<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to__________
Commission file number 0-14224
IFR SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 48-1197645
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10200 WEST YORK STREET, WICHITA, KANSAS 67215
(Address and zip code of principal executive offices)
(316) 522-4981
(Registrant's telephone number, including area code)
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 periods 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 .
--- ---
There were 8,240,528 shares of common stock, par value $.01 per share,
of the Registrant outstanding as of January 20, 2000.
<PAGE>
IFR SYSTEMS, INC.
FORM 10 - Q
INDEX
<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at December 31, 1999
and March 31, 1999 3
Condensed Consolidated Statements of Operations for the three
and nine months ended December 31, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows for the
nine months ended December 31, 1999 and 1998 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of
Operations 10
PART II -- OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and reports on Form 8-K 15
SIGNATURES 16
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
IFR SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 1999
------------ ----------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,314 $ 5,086
Accounts receivable, less $664 and $731
allowance for doubtful accounts, respectively 25,894 27,306
Inventories:
Finished products 13,433 15,568
Work in process 9,262 8,811
Materials 14,371 13,650
--------- ---------
37,066 38,029
Prepaid expenses and sundry 6,006 6,042
Deferred income taxes 2,493 2,492
Current assets of discontinued operations - 17,460
--------- ---------
TOTAL CURRENT ASSETS 75,773 96,415
PROPERTY AND EQUIPMENT:
Property and equipment 38,519 36,079
Allowances for depreciation (16,969) (13,835)
--------- ---------
21,550 22,244
PROPERTY UNDER CAPITAL LEASE:
Building and machinery 5,201 5,201
Allowances for depreciation (2,301) (1,962)
--------- ---------
2,900 3,239
PROPERTY AND EQUIPMENT OF DISCONTINUED OPERATIONS,
NET OF ALLOWANCES FOR DEPRECIATION OF $0 AND
$4,380, RESPECTIVELY - 3,058
OTHER ASSETS:
Cost in excess of net assets acquired, less
amortization of $1,370 and $812, respectively 20,346 21,485
Developed technology, less amortization
of $1,794 and $1,092, respectively 17,006 17,708
Other intangibles, less amortization of $2,233
and $1,594, respectively 12,533 13,172
Other 2,101 2,090
Other assets related to discontinued operations - net - 7,632
--------- ---------
51,986 62,087
--------- ---------
TOTAL ASSETS $ 152,209 $ 187,043
========= =========
</TABLE>
Note: The balance sheet at March 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
3
<PAGE>
IFR SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 1999
------------ ---------
(UNAUDITED) (NOTE)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank borrowings $ 12,800 $ 17,700
Accounts payable 10,570 9,883
Accrued compensation and payroll taxes 4,119 4,401
Other liabilities and accrued expenses 9,289 8,890
Federal and state income taxes and local taxes 3,720 1,120
Current maturity of capital lease obligations 190 185
Current maturity of long-term debt 5,000 4,250
Current liabilities of discontinued operations - 3,823
--------- ---------
TOTAL CURRENT LIABILITIES 45,688 50,252
CAPITAL LEASE OBLIGATIONS 3,248 3,442
LONG-TERM DEBT 57,510 93,125
DEFERRED INCOME TAXES 11,412 11,828
DEFERRED INCOME TAXES OF DISCONTINUED OPERATIONS - 168
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value---authorized
1,000,000 shares, none issued - -
Common stock, $.01 par value---authorized
50,000,000 shares, issued 9,266,250 shares 93 93
Additional paid-in capital 7,308 7,368
Cost of common stock in treasury--1,029,322
and 1,056,985 shares, respectively (8,386) (8,611)
Accumulated other comprehensive income (loss) (963) (1,187)
Retained earnings 36,299 30,565
--------- ---------
34,351 28,228
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 152,209 $ 187,043
========= =========
See notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
IFR SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES $ 35,265 $ 36,072 $ 103,961 $ 109,044
COST OF PRODUCTS SOLD 21,872 20,299 61,887 66,029
--------- --------- --------- ---------
GROSS PROFIT 13,393 15,773 42,074 43,015
OPERATING EXPENSES:
Selling 6,148 6,607 18,083 20,151
Administrative 5,044 3,281 12,570 11,169
Engineering 4,315 4,474 12,553 13,782
--------- --------- --------- ---------
15,507 14,362 43,206 45,102
--------- --------- --------- ---------
OPERATING INCOME (LOSS) (2,114) 1,411 (1,132) (2,087)
OTHER INCOME (EXPENSE):
Interest income 67 159 139 432
Interest expense (1,881) (2,582) (6,208) (7,201)
Other, net (184) 78 (310) 20
--------- --------- --------- ---------
(1,998) (2,345) (6,379) (6,749)
--------- --------- --------- ---------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (4,112) (934) (7,511) (8,836)
INCOME TAX BENEFIT (1,480) (400) (2,785) (3,714)
--------- --------- --------- ---------
LOSS FROM CONTINUING OPERATIONS (2,632) (534) (4,726) (5,122)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
LESS APPLICABLE INCOME TAXES - 133 10,460 (38)
--------- --------- --------- ---------
NET INCOME (LOSS) $ (2,632) $ (401) $ 5,734 $ (5,160)
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE - BASIC:
Loss from continuing operations $ (0.32) $ (0.07) $ (0.57) $ (0.62)
Income from discontinued operations - 0.02 1.27 -
--------- --------- --------- ---------
Net income (loss) $ (0.32) $ (0.05) $ 0.70 $ (0.62)
========= ========= ========= =========
EARNINGS (LOSS) PER SHARE - DILUTED:
Loss from continuing operations $ (0.32) $ (0.07) $ (0.57) $ (0.62)
Income from discontinued operations - 0.02 1.27 -
