SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1997
Commission file number 1-9149
THE INTERLAKE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3428543
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
550 Warrenville Road, Lisle, Illinois 60532-4387
(Address of Principal Executive Offices) (Zip Code)
(630) 852-8800
(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 period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ____
As of October 15, 1997, 23,301,792 shares of the Registrant's common stock
were outstanding.
THE INTERLAKE CORPORATION
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following consolidated financial statements as of September 28, 1997 and
for the periods ended September 28, 1997 and September 29, 1996 are
unaudited, but include all adjustments which the Registrant considers
necessary for a fair presentation of results of operations and financial
position for the applicable periods. Except as noted, all adjustments are
of a normal, recurring nature.
THE INTERLAKE CORPORATION
Consolidated Statement of Operations
For the Periods Ended
September 28, 1997 and September 29, 1996
(In thousands except per share amounts)
<TABLE>
Third Quarter Nine Months
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales from Continuing Operations $195,490 $174,047 $551,509 $513,920
Cost of Products Sold 156,641 134,360 433,218 397,040
Selling & Administrative Expense 24,778 25,258 74,293 75,521
Operating Profit 14,071 14,429 43,998 41,359
Non-operating (Income) Expense (450) (348) (983) (1,627)
Earnings Before Interest & Taxes 14,521 14,777 44,981 42,986
Interest Expense 11,318 11,828 34,279 35,491
Interest Income (661) (472) (2,050) (1,301)
Income from Continuing Operations Before Taxes,
Minority Interest, Extraordinary Loss & Accounting
Change 3,864 3,421 12,752 8,796
Provision for Income Taxes 2,402 2,236 8,011 5,826
Income from Continuing Operations Before Minority
Interest, Extraordinary Loss & Accounting Change 1,462 1,185 4,741 2,970
Minority Interest in Net Income of Subsidiaries 971 749 3,501 2,792
Income from Continuing Operations Before
Extraordinary Loss & Accounting Change 491 436 1,240 178
Income from Discontinued Operations, Net of
Income Taxes 349 1,777 1,833 4,271
Extraordinary Loss, Net of Income Taxes -- -- (1,482) --
Cumulative Effect of Change in Accounting Principle -- -- -- 1,610
Net Income $ 840 $ 2,213 $ 1,591 $ 6,059
Net Income (Loss) Per Share of Common Stock:
Continuing Operations Before Extraordinary Loss
& Accounting Change $ .02 $ .01 $ .04 $ --
Discontinued Operations, Net of Income Taxes .01 .06 .06 .14
Extraordinary Loss, Net of Income Taxes -- -- (.05) --
Cumulative Effect of Change in
Accounting Principle -- -- -- .05
Net Income $ .03 $ .07 $ .05 $ .19
Average Shares Outstanding 32,479 31,599 32,479 31,599
</TABLE>
THE INTERLAKE CORPORATION
Consolidated Balance Sheet
September 28, 1997 and December 29, 1996
(Dollars in thousands)
<TABLE>
Assets 1997 1996
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 40,223 $ 70,228
Receivables, less allowances for doubtful accounts of
$2,036 at September 28, 1997 and $2,037 at December 29, 1996 128,543 128,990
Inventories - Raw materials and supplies 24,532 22,144
- Semi-finished and finished products 36,824 37,842
Other current assets 13,250 12,893
Total Current Assets 243,372 272,097
Other Assets 44,953 40,527
Property, Plant and Equipment, at cost 395,214 387,546
Less - Depreciation and amortization (247,659) (242,447)
147,555 145,099
Total Assets $ 435,880 $ 457,723
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities:
Accounts payable $ 70,612 $ 65,366
Accrued liabilities 28,988 33,921
Interest payable 7,730 10,824
Accrued salaries and wages 15,921 15,675
Income taxes payable 33,953 29,591
Debt due within one year 10,331 3,759
Total Current Liabilities 167,535 159,136
Long-Term Debt 367,631 395,060
Other Long-Term Liabilities and Deferred Credits 91,223 92,506
Preferred Stock - 2,000,000 shares authorized
Convertible Exchangeable Preferred Stock - Redeemable,
par value $1 per share, issued 40,000 shares (liquidation
value $63,681 at September 28, 1997 and $59,626 at
December 29, 1996) 39,155 39,155
Shareholders' Equity (Deficit):
Common stock, par value $1 per share, authorized 100,000,000
shares, issued 23,373,695 shares at September 28, 1997
and 23,228,695 shares at December 29, 1996 23,374 23,229
Additional paid-in capital 2,731 3,741
Cost of common stock held in treasury (76,903 shares at
September 28, 1997 and 115,696 shares at December 29, 1996) (1,794) (2,700)
