<PAGE> 1
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 October 1, 1995
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 0-17743
-------
COMPTRONIX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 63-0860282
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Comptronix Corporation
Three Maryland Farms
Suite 140 37027
Nashville, Tennessee
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (615) 377-3330
--------------
N/A
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
13,298,410 as of November 14, 1995
- --------------------------------------------------------------------------------
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM I. CONDENSED FINANCIAL STATEMENTS
COMPTRONIX CORPORATION
BALANCE SHEETS
ASSETS
(in thousands)
<TABLE>
<CAPTION>
October 1, December 31,
1995 1994
----------------- ----------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 16 $ 397
Accounts receivable, net 10,980 13,683
Inventories 20,034 16,119
Other current assets 519 570
----------------- ----------------
Total Current Assets 31,549 30,769
Property, Plant and Equipment
(Less accumulated depreciation
and amortization of $25,405 at Oct.
1, 1995 and $23,508 at December 31,
1994) 15,233 17,719
Other Assets 1,190 1,988
----------------- ----------------
Total Assets $ 47,972 $ 50,476
================= ================
</TABLE>
See notes to financial statements.
2
<PAGE> 3
COMPTRONIX CORPORATION
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
October 1, Decmber 31,
1995 1994
------------- ------------
(unaudited)
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 1,559 $ 2,517
Accounts payable 8,606 7,474
Accrued payroll and related expenses 980 1,034
Other payables and accruals 2,960 2,562
------------- ------------
Total current liabilities 14,105 13,587
Convertible Subordinated Debentures 29,230 34,500
Long-term debt, excluding current maturities 15,559 16,380
Stockholders' Equity:
Redeemable convertible preferred stock Series A-6%, no
par value per share; authorized 5,000,000 shares
issued and outstanding, 1,844,791 shares plus $560
dividend accretion at Oct. 1, 1995 and 1,274,787
shares plus $203 dividend accretion at December 19,008 12,951
31, 1994
Common stock, par value $.01 per share; authorized
50,000,000 shares; issued 13,293,357 shares at Oct.
1, 1995 and 11,153,194 at December 31, 1994 133 111
Additional paid-in capital 29,725 29,873
Accumulated deficit (59,788) (56,926)
------------- ------------
Total Stockholders' Equity/(Deficiency) (10,922) (13,991)
------------- ------------
Total Liabilities and Stockholders' Equity $ 47,972 $ 50,476
============= ============
</TABLE>
See notes to financial statements.
3
<PAGE> 4
COMPTRONIX CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended
---------------------------------
October 1, October 2,
1995 1994
----------- ------------
(in thousands except per share)
<S> <C> <C>
Sales $ 19,282 $ 25,612
Cost of Sales 17,583 24,736
----------- -------------
Gross profit 1,699 876
Marketing, general and administrative expense 1,316 1,457
Interest expense - net 923 1,159
Estimated loss on sale of excess capacity - 2,035
Other (income)/ expense (8) 92
----------- -------------
2,231 4,743
----------- -------------
Net loss (532) (3,867)
Accrued dividend in kind on preferred stock 293 190
----------- -------------
Net loss applicable to common stock $ (825) $ (4,057)
=========== =============
Net loss per common share $ (0.06) $ (0.36)
=========== =============
Weighted average common shares 13,293 11,122
=========== =============
</TABLE>
See notes to financial statements.
4
<PAGE> 5
COMPTRONIX CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------
October 1, October 2,
1995 1994
------------ -----------
(in thousands except per share)
<S> <C> <C>
Sales $ 69,523 $ 89,349
Cost of Sales 64,332 89,222
----------- ----------
Gross profit 5,191 127
Marketing, general and administrative expense 4,469 5,322
Interest expense - net 2,855 3,392
Estimated loss on sale of excess capacity -- 5,535
Other (income)/expense (76) 174
----------- ----------
7,248 14,423
----------- ----------
Net loss (2,057) (14,296)
Accrued dividend in kind on preferred stock 804 565
----------- ----------
Net loss applicable to common stock $ (2,861) $ (14,861)
=========== ==========
Net loss per common share $ (0.22) $ (1.34)
=========== ==========
Weighted average common shares 13,080 11,060
=========== ==========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
COMPTRONIX CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
October 1, October 2,
1995 1994
---------- ----------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,057) $ (14,296)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on sale of San Jose division -- 5,535
Depreciation and amortization 3,907 4,435
Allowance for doubtful accounts (597) 224
(Increase)/decrease in accounts receivable - 3,300 (894)
trade
Decrease in income tax refund receivable -- 229
(Increase)/decrease in inventories (3,915) 2,783
Decrease in prepaid exp.and other assets 227 387
Increase in accounts payable 1,132 6,748
Increase/(decrease) in accrued payroll and (54) 663
related expenses
Increase in other payables and accruals 405 1,949
--------- ---------
Net cash provided by operating activities 2,348 7,763
--------- ---------
Cash flows from investing activities:
Capital expenditures, net (950) (1,564)
--------- ---------
Net cash used in investing activities (950) (1,564)
--------- ---------
Cash flows from financing activities:
Payment of settlement and restructuring costs -- (1,500)
Net proceeds/(payments) on revolving line of credit 351 (3,346)
Principal payments on other long term debt (2,130) (1,804)
Proceeds from issuance of common stock -- 73
--------- ---------
Net cash used in financing activities (1,779) (6,577)
--------- ---------
Net decrease in cash (381) (378)
Cash, beginning of period 397 897
--------- ---------
Cash, end of period $ 16 $ 519
========= =========
</TABLE>
See notes to financial statements.