--------- --------- --------- ---------
Net income (loss) $ (0.32) $ (0.05) $ 0.70 $ (0.62)
========= ========= ========= =========
AVERAGE COMMON SHARES OUTSTANDING 8,236 8,208 8,230 8,203
========= ========= ========= =========
DILUTIVE COMMON SHARES OUTSTANDING 8,236 8,208 8,230 8,203
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (loss) $ 5,734 $ (5,160)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation of property and equipment 3,659 4,686
Amortization of intangibles 2,032 2,661
Amortization of loan origination fees 298 -
Gain on sale of OTM Division (17,207) -
Deferred income taxes (489) (5,334)
Deferred compensation expense 90 -
Utilization of acquired tax loss carryforwards - 416
Changes in operating assets and liabilities:
Accounts receivable 560 9,265
Inventories 574 6,351
Other current assets 37 1,507
Accounts payable and accrued liabilities 372 (14,093)
Other current liabilities 1,841 (2,026)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (2,499) (1,727)
INVESTING ACTIVITIES
Proceeds from OTM Sale 43,988 -
Purchases of property and equipment (2,738) (3,481)
Proceeds from sale of equipment 87 1,071
Sundry (269) 1,634
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 41,068 (776)
FINANCING ACTIVITIES
Principal payments on capital lease obligations (189) (267)
Principal payments on long-term debt (34,865) (875)
Principal payments on short-term bank borrowings (24,960) (1,300)
Proceeds from short-term bank borrowings 20,060 7,300
Proceeds from exercise of common stock options 165 1,047
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (39,789) 5,905
EFFECT OF EXCHANGE RATE CHANGES ON CASH 448 895
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (772) 4,297
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,086 366
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,314 $ 4,663
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
IFR SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended December 31, 1999 are not necessarily indicative of the results
that may be expected for the year ending March 31, 2000. For further
information, refer to the Consolidated Financial Statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
March 31, 1999.
The Company operates in one significant business segment, electronic
test and measurement equipment (ETM).
NOTE 2 - BANK BORROWINGS
In March 1998, the Company entered into an amended and restated Credit
Agreement with a bank syndication (the Agreement) to provide available lines of
credit aggregating $30,000,000. The Agreement expires on February 5, 2004. Under
the terms of the Agreement, borrowings bear interest at a spread over LIBOR
based on certain financial criteria. The Agreement also includes a swing line
facility aggregating $5,000,000. As of December 31, 1999, the Company has
available unused lines of credit aggregating $12,200,000.
At December 31, 1999, the Company was in violation of certain of the
financial covenants under the Credit Agreement but has obtained the
appropriate waivers from the bank syndication. The Company is currently in
negotiations with the syndication to restructure the Agreement and expects
the new agreement to be in place by March 31, 2000. The new agreement will
likely reduce the available line of credit to $20,000,000 and reset certain
of the financial covenants.
7
<PAGE>
NOTE 3 - DISCONTINUED OPERATIONS
On June 25, 1999, the Board of Directors approved a formal plan to sell
the Company's Optical Test and Measurement (OTM) Division. The sale was
completed on July 7, 1999 to GN Nettest, a company in the GN Great Nordic Group,
Copenhagen, Denmark for $43,988,000 in cash. A net of tax gain of $10,134,000
($1.23 per share) was recorded in the quarter ending September 30, 1999. The
proceeds from the sale were used to reduce the Company's outstanding debt
obligation in July 1999, with $31,740,000 applied to long-term debt and
$11,260,000 used to reduce short-term debt.
The results of operations for the OTM Division have been segregated and
classified as discontinued operations in the consolidated statements of
operations, and prior periods have been restated. Selected results of operations
for the OTM Division follows (IN THOUSANDS):
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
Sales $8,335 $25,205
Income tax expense 310 365
Income (loss) from discontinued operations 326 (38)
Net gain on discontinued operations 10,134 -
</TABLE>
The consolidated income statements and the balance sheet in the prior
period have been restated to reflect the OTM Division as discontinued
operations. The consolidated statements of cash flows include the OTM Division.
NOTE 4 - COMPREHENSIVE INCOME
The Company's total comprehensive income was as follows (IN THOUSANDS):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $(2,632) $(401) $5,734 $(5,160)
Other comprehensive income:
Foreign currency translation (851) (980) 224 652
------------------------------------------------
Total comprehensive income (loss) $(3,483) $(1,381) $5,958 $(4,508)
================================================
</TABLE>
8
<PAGE>
NOTE 5 - RESTRUCTURING
Restructuring liabilities related to the Marconi acquisition of
approximately $7,700,000 were recorded during the period ended June 30, 1998 for
severance and related costs associated with the shutdown of certain acquired
facilities. Payments of $6,998,000 have been charged against the liability
through December 31, 1999. The original estimate of the liability was reduced
during the current quarter by $581,000 due to the execution of a long-term
sublease of the Fort Worth Texas facility to a third party. The impact of the
reversal resulted in a reduction of goodwill. The remaining balance of $121,000
covers remaining costs under the lease and miscellaneous severance payments.