Accumulated deficit (236,364) (237,955)
Unearned compensation (3,714) (5,102)
Accumulated foreign currency translation adjustments (13,897) (9,347)
(229,664) (228,134)
Total Liabilities and Shareholders' Equity (Deficit) $ 435,880 $ 457,723
</TABLE>
THE INTERLAKE CORPORATION
Consolidated Statement of Cash Flows
For the Periods Ended September 28, 1997 and September 29, 1996
(In thousands)
<TABLE>
1997 1996
<S> <C> <C>
Cash flows from (for) operating activities:
Net income $ 1,591 $ 6,059
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,768 15,345
Discontinued operations (1,833) --
Extraordinary loss 1,482 --
Cumulative effect of change in accounting principle -- (1,876)
Other operating adjustments 127 (11,870)
(Increase) decrease in working capital:
Accounts receivable (1,140) (3,855)
Inventories (2,196) (4,019)
Other current assets (812) (3,813)
Accounts payable 6,347 4,603
Other accrued liabilities (7,615) (8,244)
Income taxes payable 3,848 3,341
Total working capital change (1,568) (11,987)
Net cash provided (used) by operating activities 14,567 (4,329)
Cash flows from (for) investing activities:
Capital expenditures (18,115) (17,761)
Proceeds from disposal of PP&E 550 183
Acquisitions (4,853) (310)
Divestitures 1,703 --
Other investment flows 121 350
Net cash provided (used) by investing activities (20,594) (17,538)
Cash flows from (for) financing activities:
Proceeds from issuance of short-term notes 6,476 --
Proceeds from issuance of long-term debt -- 9,000
Retirements of long-term debt (29,134) (3,575)
Debt retirement costs (1,504) --
Other financing flows 926 1,508
Net cash provided (used) by financing activities (23,236) 6,933
Effect of exchange rate changes (742) 350
Increase (Decrease) in cash and cash equivalents (30,005) (14,584)
Cash and cash equivalents, beginning of period 70,228 41,562
Cash and cash equivalents, end of period $ 40,223 $ 26,978
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Financial Statements
The interim information furnished in these financial statements is
unaudited.
The Registrant and its subsidiaries are referred to herein on a consolidated
basis as the Company.
Note 2 - Discontinued Operations
In the third quarter of 1997, the Company recorded certain adjustments
related to the October 1996 sale of its packaging businesses resulting in
income from discontinued operations of $.3 million, net of applicable income
taxes. In the first quarter of 1997, the Company received additional
proceeds from the sale of its packaging businesses resulting in income from
discontinued operations of $1.5 million, net of applicable income taxes.
Note 3 - Extraordinary Loss
In the first quarter of 1997, the Company repurchased $14.5 million in
principal amount of its 12% Senior Notes at a premium of $1.5 million. In
addition, deferred debt issuance costs of $.3 million related to the
repurchased Notes were written off. An extraordinary loss of $1.5 million,
net of applicable income taxes, was reported in the quarter.
Note 4 - Accounting Change
In the second quarter of 1996, the Company changed its method of amortizing
unrecognized actuarial gains and losses with respect to its post-retirement
benefits to amortize them over a five-year period. The method previously
used was to amortize any unrecognized gain or loss in excess of 10% of the
Accumulated Post-retirement Benefit Obligation amount over 15 years. This
change was accounted for as a change in accounting principle, the cumulative
effect of which was recorded as of the beginning of 1996. As a result, net
income for the first quarter of 1996 was increased by $1.6 million for
continuing operations and $.3 million for discontinued operations.
Note 5 - Computation of Common Share Data
The weighted average number of common shares outstanding used to compute net
income per share was 32,479,000 for 1997 and 31,599,000 for 1996.
Note 6 - Income Taxes
The effective tax rate on income from continuing operations was 62.8% and
66.2% for the 1997 and 1996 nine month periods, respectively. Because most
of the Company's interest expense is borne in the United States at the
parent company, the Company had substantial taxable income in foreign and
state jurisdictions. The Company also provided for additional amounts
related to open federal return tax years of 1982 to 1990.
Note 7 - Acquisitions
In the first quarter of 1997, the Company acquired the assets of ARC Metals
Inc. for $5.0 million in cash and a promissory note in the amount of $2.8
million.