6
<PAGE> 7
NOTES TO CONDENSED FINANCIAL STATEMENTS
October 1, 1995
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with instructions to Form 10- Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The statements (and all other information
in this report) have not been audited by independent accountants, but in the
opinion of the Company, contain all adjustments necessary for a fair
presentation of the results for the period. The results of operations for the
nine month period ended October 1, 1995 are not necessarily indicative of the
results of operations for the year ending December 31, 1995.
NOTE 2 - LONG TERM DEBT
In November 1993, the Company retired its existing revolving line of credit and
equipment loan with a credit facility with CIT Group/Business Credit, Inc. The
credit facility consists of a $34.0 million three (3) year revolving line of
credit secured by accounts receivable and inventory and a $6.0 million
five-year term loan secured by equipment. The borrowings under the revolving
line of credit are limited to 85% of the Company's eligible accounts receivable
and 50% of the Company's eligible inventory (a total availability of $14.3
million at October 1, 1995 and $14.3 million at December 31, 1994 and total
borrowings of $12.1 million and $11.8 million, respectively). In November
1995, the CIT Group extended the terms of the Company's credit facility for two
additional years, restructured the financial covenants contained in the
facility and granted a waiver for any covenant violations resulting from the
third quarter results. The restructured credit facility has various provisions
which limit the Company's ability to incur additional indebtedness, purchase
and dispose of equipment and declare or pay cash dividends. The Company is
also required to maintain the following financial covenant:
Fixed Charge Coverage Ratio:
<TABLE>
<CAPTION>
Fiscal Periods Ratio
<S> <C>
For each twelve (12) month ending December 31, 1995
and March 31, 1996 .70 to 1
For the twelve (12) month ending June 30, 1996,
September 30, 1996 and December 31, 1996 1.00 to 1
For the twelve (12) month ending March 31, 1997
and for the twelve (12) months ending on each fiscal
quarter end thereafter 1.25 to 1
</TABLE>
Based on the Company's current business plan and the consolidation of the
Colorado Springs and Guntersville facilities resulting in reduced overhead
expenses, management currently believes the Company will meet the revised
covenant. If it does not comply with this covenant, the Company will be
required to seek a waiver or amendment to the CIT Credit Agreement in order to
continue borrowing under such agreement and to avoid potential acceleration of
the indebtedness outstanding.
The Company believes that cash generated from operations and with borrowings
under its credit facility described above should be sufficient for the Company
to meet its obligations during 1995, including debt service and trade creditor
obligations. Based on its current assessment of the level of its business, the
7
<PAGE> 8
Company does not anticipate that it will be required to make significant
capital expenditures in the next twelve to eighteen months.
On January 25, 1995, the Company completed a private negotiated exchange of
$5.3 million of debentures for shares of the Company's common and Series A
preferred stock. This exchange provided the exchanging debenture holders an
aggregate of 2.1 million shares of common stock and .5 million shares of Series
A preferred stock. The Company had no material gain or loss on the
transaction.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
GENERAL
Comptronix Corporation provides manufacturing services to original equipment
manufacturers ("OEMs"), including producers of computers, computer peripherals,
industrial instruments, communications equipment, medical devices and test
equipment. The Company operates two plants in Guntersville, Alabama.