NOTE 6 - EARNINGS PER SHARE DATA
The following is a reconciliation of the numerator and denominators used
in computing basic and diluted earnings per share from continuing operations (in
thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NUMERATOR
Loss from continuing operations
available to common shareholders $(2,632) $ (534) $(4,726) $(5,122)
=======================================================
DENOMINATORS
Basic earnings (loss) per share:
Weighted-average common shares
outstanding 8,236 8,208 8,230 8,203
=======================================================
Basic loss per share from
continuing operations $ (0.32) $ (0.07) $ (0.57) $ (0.62)
=======================================================
Diluted earnings (loss) per share:
Weighted-average common shares
outstanding 8,236 8,208 8,230 8,203
Effect of stock options 8 13 4 115
-------------------------------------------------------
Weighted-average common shares
outstanding - diluted 8,244 8,221 8,234 8,318
=======================================================
Diluted loss per share from
continuing operations $ (0.32) $ (0.06) $ (0.57) $ (0.62)
=======================================================
</TABLE>
9
<PAGE>
Note - Because the effect of stock options for 1999 and 1998 is
antidilutive for the periods presented, diluted per share amounts are equal to
the basic per share amounts on the Condensed Consolidated Statement of
Operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
In addition to historical information, this report contains
forward-looking statements and information that is based on management's beliefs
and assumptions, as well as information currently available to management. When
used in this document, the words "anticipate", "estimate", "expect", "intend",
"believe", and similar expressions are intended to identify forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable and are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
it can give no assurance that such expectations will prove to be correct and
that actual results will not differ materially from the Company's expectations.
Such forward-looking statements speak not only as of the date of this report,
and the Company cautions readers not to place undue reliance on such statements.
Factors that could cause actual results to differ from expectations
include: (1) the degree and nature of competition, including pricing pressure
and the development of new products or discoveries of new technologies by
competitors, (2) fluctuations in the global economy and various foreign
countries including recent developments adversely affecting the economies of
various Asian countries, (3) demand for the Company's products, (4) loss of
significant customers, (5) the Company experiencing delays in developing new
products and technologies, (6) the ability of the Company to continue the
transition to digital technologies in the communications test equipment
products, (7) the failure of such technologies or products to perform according
to expectations, (8) difficulties in manufacturing new products so they may be
profitably priced on a competitive basis, (9) lack of adequate market acceptance
of new products or technologies, (10) changes in products or sales mix and the
related effects on gross margins, (11) availability of components, parts, and
supplies from third party suppliers on a timely basis and at reasonable prices,
(12) currency fluctuations, (13) inventory risks due to changes in market demand
of the Company's business strategies, (14) inability to hire sufficient
personnel at reasonable levels of compensation and other labor problems, (15)
inability to realize anticipated efficiencies and savings from the Company's
recent acquisition of Marconi Instruments Limited and (16) other risks described
herein.
10
<PAGE>
YEAR 2000 MATTERS
The Company successfully completed its Year 2000 readiness project
during December 1999. The Company has not experienced any significant Year 2000
related system failures nor has the Company been negatively impacted by any of
its suppliers. The Company intends to continue to monitor and test its own
systems for Year 2000 compliance for the near term. The Company expects no
further significant expenditures will be required to address Year 2000 concerns.
DISCONTINUED OPERATIONS
On June 25, 1999, the Board of Directors approved a formal plan to sell
the Company's Optical Test and Measurement (OTM) Division. The sale was
completed on July 7, 1999 to GN Nettest, a company in the GN Great Nordic Group,
Copenhagen, Denmark for $43,988,000 in cash. A net of tax gain of $10,134,000
($1.23 per share) was recorded in the quarter ending September 30, 1999. The
proceeds from the sale were used to reduce debt in July 1999, with $31,740,000
applied to long-term debt and $11,260,000 used to reduce short-term debt. The
sale will allow the Company to further focus on the ETM products.
As a consequence of the divestiture, the results of operations for the
OTM Division have been segregated and classified as discontinued operations in
the consolidated statements of operations and prior periods have been restated.
The consolidated balance sheets have been segregated to reflect the OTM Division
as discontinued operations and prior periods have been restated. The
consolidated statements of cash flows include the OTM Division.
RESULTS OF OPERATIONS
3RD QUARTER FY00 COMPARED TO 3RD QUARTER
Sales for the third quarter ended December 31, 1999 were $35,265,000
compared to $36,072,000 in the third quarter of the prior year. This
represents a decrease of 2.2%, or $807,000. The major drivers of the decrease
in sales are a decline in the price of radio test sets delivered to the
government and lower sales of automated test equipment, offset by increased
sales of commercial radio test sets, spectrum analyzers and service compared
to the prior year quarter.
Gross margins decreased to 38.0% for the current year quarter as
compared to 43.7% in the previous year quarter. The decline in gross margin was
due to a special cost reduction charge of $720,000, or 2.0%, and the product
mix.
11
<PAGE>
Operating expenses increased 4.2% to 44.0% of sales for the current
quarter as compared to 39.8% in the previous year quarter. During the quarter,
the Company took certain actions which will result in ongoing cost reductions
through lower compensation expense. The costs associated with such actions,
primarily employee severance paid during the period, increased operating
expenses by $2,268,000, or 6.4% of sales. These non-recurring charges increased
selling expenses, administrative expenses, and engineering expenses by
$286,000, $1,659,000 and $323,000 respectively. Excluding the cost reduction
charges, operating expenses decreased by 2.3% due to reductions in engineering
expenses of 1.1% and selling expenses of 1.7% offset by an increase in
administrative expense of 0.5%.
Other expenses decreased $347,000 compared to the prior year quarter as
the result of reduced interest expense ($609,000) resulting from the paydown of
debt with proceeds from the OTM sale in the second quarter offset by
miscellaneous other expenses.
The estimated effective income tax rate was approximately 36.0% for the
current period and 42.8% for the previous year period. The decrease represents
the impact of the foreign subsidiaries and their related tax rates.
FY00 YEAR-TO-DATE COMPARED TO FY99 YEAR-TO-DATE
Sales for the nine months ended December 31, 1999 were
$103,961,000 compared to $109,044,000 in the previous year. This represents a
decrease of 4.7%, or $5,083,000. Sales declines were experienced in the
following product lines: radio test sets to the government, sources and
analyzers, microwave, distributed products and automated test equipment These
were offset by increased sales of spectrum analyzers, avionics, and service
compared to prior year.