Note 8 - Environmental Matters
In connection with the reorganization of the old Interlake, Inc. (now Acme
Steel Company ("Acme")) in 1986, the Company, then newly-formed, indemnified
Acme against certain environmental liabilities relating to properties which
had been shut down or disposed of by Acme's iron and steel division prior
to the 1986 reorganization. As of September 28, 1997, the Company's
reserves for environmental liabilities totaled $1.5 million, most of which
relates to the Acme indemnification.
Based on its current estimate of its potential environmental liabilities,
including all contingent liabilities, individually and in the aggregate,
asserted and unasserted, the Company believes that, subject to the
uncertainty with respect to the Duluth Site discussed below, the costs of
environmental matters have been fully provided for or are unlikely to have
a material adverse effect on the Company's business, future results of
operations, liquidity or financial condition. In arriving at its current
estimate of its potential environmental liabilities, the Company has relied
upon the estimates and analysis of its environmental consultants and legal
advisors, as well as its own evaluation, and has considered: the probable
scope and cost of investigations and remediations for which the Company
expects to have liability; the likelihood of the Company being found liable
for the claims asserted or threatened against it; and the risk of other
responsible parties not being able to meet their obligations with respect
to clean-ups. The Company's estimate has not been discounted to reflect the
time-value of money, although a significant delay in implementation of
certain of the remedies thought to be probable could result in cost
estimates increasing due to inflation.
In May 1994, the Company instituted an action seeking a declaratory judgment
against and recoveries from insurers under policies covering nearly 30
years. This action has been stayed pending appeal of a ruling that the
Company's notice to the insurers of environmental claims in connection with
the Duluth Site was late. The Company has entered into settlement
agreements with certain of the defendants in the litigation which has
resulted in some recoveries.
The Company's current estimates of its potential environmental liabilities
are subject to considerable uncertainty due to continuing uncertainty
surrounding one of the sites for which the Company is responsible pursuant
to its indemnity of Acme -- namely, the Superfund site on the St. Louis
River in Duluth, Minnesota (the "Duluth Site"). These uncertainties
primarily relate to whether remediation of certain underwater sediments will
be required and, if so, the nature of any remedy. In the light of these
uncertainties, the Company's estimates could be subject to change in the
future. The Minnesota Pollution Control Agency ("MPCA") has requested the
Company to undertake an investigation and to evaluate remedial alternatives
for the underwater sediments. The Company's consultants have substantially
completed their investigation. Based on this investigation, the Company is
reviewing possible remedial alternatives for the underwater sediments. The
Company believes that, until this review is completed, any estimate of
remediating the underwater sediments will not be meaningful. The Company
also continues to believe that the range of reasonable remedial alternatives
for the underwater sediments includes that of taking no action, thereby
avoiding the disruption of the natural remediation of the underwater
sediments which has been underway for over 30 years. Thus, the Company
believes the minimum of the range of costs of remedial alternatives to be
zero, and to date has not made provision for the remediation of underwater
sediments. If a clean-up is ultimately determined to be appropriate, the
range of costs would likely be dependent in part upon the extent to which
the remedy selected called for the removal and/or treatment of contaminated
sediments and could run from several millions to tens of millions of
dollars.
In March 1996, the citizens' board of the MPCA named the successors to
certain coal tar processors at the Duluth Site (the "tar companies") as
additional responsible parties for a portion of the underwater sediments
operable unit. The Company believes that the tar companies are the cause
of a significant portion of the underwater contamination at the site, while
the tar companies to date have maintained that their contributions were
minimal.
The Company's current expectation is that cash outlays related to its
outstanding reserves for environmental matters largely will be made during
1997 and 1998. If the Company ultimately determines that additional charges
are necessary in connection with the underwater sediments at the Duluth
Site, the Company believes it is likely that cash outlays would occur near
the end of the decade, or later.
Note 9 - Commitments and Contingencies
The Company is engaged in certain routine litigation arising in the ordinary
course of business. Based upon its evaluation of available information,
management does not believe that any such matters are likely, individually or
in the aggregate, to have a material adverse effect upon the Company's
business, future results of operations, liquidity or financial condition.