Operating results are generally affected by a number of factors, including the
relative mix of high volume/lower margin business and lower volume/higher
margin business, price competition, raw material costs, labor efficiencies, the
degree of automation that can be used in the assembly process and the
efficiencies achieved by the Company in managing inventories and fixed assets.
The financial information and the discussion below should be read in
conjunction with the unaudited financial statements and notes thereto included
in this Form 10-Q. This discussion will also address certain factors which are
anticipated to effect the Company's 1995 results and financial condition.
RESULTS OF OPERATIONS
Quarter Ended October 1, 1995 and October 2, 1994
The following table sets forth for the period indicated, the percentage of
sales of certain items in the Statement of Operations.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------
October 1, October 2,
1995 1994
---------- ----------
(%) (%)
<S> <C> <C>
Sales 100.0 100.0
Cost of Sales 91.2 96.6
---------- ----------
Gross profit 8.8 3.4
Marketing, general and administrative expense 6.8 5.7
Interest expense - net 4.8 4.5
Loss on sale of San Jose division -- 7.9
Other expense -- .4
---------- ----------
Net loss (2.8) (15.1)
</TABLE>
Total Company sales for the third quarter of 1995 were $19.3 million, a
decrease of $6.3 million as compared to the third quarter 1994 sales of $25.6
million. The decrease in sales is primarily attributable to inefficiencies
relating to the start-up of certain programs which were transferred from the
Colorado Springs division during the second quarter. These temporary capacity
constraints affected the Company's ability to meet customer delivery schedules
in the second and third quarters and reduced revenues by several million
dollars. The Company has addressed these issues during the quarter by
realigning management responsibilities; increasing the direct labor work force
by 200 employees (a 35% increase) and improving manufacturing processes and
layouts.
Gross profit for the third quarter of 1995 was $1.7 million, 8.8% of sales, as
compared to a gross profit of $.9 million, 3.4% of sales, for the third quarter
of 1994. Overhead reductions and other cost control efforts account for the
improvement in gross profit.
Marketing, general and administrative expenses were $1.3 million, 6.8% of sales,
for the third quarter of 1995, as compared to $1.5 million, 5.7% of sales, for
the third quarter 1994. The overall decrease is attributable to the Company's
cost control measures implemented during 1994 and continued into 1995.
9
<PAGE> 10
Interest expense decreased to $.9 million for the third quarter of 1995 from
$1.2 million for the third quarter of 1994. The decrease in interest expense
over the 1994 third quarter is the result of decreased borrowings for lower
levels of inventory and receivables.
The Company's net loss was $.8 million for the third quarter of 1995 as
compared to a net loss of $4.1 million for the third quarter of 1994. Net loss
per share was $0.06 (based upon a weighted average of 13,293,000 shares
outstanding) in the third quarter of 1995, compared to net loss per share $0.36
(based upon a weighted average of 11,122,000 shares outstanding) in the third
quarter of 1994.
Nine Months Ended October 1, 1995 and October 2, 1994
The following table sets forth for the period indicated, the percentage of
sales of certain items in the Statement of Operations.
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
October 1, October 2,
1995 1994
---------- ----------
(%) (%)
<S> <C> <C>
Sales 100.0 100.0
Cost of Sales 92.5 99.9
---------- ----------
Gross profit 7.5 .1
Marketing, general and administrative expense 6.4 5.9
Interest expense - net 4.1 3.8
Loss on sale of San Jose division -- 6.2
Other expense -- .2
---------- ----------
Net loss (3.0) (16.0)
</TABLE>
With the disposition of the San Jose operations effective July 3, 1994, the
first six months of 1995 Company sales and expenses do not include any effects
of the San Jose operations. For the 1994 first half, San Jose sales and
expenses are included in their respective categories.
Total Company sales for the first nine months ended October 1, 1995 were $69.5
million, a decrease of 4.4% as compared to $72.7 million in the same period of
1994, excluding the $16.6 million for the San Jose division. The decrease in
sales is primarily attributable to inefficiencies and lost production days with
the transition of the Colorado Springs division to the Guntersville facilities.
These temporary capacity constraints affected the Company's ability to meet
customer delivery schedules in the second and third quarters and reduced
revenues by several million dollars.
Gross profit for the first nine months ended October 1, 1995 was $5.2 million,
7.5% of sales, as compared to a gross profit of $.7 million, 1.0% of sales,
for the first nine months of 1994, excluding $0.6 million gross loss for the
San Jose division. The improvement in gross profit is primarily from a more
profitable mix of business, as well an increase in consigned business which
produces higher gross profit margins and overhead reductions and other cost
control efforts.