Gross margins increased 1.1% to 40.5% of sales for the nine-month
period. The previous year included inventory valuation charges related to the
Marconi acquisition of $7,106,000, or 6.5% of sales. The current year also
included non-recurring cost reduction charges of $720,000, or 0.7%. Excluding
the effect of the acquisition adjustment and non-recurring cost reduction
charges, gross margins declined from 46.0% to 41.2% in the current year. The
decrease of 4.8% is due to the product mix.
Operating expenses increased 0.2% to 41.6% of sales for the nine-month
period. The increase in operating expenses is due to non-recurring cost
reduction charges of $2,268,000, or 2.2%. Excluding the cost reduction charges,
normalized operating expenses decreased by 2.0% as a percentage of sales,
comprised of reductions in engineering expenses of 0.8% and selling expenses of
1.4% offset by an increase in administrative expense of 0.2%. The decrease in
normalized operating expenses of 2.0% was due to head count reductions and
expense controls.
Other expenses decreased $370,000 compared to the prior year period as
the result of reduced interest expense ($700,000) and interest income offset by
miscellaneous other expense.
The estimated effective income tax rate was 37.1% for the nine months
ended December 31, 1999 and 42.0% in the previous year. The decrease represents
the impact of the foreign subsidiaries and their related tax rates.
12
<PAGE>
LIQUIDITY AND SOURCES OF CAPITAL
The Company maintains an adequate financial position with working
capital of $30,085,000 at December 31, 1999. The Company had a cash outflow from
operations of $2,499,000 for the nine-month period ended December 31,1999
compared to a cash outflow of $1,727,000 for the prior year end period.
Cash flows provided by investing activities were $41,068,000 for the
nine-month period ended December 31,1999, compared to cash outflows of $776,000
for the nine-month period of the prior year. The increase in funds provided is
due primarily to the proceeds from the sale of the OTM Division.
Cash flows used in financing activities for the nine-month period ended
December 31, 1999 were $39,789,000 compared to cash inflows of $5,905,000 in the
nine-month period of the prior year. Proceeds from the sale of the OTM Division
were used to reduce long-term debt.
No cash dividends were paid in fiscal year 1999 and no cash dividends
are anticipated to be paid in fiscal year 2000. Certain restrictive debt
covenants allow for the payment of cash dividends only when certain leverage
ratios are obtained.
On September 20, 1996, the Board of Directors of the Company
authorized the repurchase of up to 750,000 shares of the Company's common
stock. The main purpose of the shares buyback program is to offset the
dilution of stock option exercises. As of December 31, 1999, the Company had
purchased an aggregate of 470,000 shares under the program. Certain
restrictive debt covenants limit the amount of capital stock allowed to be
repurchased.
The Company has a Credit Agreement (Agreement) with a bank
syndication which includes two term loans and a $25,000,000 line of credit.
At December 31, 1999, $12,800,000 was outstanding under the line of credit.
At December 31, 1999, the Company was in violation of certain of the
financial covenants under the Credit Agreement but has obtained the
appropriate waivers from the bank syndication. The Company is currently in
negotiations with the syndication to restructure the Agreement and expects
the new agreement to be in place by March 31, 2000. The new agreement will
likely reduce the available line of credit to $20,000,000 and reset certain
of the financial covenants.
The Company anticipates that available lines of credit and funds
generated from operations will be adequate to meet capital asset expenditures,
debt payments, interest and working capital needs.
13
<PAGE>
OUTLOOK
The Company is continuing to manage the business very closely to keep
its costs as low as possible at the same time that it works to develop new
products and fine-tune its sales and marketing effort. This means that it has
a great deal of operating leverage built into IFR that will benefit its
shareholders once sales begin to grow again.
The goal for IFR is growth - growth in sales and growth in earnings. A
growth company cannot be built through cost cutting alone. So the Company
continues to invest in engineering and new product development of core wireless
communications and T&M product lines. The Company began releasing some of its
new products in the third quarter. In November it launched a new high power
version of its 6800 Microwave Analyzer that adds considerable new functionality
in T&M applications. It also launched a new comprehensive tester, the 1900 Base
Site Analyzer (BSA), that addresses the field installation and troubleshooting
requirements of Ericsson, Lucent and Nortel wireless telecommunications
infrastructure equipment. Early response to these new products is encouraging.
The Company plans to release additional new products during the next few months.
The Company is working to improve its sales and marketing efforts. In
the past couple of months, it has reorganized its sales programs around focused
product groups. This allows the Company to offer superior customer service and
to respond more quickly than ever to new product opportunities as they develop.
In addition, the Company is shifting its advertising dollars toward the Internet
and away from its traditional reliance on print advertising. It recently
launched an Internet-based on-line customer training program as part of this
initiative. One first on-line training program attracted 100 customers to the
Company's site, which exceeded its expectations. It will be doing a program a
month in 2000. You are welcome to check this out on the Company's Web site,
www.ifrsys.com.
14
<PAGE>
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On November 5, 1999, IFR Systems Inc. announced that its President and
Chief Operating Officer, Iain M. Robertson, has elected to take retirement,
effective immediately. Jeffrey A. Bloomer, CEO, assumed Mr. Robertson's
responsibilities as President.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.0 Termination agreement between the Company and Alfred H Hunt III
10.2 Termination agreement between the Company and Friedel Arnold
10.24 Waiver to Credit Agreement, dated as of February 14, 2000 for
the fiscal quarter ending December 31, 1999.
27.0 Financial Data Schedule
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.