On July 9, 1990, the City of Toledo, Ohio (the "City"), brought an action
(the "Primary Action") in federal district court (the "Court") in Toledo
against the Company, Acme (together with the Company, the "Interlake
defendants"), Beazer Materials and Services, Inc., succeeded by Beazer East,
Inc. ("Beazer") and Toledo Coke Corporation ("Toledo Coke") in connection with
the alleged contamination of a 1.7 acre parcel of land the City had purchased
from Toledo Coke for purposes of widening a road. Pursuant to a memorandum of
understanding dated September 30, 1996, among Beazer, the City, and the
Toledo-Lucas County Port Authority (the "Port Authority"), setting forth
certain obligations of Beazer, the City and the Port Authority for the
completion and funding of the road widening project and related environmental
work, the City, Beazer and the Interlake defendants entered into a settlement
agreement pursuant to which the City released the Interlake defendants and
Beazer from, and agreed to dismiss with prejudice, all claims in the Primary
Action. On October 10, 1996, the Court entered a consent order dismissing
with prejudice all claims in the Primary Action, leaving only pending
cross-claims between Beazer and the Interlake defendants at issue in the
litigation. In May 1997, Beazer and the Interlake defendants reached a
tentative settlement of their cross-claims, which if finalized would not have
a material effect on the financial condition of the Company.
On March 10, 1995, SC Holdings, Inc., a subsidiary of Waste Management
International Plc ("SC Holdings"), filed a complaint in federal district court
in Trenton, New Jersey, against Hoeganaes Corporation, an Interlake
subsidiary, and numerous other defendants, seeking to recover amounts expended
or to be expended in the remediation of the Cinnaminson Groundwater
Contamination Site in Burlington County, New Jersey. SC Holdings claims to
have spent approximately $10 million in investigation and remediation, and
purportedly estimates the total costs of investigation and remediation to be
approximately $60 million. The site is a broadly-defined Superfund site which
encompasses a landfill formerly operated by SC Holdings and may also include
the groundwater under Hoeganaes' Riverton, New Jersey facility. Hoeganaes may
have shipped certain materials to the landfill. SC Holdings alleges that
Hoeganaes has liability as both an owner/operator and a generator. The
parties to the litigation are presently engaged in a court-supervised
non-binding allocation process which is presently expected to be completed in
the first half of 1998. The Company believes Hoeganaes has meritorious
defenses to both of the alleged bases of liability.
Note 10 - Possible Sale of Handling Businesses
As announced in March 1997, the Company is exploring the sale of its
Handling businesses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Third Quarter 1997 Compared with Third Quarter 1996
Net sales from continuing operations of $195.5 million in the quarter ended
September 28, 1997 compared with sales of $174.0 million in the prior year
period. Currency exchange fluctuations reduced the sales increase by $3.3
million compared to the 1996 quarter. Sales in the Engineered Materials
segment grew 16% to $74.1 million due to higher volume at Special Materials
and increased fabricated component sales at Aerospace Components. Handling
segment sales increased 10% to $121.4 million due to increased sales in all
regions. Operating profit of $14.1 million compared to $14.4 million in the
prior-year period. The 1996 quarter operating profit included a $1.2
million one-time gain from changes made to certain post-retirement medical
and life insurance benefits for which certain domestic employees could have
become eligible. Income from continuing operations of $.5 million in the
1997 quarter compared to $.4 million in the 1996 quarter. Net income of $.8
million for the 1997 quarter compared to $2.2 million in 1996. The 1997
quarter included $.3 million of income from discontinued operations compared
to $1.8 million in 1996.
Segment Results
The Company's businesses are organized into two segments: Engineered
Materials and Handling. Businesses in Engineered Materials are Special
Materials (ferrous metal powders) and Aerospace Components (precision
aerospace component fabrication and aviation repair). Businesses in
Handling are North American, European and Asia Pacific handling operations.
Third Quarter Segment Results
Net Sales Operating Profit
1997 1996 1997 1996
(in millions)
Engineered Materials
Special Materials $ 46.5 $ 43.7
Aerospace Components 27.6 20.4
74.1 64.1 $10.8 $ 9.1
Handling 121.4 109.9 3.6 5.5
Corporate Items (.3) (.2)
Consolidated Totals $195.5 $174.0 $14.1 $14.4
Engineered Materials
Sales in the Engineered Materials segment increased 16% to $74.1 million,
reflecting stronger metal powder sales at Special Materials and higher
fabricated component sales at Aerospace Components. Profit for the segment
increased 19%.
Special Materials' metal powder sales increased 6% compared with the same
period last year, reflecting a unit volume increase of 7% which was limited
by auto industry strikes in the current quarter. Earnings declined 6%
because of increased spending for manufacturing maintenance in the 1997
quarter compared to the same period last year.
Aerospace Components' sales increased 35% for the quarter as shipments
increased on several engine programs in the fabricated components business.
Profit for the quarter increased 84% due to additional volume and reduced
manufacturing costs in the fabricated components business.