Marketing, general and administrative expenses were $4.5 million, 6.4% of
sales, for the first nine months of 1995, as compared to $5.3 million, for the
first nine months of 1994. The overall decrease is attributable to the
Company's cost control measures implemented during 1994 and 1995 and the
disposition of the San Jose division which accounted for approximately $.7
million in the first half of 1994.
Interest expense decreased to $2.9 million for the first nine months of 1995
from $3.4 million for the first nine months of 1994. The decrease in interest
expense over the first nine months of 1994 is the result of decreased
borrowings for lower levels of inventory and receivables.
10
<PAGE> 11
Other income was $0.1 million for the first nine months of 1995 as compared to
other expense of $.2 for the first nine months of 1994. Other income for 1995
includes amortization expense of deferred financing costs which was more than
offset by the reversal of reserves relating to previous non-cash charges
reserving for bad debts that were subsequently collected. Other expense for
1994 includes amortization expense of deferred financing costs.
The Company's net loss was $2.9 million for the first nine months ended October
1, 1995 as compared to a net loss of $14.9 million for the first nine months of
1994. Net loss per share was $0.22 (based upon a weighted average of
13,080,000 shares outstanding) in the first nine months of 1995, compared to
net loss per share $1.34 (based upon a weighted average of 11,060,000 shares
outstanding) in the first nine months of 1994.
CERTAIN CURRENTLY IDENTIFIABLE FACTORS ANTICIPATED TO AFFECT REMAINING 1995
RESULTS
Based upon the Company's current assessment of its business, there are several
currently identifiable factors which are likely to affect the remainder of 1995
operating results. In addition, factors which are likely to affect the
Company's liquidity and uses of funds during the remainder of 1995 are
discussed below under "Liquidity and Capital Resources".
As described above, the Company has experienced a decrease in sales as compared
to the third quarter of 1994 which is mainly attributable to inefficiencies in
production during the start-up of programs transferred from the Colorado
Springs division. Customers representing over 90% of the first two quarter
revenues of the Company's Colorado Springs division have transferred their
programs to Guntersville. The Company believes that it has addressed the
start-up inefficiencies by realigning management responsibilities, increasing
the direct labor work force by 35% and improving the manufacturing processes
and layouts.The Company currently believes that it will maintain or slightly
improve targeted margins as compared to the third quarter of 1995. The
Company's backlog of orders on October 1, 1995 totaled approximately $60
million compared to $56 million at the end of 1994.
In the event that the revenue base proves too large for the Guntersville
facility or in order to accommodate future growth, the Company intends to
consider the possibility of leasing or acquiring another facility in a location
where a lower level of costs makes it attractive to operate an additional
facility.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its capital expenditures through the
issuance of debt and equity securities and borrowings under its bank equipment
line of credit. The Company has financed the growth in its inventory and
accounts receivable through bank borrowings and through payment terms provided
by suppliers. During 1994 and the first nine months of 1995, the Company made
significant progress in reducing its accounts receivable and inventory balances
to more acceptable levels, and used the excess working capital to reduce debt.
The Company reduced total long-term indebtedness (other than convertible debt)
from $18.1 million at October 2, 1994 to $15.6 million at October 1, 1995.
Management of the Company recognizes the strategic importance of generating
greater working capital from operations and is focusing on improving inventory
turns, reducing work in process cycle times and improving asset utilization to
measure the Company's future success in this area.
The Company's net cash flows provided by operating activities were $2.3 million
and $7.8 million in the first nine months of 1995 and 1994, respectively.
Principally, the 1995 amount reflects an increased level of inventory and a
decreased level of accounts receivable.
The Company's net cash flows used in investing activities were $1.0 million and
$1.6 million in the first nine months of 1995 and 1994, respectively. These
uses principally relate to additions of machinery and equipment during the
first nine months of 1995.
11
<PAGE> 12
The Company's net cash flows used in financing activities were $1.8 million and
$6.6 million in the first nine months of 1995 and 1994, respectively. These
uses are principally related to payments on bank debt and settlement and
restructuring costs.
