent, and (ii) any Bank in connection with
enforcement of this Amendment, the Existing Agreement as amended hereby, and the
agreements, documents and instruments referred to herein or therein, including
the reasonable fees and expenses of counsel to such Bank.
[Remainder of Page Intentionally Left Blank.]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the day and year first above
written.
OEA, INC.
By:
-----------------------------
Name:
Title:
THE NORTHERN TRUST COMPANY,
as Agent
By:
-----------------------------
Name:
Title:
THE NORTHERN TRUST COMPANY,
as Issuing Lender
By:
-----------------------------
Name:
Title:
BANKS:
THE NORTHERN TRUST COMPANY, individually
By:
-----------------------------
Name:
Title:
BANQUE NATIONALE DE PARIS, individually and as Co-
Agent
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
<PAGE>
U.S. BANK NATIONAL ASSOCIATION, individually and
as Co-Agent
By:
-----------------------------
Name:
Title:
UNION BANK OF CALIFORNIA, N.A., individually and
as Co-Agent
By:
-----------------------------
Name:
Title:
CREDIT AGRICOLE INDOSUEZ, individually
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
LASALLE BANK NATIONAL ASSOCIATION, individually
By:
-----------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION, individually
By:
-----------------------------
Name:
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUL-31-2000 JUL-31-2000
<PERIOD-START> NOV-01-1999 AUG-01-1999
<PERIOD-END> JAN-30-2000 JAN-30-2000
<CASH> 19,409,000 19,409,000
<SECURITIES> 0 0
<RECEIVABLES> 37,694,000 37,694,000
<ALLOWANCES> 0 0
<INVENTORY> 45,250,000 45,250,000
<CURRENT-ASSETS> 116,272,000 116,272,000
<PP&E> 294,423,000 294,423,000
<DEPRECIATION> 104,448,000 104,448,000
<TOTAL-ASSETS> 311,054,000 311,054,000
<CURRENT-LIABILITIES> 147,834,000 147,834,000
<BONDS> 0 0
0 0
0 0
<COMMON> 2,202,000 2,202,000
<OTHER-SE> 144,571,000 144,571,000
<TOTAL-LIABILITY-AND-EQUITY> 311,054,000 311,054,000
<SALES> 59,568,000 119,542,000
<TOTAL-REVENUES> 59,568,000 119,542,000
<CGS> 59,420,000 116,998,000
<TOTAL-COSTS> 65,388,000 128,706,000
<OTHER-EXPENSES> 1,126,000 2,161,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,245,000 4,126,000
<INCOME-PRETAX> (6,947,000) (11,325,000)
<INCOME-TAX> (2,576,000) (4,200,000)
<INCOME-CONTINUING> (4,371,000) (7,125,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,371,000) (7,125,000)
<EPS-BASIC> (.21) (.35)
<EPS-DILUTED> (.21) (.35)
</TABLE>