IFR SYSTEMS, INC.
Date: February 14, 2000 /s/ Jeffrey A. Bloomer
- ------------------------ ----------------------
Jeffrey A. Bloomer,
Chief Executive Officer
(Duly authorized officer)
/s/ Dennis H. Coley
----------------------
Dennis H. Coley,
Chief Financial Officer
and Treasurer
(Principal financial and chief
accounting officer)
16
<PAGE>
EXHIBIT 10.0
EXECUTIVE RETIREMENT AGREEMENT
THIS EXECUTIVE RETIREMENT AGREEMENT is made and entered into this 1st
day of November, 1999, by and between IFR Systems, Inc., a Delaware corporation
(hereinafter "Employer"), and Alfred H. Hunt, III (hereinafter "Executive").
WHEREAS, through his service and leadership, Executive has made a
major contribution to the profitability, growth and financial strength of
Employer; and
WHEREAS, Executive wishes to retire from Employer as an employee and
officer of Employer effective September 30, 2001; and
WHEREAS, Employer wishes to ease Executive's transition and provide
Executive a package of compensation and benefits reflecting earlier promises
to Executive along with additional compensation and benefits that Executive
would otherwise not be entitled to pursuant to any of Employer's policies,
plans and practices, or pursuant to any purported agreement between the
parties, either express or implied.
IN CONSIDERATION of the premises and mutual promises herein contained,
the parties agree and acknowledge as follows:
1. Executive's retirement date and last date of employment will be
September 30, 2001.
2. Conditioned upon Executive's accepting and not revoking this
Agreement, Executive will become eligible for the following compensation and
benefits:
A. Executive will receive compensation in the gross annual amount
of ____________ through September 30, 2001, to be paid at a
monthly gross pay rate of __________ (less taxes and lawful
deductions).
B. Executive will receive a bonus for past services, in the form
of deferred compensation, in the gross annual amount of
__________________________________ through September 30, 2001,
to be paid at a monthly rate of ______________ (less taxes and
lawful deductions).
C. Executive shall be eligible for benefits through September 30,
2001, (including, but not limited to, vacation, sick leave,
health, dental, disability and other group insurance benefits)
in accord with Employer's personnel policies and the terms and
limitations of any applicable benefit plan. Employer retains
the right to amend or terminate such benefits in accord with
otherwise applicable law, and nothing in this Agreement shall
be construed to limit such right.
D. Expenses and other perquisites as set forth on Appendix A
attached hereto.
<PAGE>
E. This Agreement acknowledges the grant of certain options to
purchase shares of common stock of IFR Systems, Inc.
previously issued to Executive. Such options will continue to
be governed by the terms, conditions and provisions of the
applicable option agreement(s) and plan(s).
Payments of either compensation or benefits will not be made under this
Agreement until the expiration of the seven (7) day period in which Executive
may revoke this Agreement.
3. In the event of Executive's death prior to September 30, 2001, any and
all remaining payments under Sections 2.A and 2.B of this Agreement shall be
made to Executive's estate.
4. It is understood and agreed by both parties hereto that Executive will
not be serving in the capacity of a director of any Employer's subsidiaries or
affiliates.
5. The parties acknowledge and agree that Employer shall have the right,
in its sole discretion, to limit or restrict any and all services to be provided
or performed by Executive.
6. The parties acknowledge and agree that this Agreement cancels and
supercedes in full any and all prior agreements entered into between Employer
(or any Employer parent, subsidiary or affiliate) and Executive relating to
Executive's employment or employment separation. This includes, but is not
limited to, the Termination Agreement between the parties entered into effective
August 28, 1996. In regard to such Termination Agreement, Executive specifically
agrees that a "Change of Control" as defined in the Termination Agreement has
not occurred as of the date of Executive's entering into this Agreement and that
such Termination Agreement is hereby canceled and made null and void and
Executive shall have no further rights whatsoever in regard to such Termination
Agreement.
7. Executive acknowledges that during the course of his employment with
Employer that Executive has and will obtain knowledge of valuable confidential
and proprietary information. As used herein, "Confidential Information" means
any information of Employer that Employer considers to be proprietary and treats
as confidential, or information that is protectable as a trade secret under
applicable law, or information of any third party that Employer is under an
obligation to keep confidential, including, but not limited to, the following:
inventions, trade secrets, confidential knowledge, data, or other proprietary
information relating to products, processes, know-how, designs, developmental or
experimental work, computer programs, data bases, software, any portion of any
reports, analyses, or other materials generated or used in connection with
Employer's business, the prices Employer obtains or has obtained from the sale
of, or at which it sells or has sold, its products and services, and listings of
any or all of the foregoing, in whatever form, or any other information
concerning Employer's business without regard to whether all or any part of the
foregoing matter would otherwise be deemed "confidential" or "material," the
parties hereto stipulating that, as between them, the same are confidential and
material and significantly affect the effective and successful conduct of
Employer's business. Executive agrees that he shall not at any time, whether
during or after the cessation of his employment, reveal to any person or any
entity any of the Confidential
<PAGE>
Information, except, and only to the extent, as may be required in the ordinary
course of performing Executive's assigned duties as an employee and officer of
Employer, and Executive agrees to keep secret, and take all necessary
precautions against disclosure of, all Confidential Information and all matters
entrusted to him and not to use or attempt to use any Confidential Information
in any manner that may cause injury or loss, or may be calculated to cause
injury or loss, whether directly or indirectly, to Employer or its customers.
For purposes of this Section 7 the term Employer shall be deemed to include IFR
Systems, Inc. and any parent, subsidiary or affiliate of the same.