In November 1993, the Company retired its existing revolving line of credit and
equipment loan with a credit facility with CIT Group/Business Credit, Inc. The
credit facility consists of a $34.0 million three (3) year revolving line of
credit secured by accounts receivable and inventory and a $6.0 million
five-year term loan secured by equipment. The borrowings under the revolving
line of credit are limited to 85% of the Company's eligible accounts receivable
and 50% of the Company's eligible inventory (a total availability of $14.3
million at October 1, 1995 and $14.3 million at December 31, 1994 and total
borrowings of $12.1 million and $11.8 million, respectively). In November
1995, the CIT Group extended the terms of the Company's credit facility for two
additional years, restructured the financial covenants contained in the
facility and granted a waiver for any covenant violations resulting from the
third quarter results. The restructured credit facility has various provisions
which limit the Company's ability to incur additional indebtedness, purchase
and dispose of equipment and declare or pay cash dividends. The Company is
also required to maintain the following financial covenant:
Fixed Charge Coverage Ratio:
<TABLE>
<CAPTION>
Fiscal Periods Ratio
<S> <C>
For each twelve (12) month ending December 31, 1995
and March 31, 1996 .70 to 1
For the twelve (12) month ending June 30, 1996,
September 30, 1996 and December 31, 1996 1.00 to 1
For the twelve (12) month ending March 31, 1997
and for the twelve (12) months ending on each fiscal
quarter end thereafter 1.25 to 1
</TABLE>
Based on the Company's current business plan and the consolidation of the
Colorado Springs and Guntersville facilities resulting in reduced overhead
expenses, management currently believes the Company will meet the revised
covenant. If it does not comply with this covenant, the Company will be
required to seek a waiver or amendment to the CIT Credit Agreement in order to
continue borrowing under such agreement and to avoid potential acceleration of
the indebtedness outstanding.
The Company believes that cash generated from operations and with borrowings
under its credit facility described above should be sufficient for the Company
to meet its obligations during 1995, including debt service and trade creditor
obligations. Based on its current assessment of the level of its business, the
Company does not anticipate that it will be required to make significant
capital expenditures in the next twelve to eighteen months.
On January 25, 1995, the Company completed a private negotiated exchange of
$5.3 million of debentures for shares of the Company's common and Series A
preferred stock. This exchange provided the exchanging debenture holders an
aggregate of 2.1 million shares of common stock and .5 million shares of Series
A preferred stock. The Company had no material gain or loss on the
transaction.
12
<PAGE> 13
EBITDA
The Company's earnings before interest, income taxes, depreciation and
amortization ("EBITDA") was $4.7 million income and $.9 million loss for the
first nine months of 1995 and 1994, respectively. The Company presents EBITDA
as a supplement to the discussion of the Company's operating income and cash
flow from operations analysis because the Company believes that certain parties
find it to be a useful tool for measuring the Company's performance and ability
to service debt. EBITDA is not a substitute for GAAP operating and cash flow
data. Management however, believes that EBITDA does supplement this
information because the Company has made significant investments in capital
equipment, primarily through borrowings. Therefore, the Company is incurring a
significant amount of depreciation on this equipment reflected in its results
of operations. As a result, the Company believes that information with respect
to EBITDA should be read in conjunction with the discussion of results of
operations and the discussion of liquidity and capital resources.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
(a) Exhibits
Number Description
10 Agreements between the CIT Group
and Comptronix Corporation
27 Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K
None.
</TABLE>
14
<PAGE> 15
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.
COMPTRONIX CORPORATION
(Registrant)
/s/ E. Townes Duncan
--------------------------
Date: November 15, 1995 By: E. Townes Duncan
Chairman of the Board
/s/ Joseph G. Andersen
--------------------------
By: Joseph G. Andersen
Chief Financial Officer
15
<PAGE> 1
EXHIBIT 10
WAIVER AND AMENDMENT LETTER
November 2, 1995
Comptronix Corporation
Three Maryland Farms
Suite 140
Brentwood, TN 37027
Gentlemen:
We refer to the Financing Agreement between us dated November 22, 1993 as
amended (the "Financing Agreement"). Capitalized terms used herein and defined
in the Financing Agreement shall have the same meanings as specified therein
unless otherwise specifically defined herein.
You have advised us that you are in violation of the financial covenants set
forth in Section 7, Paragraphs 9 (EBITDA) and 13 (Interest Coverage Ratio) of
the Financing Agreement for the fiscal period ending September 30, 1995.
This letter is to confirm our agreement that, solely with respect to said
fiscal period, the foregoing violations and/or breaches of the Financing
Agreement shall not be deemed to be Defaults and/or Events of Default under the
Financing Agreement. On and after the date hereof you shall be in compliance
with all of the terms and provisions of the Financing Agreement (including,
without limitation, the financial covenants referred to above) as amended
hereby.