Order backlogs in this segment were $178.6 million, up from $158.0 million
at the end of the third quarter of 1996. Special Materials' backlog, which
is generally short term in nature, was down 9%. Aerospace Components' record
backlog rose 19%, with new and follow-on orders for commercial, military and
space programs.
Handling
Sales in the Handling segment increased 10% to $121.4 million, compared with
$109.9 million in the 1996 period, with higher sales volume partially offset
by lower prices at most units. At comparable exchange rates, 1997 third
quarter sales increased 13% over the 1996 period. European sales rose 10%
due to increased volume partially offset by lower sales prices at most units,
while Asia Pacific sales improved 32% from increased shipments in Australia.
Handling sales in North America increased 1% in the 1997 quarter compared to
the prior year period, as volume increases were substantially offset by lower
sales prices.
Handling's third quarter profit declined 33% to $3.6 million compared with
$5.5 million in the 1996 period. North American profit decreased 84% due to
lower selling prices and increased manufacturing costs partially offset by
higher volume. The 1996 quarter benefited from a one-time gain of $.9
million from changes made to certain North American postretirement benefits.
European profit increased 16% as higher volume and reduced material costs
exceeded lower sales prices at most units. Asia Pacific profit increased 88%
principally due to higher volume within Australia. Changes in exchange rates
did not have a material effect on profit comparisons in the third quarter.
Order backlogs in the Handling segment increased 34% to $125.2 million
compared to $93.1 million at the end of the third quarter 1996. Asia
Pacific's record backlog increased 138% compared to September 1996. North
American backlog rose 14% compared to the prior year quarter.
Nine Months 1997 Compared with Nine Months 1996
Net sales from continuing operations were up 7% to $551.5 million in the
first nine months of 1997, compared with net sales of $513.9 million in the
1996 period. Currency exchange fluctuations reduced the sales increase by
$3.5 million compared to the 1996 nine-month period. Sales in the Engineered
Materials segment increased 16% to $224.2 million, due to higher unit volume
at Special Materials and higher fabricated component sales at Aerospace
Components. In the Handling segment sales were up 2% to $327.3 million.
Higher sales in Europe and Asia Pacific were partially offset by lower sales
in North America. Operating profit increased 6% to $44.0 million, from $41.4
million in 1996. Income from continuing operations in the 1997 period was
$1.2 million compared with $.2 million in 1996. Operating profit in the
1996 period included a $1.2 million one-time gain from changes made to
certain post-retirement medical and life insurance benefits. Selling and
administrative expenses were 13.5% of sales for the first nine months of 1997
compared to 14.7% in the 1996 period. Net income of $1.6 million in the 1997
period included income of $1.8 million from discontinued operations and an
extraordinary loss of $1.5 million on the early retirement of a portion of
the Company's debt. Net income in the first nine months of 1996 included
$4.3 million from discontinued operations and a $1.6 million benefit from the
cumulative effect of a change in accounting principle.
Segment Results
Nine Month Segment Results
Net Sales Operating Profit
1997 1996 1997 1996
(in millions)
Engineered Materials
Special Materials $147.7 $130.8
Aerospace Components 76.5 62.5
224.2 193.3 $36.7 $28.9
Handling 327.3 320.6 8.1 13.7
Corporate Items (.8) (1.2)
Consolidated Totals $551.5 $513.9 $44.0 $41.4
Engineered Materials
Sales in the Engineered Materials segment increased 16% to $224.2 million
reflecting stronger metal powder sales at Special Materials and higher
fabricated component sales at Aerospace Components. Profit for the segment
increased 27%.
Special Materials' metal powder sales increased 13% due to increased unit
volume of 15% compared with the year earlier period. Earnings increased 15%
in the nine-month period, reflecting the additional unit volume and lower
material costs, somewhat offset by lower selling prices.
Aerospace Components' sales increased 22% compared with the same period last
year, as shipments increased on several engine programs in the fabricated
components business. Profit for the period increased 45% due to the
additional volume and lower manufacturing costs.
Handling
Sales in the Handling segment increased 2% compared to the 1996 period to
$327.3 million. At comparable exchange rates, sales in the 1997 nine-month
period increased 3% compared to the 1996 period. North American sales
declined 4%, as lower sales prices were partially offset by volume increases.
Sales in Asia Pacific improved 19% because of increased shipments within
Australia. European sales rose 2% compared to the 1996 period, as increased
volume was partially offset by lower selling prices at most units.