8. Executive agrees that Employer shall be entitled to injunctive or other
equitable relief enjoining and restraining any actual or threatened breach of
the provisions of Section 7 of this Agreement. Nothing herein, however, shall be
construed as prohibiting Employer from pursuing any other remedies available to
Employer for such breach or threatened breach, including, but not limited to,
the recovery of damages (both actual and punitive) from Executive.
9. By signing this Agreement, Executive releases and discharges Employer,
its owners, successors, parents, affiliates, subsidiaries, employees, agents,
attorneys, officers and directors, (hereinafter referred to as "Releasees") from
all claims, liabilities, demands, and causes of action, known or unknown, fixed
or contingent, which Executive may have or claim to have against the Releasees
arising out of Executive's employment or employment separation. This includes,
but is not limited to, claims of wrongful discharge, or those arising under any
purported contract, written or oral, express or implied, under the Fair Labor
Standards Act, the State Overtime or Wage Payment Law, or under federal, state
and local laws prohibiting employment discrimination on account of age, race,
sex, creed, national origin, or mental or physical disability, including, but
not limited to, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act (ADEA), the Rehabilitation Act, the Americans
with Disabilities Act (ADA), the Family and Medical Leave Act (FMLA), and the
Kansas Act Against Discrimination (KAAD), all as may be amended from time to
time.
10. Neither the execution of this Agreement nor the payment of the
consideration herein specified shall constitute, nor be construed or
represented as, an admission by Releasees, or any of them, of any breach of
contract, breach of the duty of good faith and fair dealing, retaliatory
discharge, or the commission of or any breach of a statutory or common law
right or tort.
11. Executive agrees not to disclose, or permit those acting on Executive's
behalf to disclose, the terms of this Agreement to any person, firm,
organization or entity of any character or nature, unless divulged (i) to an
agency of the federal or state government, (ii) pursuant to a court order,
(iii) pursuant to a requirement of law, or (iv) with the prior written
consent of Employer. This provision is not intended to prohibit nor does it
prohibit, however, Executive's disclosure of the terms of this Agreement to
his attorney(s), accountant(s), financial advisor(s) or immediate family
members.
<PAGE>
12. In signing this Agreement, Executive understands that the terms hereof
are contractual and not merely a recital, and that Executive is not relying
upon any statement or representation made by any Releasees, but, instead,
Executive is relying solely upon Executive's own judgment and/or the advice
of Executive's attorney. Executive acknowledges that this Agreement is the
entire agreement of the parties regarding this matter.
13. This Agreement is to be interpreted and enforced according to the laws
of the State of Kansas and shall be binding upon Executive's heirs, next of
kin, executors, administrators, successors, and assigns, and shall inure to
the benefit of the Releasees and all other persons and entities released
herein.
14. Executive has twenty-one (21) days, or until _______________, 1999, in
which to decide to enter into this Agreement, although Executive may accept
at any time prior to the expiration of such twenty-one (21) day period.
15. Executive may revoke any acceptance of this Agreement within seven (7)
days, and this Agreement shall not become effective until such revocation
period has expired.
16. BEFORE EXECUTING THIS AGREEMENT, EXECUTIVE SHOULD CONSULT HIS OWN
ATTORNEY.
17. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ AND UNDERSTANDS THIS ENTIRE
AGREEMENT, THAT HE HAS SIGNED IT KNOWINGLY AND VOLUNTARILY, AND THAT HE WAS
UNDER NO DURESS OR PRESSURE TO DO SO.
- ----------------------- -----------------------------------
Date Alfred H. Hunt, III
"Executive"
By
- ----------------------- ---------------------------------
Date IFR Systems, Inc.
"Employer"
<PAGE>
APPENDIX A
BENEFITS
APPROXIMATE
ANNUAL EXPENSE
--------------
Automobile Lease and applicable expenses ________
Country Club Dues Rolling Hills ________
<PAGE>
EXHIBIT 10.2
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT is made and entered into this __________
day of May, 1999, by and between IFR Systems, Inc. and IFR Americas, Inc.,
Delaware corporations (hereinafter "Employer"), and Friedel E. Arnold
(hereinafter "Executive").
WHEREAS, Executive has made a major contribution to the profitability,
growth and financial strength of Employer; and
WHEREAS, Executive wishes to retire from Employer as an Executive
Vice-President effective May 31, 1999; and
WHEREAS, Employer wishes to ease Executive's transition and provide
Executive a severance package reflecting earlier promises to Executive along
with additional severance pay and benefits that Executive would otherwise not
be entitled to pursuant to any of Employer's policies, plans and practices,
or pursuant to any purported agreement between the parties, either express or
implied.
IN CONSIDERATION of the premises and mutual promises herein
contained, the parties agree and acknowledge as follows:
1. Executive's retirement date and last date of employment will be May 31, 1999,
subject to Executive's agreement to the remaining conditions of this Separation
Agreement.
2. Conditioned upon Executive's accepting and not revoking this Separation
Agreement, Executive will become eligible for the following payments and
benefits:
A. Executive will receive eleven (11) months of severance pay at
a monthly gross pay rate of _________ in the total amount of
______________________________________________ (less taxes and
lawful deductions). Such amount will be paid by salary
continuation commencing June 1, 1999, and ending April 30,
2000.
B. Upon the effective date of this Agreement, Executive will
receive a severance allowance in the lump sum amount
______________________________________ (less taxes and lawful
deductions). The parties specifically agree that this
allowance is provided in part, and is good and sufficient
consideration for, cancellation of Executive's stock options
as set forth under Section 6 of this Agreement.
C. On or before May 7, 1999, Executive will return to Employer
his Employer-provided vehicle. Upon the effective date of this
Agreement, Executive will receive a vehicle allowance in the
lump sum amount of
1
<PAGE>
_______________________________(less taxes and lawful
deductions).