In addition, effective immediately, the Financing Agreement shall be, and
hereby is, amended as follows:
(1) the Fixed Charge Coverage Ratio covenant contained in Paragraph 16 of
Section 7 of the Financing Agreement shall be, and hereby is, amended
in its entirety to read as follows:
"16. The Company shall have on the last day of the applicable fiscal
periods below a Fixed Charge Coverage Ratio of not less than:
<TABLE>
<CAPTION>
Fiscal Period Ratio
------------- -----
<S> <C>
"For each twelve (12) month period ending .70 to 1
December 31, 1995 and March 31, 1996
For each twelve (12) month period ending
June 30, 1996, September 30, 1996 and
December 31, 1996 1.00 to 1
For the twelve (12) months ending
March 31, 1997 and for the twelve (12)
months ending on each fiscal quarter
end thereafter 1.25 to 1"
</TABLE>
<PAGE> 2
2. Paragraphs 9 (EBITDA), 12 (Working Capital) and 13 (Interest Coverage
Ratio) of the Financing Agreement shall be, and hereby are, amended in
their entirety to read as follows:
"9. Intentionally Omitted."
"12. Intentionally Omitted."
"13. Intentionally Omitted."
3. The first and fifth sentence of Section 11 shall be, and each hereby
is, amended in its entirety to read as follows:
"Except as otherwise permitted herein, Lenders may terminate this
Financing Agreement and the Line of Credit only as of the fifth or any
subsequent Anniversary Date and then only by giving the Company at
least ninety (90) days prior written notice thereof."
"If such termination is on a date other than a day that is within ten
(10) days of the fifth or any subsequent Anniversary Date, the Company
shall pay to the Agent for the Account of the Lenders an Early
Termination Fee and, to the extent applicable, the Prepayment
Premium."
4. The definition of Prepayment Premium as contained in Section 1 of the
Financing Agreement shall be, and hereby is, amended in its entirety
to read as follows:
"Prepayment Premium shall: i) mean the amount due CITBC by the Company
upon a voluntary prepayment, in whole or in part, of the Term Loan on
a date other than a day which is within ten (10) days of the fifth
Anniversary Date or any succeeding Anniversary Date, and ii) be
computed by multiplying the amount so prepaid by either x) three
percent (3%) if the voluntary prepayment is on a day other than a day
which is within ten (10) days of the fourth Anniversary Date; or y)
one percent (1%) if the voluntary prepayment is after the fourth
Anniversary Date but is on a date other than a day which is within ten
(10) days of an Anniversary Date."
In consideration of (i) our execution of this Waiver and Amendment Letter you
agree to pay us an Accommodation Fee of $15,000.00 and (ii) the preparation of
this agreement by our-in-house legal department you agree to pay to us a
Documentation Fee of $195.00. Such fees shall be due and payable in full on
the date hereof and may, at our option, be charged to your Revolving Loan
Account on the due date thereof.
Except to the extent set forth herein, no other waiver of, or change in any of
the terms, provisions or conditions of the Financing Agreement is intended or
implied. This agreement shall not constitute a waiver of any other existing
Defaults or Events of Default under the Financing Agreement (whether or not we
have knowledge thereof), and shall not constitute a waiver of any future
Defaults or Events of Default whatsoever.
<PAGE> 3
If the foregoing is in accordance with your understanding of our agreement,
kindly so indicate by signing and returning the enclosed copy of this letter.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By: /s/ M.H. Hampton
------------------------
Title: Assistant Vice President
------------------------
Read and Agreed to:
COMPTRONIX CORPORATION
By: /s/ Joesph G. Andersen
------------------------
Title: Chief Financial Officer
------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF COMPTRONIX CORPORATION FOR THE NINE MONTHS ENDED OCTOBER
1, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> OCT-01-1995
<CASH> 16
<SECURITIES> 0
<RECEIVABLES> 11,133
<ALLOWANCES> 153
<INVENTORY> 20,034
<CURRENT-ASSETS> 31,549
<PP&E> 40,638
<DEPRECIATION> 25,405
<TOTAL-ASSETS> 47,972
<CURRENT-LIABILITIES> 14,105
<BONDS> 29,230
<COMMON> 133
19,008
0
<OTHER-SE> (30,063)
<TOTAL-LIABILITY-AND-EQUITY> 47,972
<SALES> 69,523
<TOTAL-REVENUES> 69,523
<CGS> 64,332
<TOTAL-COSTS> 68,801
<OTHER-EXPENSES> (76)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,855
<INCOME-PRETAX> (2,057)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,057)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,861)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