Handling's profit for the nine-month period decreased 41% compared to the
same period last year. North American profit decreased 70% as lower selling
prices and higher manufacturing costs were partially offset by increased
volume. In Europe, higher volume, lower material costs and reduced selling
and administrative expenses, partially offset by lower selling prices,
contributed to a 46% profit increase. Asia Pacific profit increased 64%
compared to the 1996 nine-month period due to higher shipments within
Australia partially offset by higher manufacturing and selling and
administrative costs. Changes in exchange rates did not have a material
impact on profits during the periods.
Discontinued Operations
Certain adjustments recorded in connection with the October 1996 sale of the
packaging businesses resulted in additional income of $.3 million, net of
income taxes, in the third quarter of 1997. In the first quarter of 1997,
the Company received additional proceeds from the sale of its packaging
businesses resulting in income from discontinued operations of $1.5 million,
net of income taxes.
Extraordinary Loss
An extraordinary loss of $1.5 million, net of income taxes, was recorded in
the first quarter of 1997 for the premium incurred and the write-off of
deferred debt issuance costs related to the repurchase and early retirement
of $14.5 million in principal amount of the Company's 12% Senior Notes.
Financial Condition
The Company's total debt at the end of the third quarter was $378.0 million,
down $20.9 million from year-end 1996. Cash and equivalents totaled $40.2
million at the end of the quarter, compared with $70.2 million at the end of
1996, principally due to the acquisition of ARC Metals by Special Materials,
the repurchase of $14.5 million in principal amount of 12% Senior Notes in the
open market, the repayment of bank debt and capital expenditures. Capital
expenditures of $18.1 million during the first nine months of 1997 were
comparable to capital spending in the 1996 period. The Company anticipates
that 1997 capital spending will be approximately $27.0 million.
Under its bank credit agreement, the Company has available revolving
facilities of an additional $32.2 million over the September 28, 1997
revolving indebtedness. If current levels of performance are maintained, the
Company anticipates it will be in compliance with the covenants under its
bank credit agreement. The Company believes that it will have adequate
liquidity to meet its debt service and operating requirements, based
on expected operating cash flow, cash on hand, and the availability of
additional revolver borrowings under the Company's bank credit agreement.
Sale of Handling Businesses
As announced in March 1997, the Company is exploring the sale of its Handling
businesses.
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The nature of the Company's business is such that it is regularly involved in
legal proceedings incidental to its business. None of these proceedings is
material within the meaning of regulations of the Securities and Exchange
Commission.
The Company is a party in certain litigation and a proceeding before a
governmental agency which relate to the contamination of the environment.
These matters are described in Note 8 and Note 9 of Notes to Consolidated
Financial Statements included herein. Reference is also made to the
Company's Annual Report on Form 10-K for the fiscal year ended December 29,
1996, Part I, Item 3--Legal Proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 4.1 Thirteenth Amendment, dated as of July 28, 1997, to
the Amended and Restated Credit Agreement
Exhibit 27 Financial Data Schedule for the quarter ended
September 28, 1997
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE INTERLAKE CORPORATION
October 23, 1997 /s/STEPHEN GREGORY
Stephen Gregory
Vice President - Finance
and Chief Financial Officer
THIRTEENTH AMENDMENT
TO THE AMENDED AND RESTATED CREDIT AGREEMENT
THIRTEENTH AMENDMENT (the "Amendment"), dated as of July 28, 1997
among THE INTERLAKE CORPORATION, a Delaware corporation (the "Company"), each
Subsidiary Borrower party to the Credit Agreement referred to below, The
Interlake Corporation Employee Stock Ownership Trust (the "ESOP Borrower"),
acting by and through the LaSalle National Bank, not in its individual or
corporate capacity but solely in its capacity as trustee of the ESOP Trust
(the "ESOP Trustee" and together with the Company and the Subsidiary
Borrowers, the "Credit Parties"), THE CHASE MANHATTAN BANK (as successor to
CHEMICAL BANK), individually and as Administrative Agent (the "Administrative
Agent"), THE FIRST NATIONAL BANK OF CHICAGO, individually and as Co-Agent
(the "Co-Agent"), and the financial institutions party to the Credit
Agreement referred to below and listed on the signature pages hereto (the
"Banks"). All capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided such terms in the Credit
Agreement referred to below.