D. Upon the effective date of this Agreement, Executive will
receive a benefit allowance in the lump sum amount of
______________________________ (less taxes and lawful
deductions). Executive's 401(k) contributions and accrual of
pension benefits will cease as of May 31, 1999. In addition,
Employer-sponsored life, accidental death and dismemberment
insurance, short and long-term disability benefits and all
other insurance benefits will cease as of May 31, 1999, unless
otherwise continued individually by Executive in accordance
with the terms of any insurance policy or policies.
E. Upon the effective date of this Agreement, Executive will
receive a health insurance allowance in the lump sum amount
of __________________________________________ (less taxes
and lawful deductions). Executive may elect continued
coverage through April 30, 2000, for himself and his
eligible dependents under the IFR Systems, Inc. Group
Medical and Dental Plan ("Medical Plan"). Such coverage will
be provided pursuant to the same terms and conditions,
including cost, under which the Medical Plan is offered to
active IFR Americas, Inc. management employees, as may be
amended from time to time. Such coverage will NOT be
credited against Executive's continuation rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"). After April 30, 2000, if Executive and/or his
dependants were covered by the Medical Plan as of that date,
continued coverage will be available at Executive's own
expense and will be provided subject to and in accordance
with the terms of the Medical Plan and applicable law.
Payments of either cash or benefits will not be made under this Separation
Agreement until the expiration of the seven (7) day period in which Executive
may revoke this Agreement. In addition, payments under this Agreement shall not
be eligible for deferral under the IFR Systems, Inc. Deferred Compensation Plan
or IFR Systems, Inc. Savings and Investment Plan.
3. In the event of Executive's death prior to April 30, 2000, any and all
remaining payments under Section 2 of this Agreement will be made to Executive's
spouse, if surviving. If Executive does not leave a surviving spouse, or in the
case of the simultaneous death of Executive and his spouse, any and all
remaining payments under the Separation Agreement shall be made in equal parts
to Executive's three sons, if surviving. If Executive does not leave a surviving
son, any and all remaining payments under the Separation Agreement shall be made
to Executive's estate.
4. It is understood and agreed by both parties hereto that Executive will not be
serving in the capacity of a director of Employer or any Employer parent,
subsidiary or affiliate. In accord with that understanding, Executive shall
formally resign from any and all such positions effective May 31, 1999, the date
of his retirement.
5. By signing this Agreement, Executive releases and discharges Employer, its
owners,
2
<PAGE>
successors, parents, affiliates, subsidiaries, employees, agents, attorneys,
officers and directors, (hereinafter referred to as "Releasees") from all
claims, liabilities, demands, and causes of action, known or unknown, fixed or
contingent, which Executive may have or claim to have against the Releasees
arising out of Executive's employment or employment termination. This includes,
but is not limited to, claims of wrongful discharge, or those arising under any
purported contract, written or oral, express or implied, under the Fair Labor
Standards Act, the State Overtime or Wage Payment Law, or under federal, state
and local laws prohibiting employment discrimination on account of age, race,
sex, creed, national origin, or mental or physical disability, including, but
not limited to Title VII of the Civil Rights Act of 1964, the Age Discrimination
in Employment Act (ADEA), the Rehabilitation Act, the American with Disabilities
Act (ADA), the Family and Medical Leave Act (FMLA), and the Kansas Act Against
Discrimination (KAAD), all as may be amended from time to time.
6. In making this Agreement, the parties recognize that certain stock options
were granted Executive under the IFR Systems, Inc. 1988 Incentive Stock Option
Plan, the IFR Systems, Inc. 1992 Nonqualified Stock Option Plan and the IFR
Systems, Inc. 1996 Incentive Stock Option Plan. By entering into this Agreement,
the parties hereby agree that any and all stock options granted Executive by
such Plans (and any and all subsequent amendments or additions to such Plans) to
the extent not exercised by May 1, 1999, are hereby canceled and made null and
void and Executive shall have no further rights of exercise whatsoever in regard
to such options.
7. The parties agree and acknowledge that this Separation Agreement cancels and
supercedes in full any and all prior agreements entered into between the parties
relating to Executive's employment or employment termination. This includes, but
is not limited to, the Termination Agreement between the parties entered into
effective August 28, 1996. In regard to such Termination Agreement, Executive
specifically agrees that a "Change of Control" as defined in the Termination
Agreement has not occurred as of the date of Executive's entering into this
Separation Agreement and that such Termination Agreement is hereby canceled and
made null and void and Executive shall have no further rights whatsoever in
regard to such Termination Agreement.
8. Neither the execution of this Agreement nor the payment of the consideration
herein specified shall constitute, nor be construed or represented as, an
admission by Releasees, or any of them, of any breach of contract, breach of the
duty of good faith and fair dealing, retaliatory discharge, or the commission of
or any breach of a statutory or common law right or tort.
3
<PAGE>
9. Executive recognizes and acknowledges that Employer's costs, future plans,
methods of operation, product specifications, management and marketing
techniques, administrative procedures, marketing plans, financial condition,
methods of determination of prices, profits, sales and net income, confidential
matters, and all other information as to the business affairs of Employer not
generally known to the public, as the same may exist from time to time, are
confidential information and are valuable, special and unique assets of
Employer. Executive, therefore, agrees that Executive will not disclose such
confidential information (or any part thereof), or any other information as to
the business affairs of Employer to any person or other entity for any reason or
purpose whatsoever. Executive agrees that Employer shall be entitled to
injunctive or other equitable relief in joining and restraining any actual or
threatened breaches of the provisions of this Section. Nothing herein, however,
shall be construed as prohibiting Employer from pursuing any other remedies
available to Employer for such breach or threatened breach, including but not
limited to the recovery of damages (both actual and punitive) from Executive.