W I T N E S S E T H :
WHEREAS, each of the Credit Parties, the Banks, the Administrative
Agent and the Co-Agent are parties to that certain Amended and Restated
Credit Agreement dated as of September 27, 1989 and amended and restated as
of May 28, 1992 and as further amended by the First Amendment dated as of
August 14, 1992, the Second Amendment and Waiver dated as of October 30,
1992, the Third Amendment and Waiver dated as of August 20, 1993, the Fourth
Amendment dated as of December 22, 1993, the Fifth Amendment dated as of
February 23, 1994, the Sixth Amendment dated as of August 16, 1994, the
Seventh Amendment dated as of January 24, 1995, the Eighth Amendment dated
as of February 1, 1995, the Ninth Amendment dated as of June 1, 1995, the
Tenth Amendment dated as of September 25, 1996, the Eleventh Amendment dated
as of January 10, 1997 and the Twelfth Amendment and Waiver dated as of June
27, 1997 (as so amended and restated and further amended and as the same may
hereafter be amended, modified or supplemented from time to time, the "Credit
Agreement"); and
WHEREAS, the Company desires to form Interlake Material Handling,
Inc., a Delaware corporation that will be a wholly-owned Subsidiary of The
Interlake Companies, Inc.;
WHEREAS, the Company desires to have The Interlake Companies, Inc.
transfer its entire U.S. material handling business and all assets related
thereto to Interlake Material Handling, Inc.;
WHEREAS, the Company, the Subsidiary Borrowers and the Banks wish
to amend the Credit Agreement as herein provided;
NOW THEREFORE, it is agreed:
i. On the Thirteenth Amendment Effective Date, Section 8.02
of the Credit Agreement is hereby amended by (a) deleting the
word "and" at the end of clause (xiv) and inserting a comma
in lieu thereof, (b) deleting the period appearing at the end
of clause (xv) and inserting "and" in lieu thereof and (c)
inserting the following new clause (xvi) after clause (xv):
"(xvi) The Interlake Companies, Inc. shall be permitted to
transfer its entire U.S. material handling business and all assets
related thereto to Interlake Material Handling, Inc. so long as (x) The
Interlake Companies, Inc. pledges its shares in Interlake Material
Handling, Inc. pursuant to the Subsidiary U.S. Pledge Agreement, dated
as of September 27, 1989 among Interlake ARD Corporation, The Interlake
Companies, Inc. and the Collateral Agent, (y) Interlake Material
Handling, Inc. shall be a Subsidiary, Subsidiary Guarantor and
Subsidiary Assignor under the Credit Agreement and shall comply with all
of the requirements of Section 7.10 of the Credit Agreement, and the
Collateral Agent shall release its liens (evidencing The Interlake
Companies, Inc. as the debtor) on the assets to be transferred, after
the Thirteenth Amendment Effective Date but prior to the transfer and
(z) Interlake Material Handling, Inc. assumes all the liabilities of The
Interlake Companies, Inc. relating to the U.S. material handling
business."
ii. On the Thirteenth Amendment Effective Date, Section 10
of the Credit Agreement is hereby amended by adding the
following definition in alphabetical order:
"Thirteenth Amendment Effective Date" shall have the meaning
provided in the Thirteenth Amendment to the Amended and Restated Credit
Agreement dated as of July 28, 1997."
iii. The Banks hereby authorize the Administrative Agent to
take all further actions that the Administrative Agent deems
necessary to create and/or perfect the security interests
required under the Credit Agreement and resulting from the
creation of Interlake Material Handling, Inc. as a new
Subsidiary of the Interlake Companies, Inc. and the transfer
of assets described in Section 1 above.
iv. In order to induce the Banks to enter into this
Amendment, each of the Credit Parties (other than the
ESOP Trustee) hereby (a) certifies that no Default or
Event of Default exists and that each of the
representations, warranties and agreements contained in
Section 6 of the Credit Agreement on the Thirteenth
Amendment Effective Date as defined in Section 8 below,
both before and after giving effect to this Amendment,
is true and correct in all material respects, and (b)
confirms that it has and will continue to comply with
all of its obligations contained in the Credit Agreement
and the other Credit Documents including with respect to
each of the Borrowers, but not limited to, all of its
obligations contained in Section 7.10(b) of the Credit
Agreement.
v. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other
provision of the Credit Agreement or any other Credit
Document.
vi. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and
delivered shall be an original, but all of which shall
together constitute one and the same instrument. A complete
set of counterparts shall be lodged with the Company and the
Administrative Agent.
vii. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
viii. This Amendment shall become effective on the date
(the "Thirteenth Amendment Effective Date") when each of
the following conditions shall have been satisfied:
(a) The Company, the Subsidiary Borrowers, the ESOP
Trustee, the Administrative Agent, the Co-Agents and
the Required Banks shall have signed a copy hereof
(whether the same or different copies) and shall
have delivered (including by way of telecopier) such
copies to the Administrative Agent; and
(b) The Company shall have paid all fees and expenses
(including legal fees and expenses) then due and owing
to the Administrative Agent.
ix. From and after the Thirteenth Amendment Effective Date,
all references in the Credit Agreement and each of the Credit
Documents or any other agreement to the Credit Agreement
shall be deemed to be references to such Credit Agreement as
amended hereby.