10. Executive agrees not to disclose, or permit those acting on Executive's
behalf to disclose, the terms of this Separation Agreement to any other person,
firm, organization or entity of any character or nature, unless divulged: (i) to
an agency of the federal or state government, (ii) pursuant to a court order,
(iii) pursuant to a requirement of law, or (iv) with the prior written consent
of Employer.
11. In signing this Agreement, Executive understands that the terms hereof are
contractual and not merely a recital, and that Executive is not relying upon any
statement or representation made by any Releasees, but, instead, Executive is
relying solely upon Executive's own judgment and/or the advice of Executive's
attorney. Executive acknowledges that this Separation Agreement is the entire
agreement of the parties regarding this matter.
12. This Agreement is to be interpreted and enforced according to the laws of
the State of Kansas and shall be binding upon Executive's heirs, next of kin,
executors, administrators, successors, and assigns, and shall inure to the
benefit of the Releasees and all other persons and entities released herein.
13. Executive has twenty-one (21) days, or until _____________, 1999 in which to
decide to enter into this Separation Agreement, although Executive may accept at
any time prior to the expiration of such twenty-one day period.
14. Executive may revoke any acceptance of this Agreement within seven (7) days,
and this Agreement shall not become effective until such revocation period has
expired.
15. BEFORE EXECUTING THIS AGREEMENT, EXECUTIVE SHOULD CONSULT HIS OWN ATTORNEY.
16. EXECUTIVE ACKNOWLEDGES THAT HE HAS READ AND UNDERSTANDS THIS ENTIRE
AGREEMENT, THAT HE HAS SIGNED IT KNOWINGLY AND VOLUNTARILY, AND THAT HE WAS
UNDER NO DURESS OR PRESSURE TO DO SO.
4
<PAGE>
Date___________________________ ______________________________
Friedel Arnold
"Employee"
Date___________________________ By ____________________________
IFR Systems, Inc.
"Employer"
Date___________________________ By ____________________________
IFR Americas, Inc.
"Employer"
5
<PAGE>
Exhibit 10.24
February 14, 2000
IFR SYSTEMS, INC.
10200 West York Street
Wichita, KS 67215
Attention: Chief Financial Officer
Dear Sir:
Reference is hereby made to that certain Amended and Restated Credit
Agreement dated as of March 19, 1998 by and among IFR Systems, Inc., a
Delaware corporation (the "BORROWER"), the lenders from time to time parties
thereto (collectively, the "LENDERS") and Bank One, NA (formerly known as The
First National Bank of Chicago), as one of the Lenders and in its capacity as
contractual representative (the "AGENT") on behalf of itself and the other
Lenders (as amended and as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"). Terms used
herein and not otherwise defined herein shall have the meanings set forth in
the Credit Agreement.
The Borrower has informed the Lenders that certain Defaults have
occurred as a result of the Company's noncompliance with (i) the Minimum
Fixed Charge Coverage Ratio financial covenant set forth in Section 7.4(A) of
the Credit Agreement, and (ii) the Maximum Leverage Ratio financial covenant
set forth in Section 7.4(B) of the Credit Agreement, in each case for the
fiscal period ending on December 31, 1999 (collectively, the "Specified
Defaults"). In accordance with the provisions of SECTION 9.3 of the Credit
Agreement, the Borrower has requested that, subject to the terms hereof, the
Required Lenders waive the Specified Defaults; PROVIDED, that in any event
this waiver shall expire on [March 15, 2000] if definitive agreements
representing the amendment and restatement of the Credit Agreement on terms
satisfactory to the Required Lenders and consistent with the Amendment Term
Sheet attached hereto as Exhibit A shall not have been executed by the
Borrower on or before such date.
Subject to the terms set forth herein, the Required Lenders hereby agree
to such waiver.
Very truly yours,
BANK ONE, NA (FORMERLY KNOWN AS
THE FIRST NATIONAL BANK OF
CHICAGO), as Agent and as a Lender
By: ____________________________
Name:
Title:
CONSENT LETTER DATED AS OF
FEBRUARY 14, 2000
<PAGE>
INTRUST BANK, as a Lender
By: ____________________________
Name:
Title:
THE BANK OF NOVA SCOTIA, as a Lender
By: ____________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as a Lender
By: ____________________________
Name:
Title:
NATIONAL WESTMINSTER BANK PLC,
as a Lender
By: ____________________________
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: ____________________________
Name:
Title:
CONSENT LETTER DATED AS OF
FEBRUARY 14, 2000
<PAGE>
LLOYDS TSB BANK PLC, as a Lender
By: ____________________________
Name:
Title:
CONSENT LETTER DATED AS OF
FEBRUARY 14, 2000
<TABLE> <S> <C>
<PAGE>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,314
<SECURITIES> 0
<RECEIVABLES> 26,558
<ALLOWANCES> 664
<INVENTORY> 37,066
<CURRENT-ASSETS> 75,773
<PP&E> 43,720
<DEPRECIATION> 19,270
<TOTAL-ASSETS> 152,209
<CURRENT-LIABILITIES> 45,688
<BONDS> 60,758
0
0
<COMMON> 93
<OTHER-SE> 34,258
<TOTAL-LIABILITY-AND-EQUITY> 152,209
<SALES> 103,961
<TOTAL-REVENUES> 103,961
<CGS> 61,887
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<INTEREST-EXPENSE> 6,208
<INCOME-PRETAX> (7,511)
<INCOME-TAX> (2,785)
<INCOME-CONTINUING> (4,726)
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<CHANGES> 0
<NET-INCOME> 5,734
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</TABLE>