* * *
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the
date first above written.
THE INTERLAKE CORPORATION
By /s/Stephen Gregory
Name: Stephen Gregory
Title:Vice President-Finance
SUBSIDIARY BORROWERS
DEXION (AUSTRALIA) PTY. LTD.
A.C.N. 000 083 956
By /s/Stephen R. Smith
Name: Stephen R. Smith
Title: Authorized AGent
S.A. DEXION-REDIRACK N.V.
By /s/ Stephen R. Smith
Name: Stephen R. Smith
Title: Authorized Agent
DEXION INTERNATIONAL LIMITED
By /s/Stephen R. Smith
Name: Stephen R. Smith
Title: Authorized Agent
DEXION GmbH
By /s/Stephen Gregory
Name: Stephen Gregory
Title: Authorized Agent
THE INTERLAKE CORPORATION EMPLOYEE
STOCK OWNERSHIP TRUST, acting by
and through the LASALLE NATIONAL
BANK, not in its individual or
corporate capacity (except for the
representations and warranties
contained in Section 6.01(b)(y) of
the Credit Agreement) but solely in
its capacity as ESOP Trustee
By /s/Jeffrey S. Schiedemeyer
Name:Jeffrey S. Schiedemeyer
Title:Vice President
BANKS
BANK OF AMERICA ILLINOIS
By /s/Lewis W. Solimene, Jr.
Name: Lewis W. Solimene, Jr.
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/Lewis W. Solimene, Jr.
Name: Lewis W. Solimene, Jr.
Title:Senior Vice President
THE BANK OF NOVA SCOTIA
By /s/F.C.H. Ashby
Name: F.C.H. Ashby
Title:Senior Manager Loan
Operations
CERES FINANCE LTD.
By /s/John Cullinane
Name: John Cullinane
Title: Director
THE CHASE MANHATTAN BANK
Individually, and as
Administrative Agent
By /s/Timothy J. Storms
Name: Timothy J. Storms
Title: Managing Director
THE FIRST NATIONAL BANK
OF CHICAGO
Individually, and as Co-Agent
By /s/Karen F. Kizer
Name: Karen F. Kizer
Title: Senior Vice President
THE FUJI BANK, LIMITED
By /s/Peter L. Chinnici
Name: Peter L. Chinnici
Title: Joint General Manager
GIROCREDIT BANK AG
DER SPARKASSEN,
GRAND CAYMAN ISLAND BRANCH
By /s/John Redding
Name: John Redding
Title: VP
By /s/Anca Trifan
Name: Anca Trifan
Title:VP
LEHMAN COMMERCIAL PAPER INC.
By /s/Michele Swenson
Name: Michele Swenson
Title: Authorized Signatory
MFS SERIES TRUST III
on behalf of
MFS HIGH INCOME FUND
By /s/
Name:
Title:vice President
THE MITSUI TRUST AND BANKING
COMPANY LIMITED
By /s/Margaret Holloway
Name: Margaret Holloway
Title:Vice President & Manager
MORGAN STANLEY SENIOR FUNDING,
INC.
By /s/Christopher A. Pucillo
Name: Christopher A. Pucillo
Title: Vice President
NATIONAL BANK OF CANADA
By /s/Jonathan M. Millard
Name: Johnathan M. Millard
Title:Assistant Vice President
By /s/William Mucker
Name: William Mucker
Title:Assistant Vice President
NATIONAL WESTMINSTER BANK PLC
By /s/David E. Yewer
Name: David E. Yewer
Title:Senior Vice President
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS, B.V.
By: Chancellor LGT Senior
Secured Management, Inc. as
Portfolio Advisor
By /s/Timothy Daileader
Name: Timothy Daileader
Title:Assistant VP
SENIOR DEBT PORTFOLIO
By: Boston Management and
Research, as Investment
Advisor
By /s/Scott H. Page
Name: Scott H. Page
Title: Vice President
ACCEPTED AND CONSENTED TO:
INTERLAKE DRC LIMITED
By /s/Stephen Gregory
Name:Stephen Gregory
Title:Authorized Agent
DEXION GROUP PLC
By /s/Stephen R. Smith
Name:Stephen R. Smith
Title:Authorized Agent
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