UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 29, 1997 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 0-17885
B E I E L E C T R O N I C S, I N C.
(Exact name of Registrant as specified in its charter)
Delaware 71-0455756
- ------------------------------------- ----------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
One Post Street, Suite 2500
San Francisco, California 94104
-------------------------------
(Address of principal executive offices)
(415) 956-4477
--------------
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock: $.001 Par Value, 7,018,543 shares as of April 25, 1997
Page 1 of 16
<PAGE>
<TABLE>
BEI ELECTRONICS , INC. AND SUBSIDIARIES
INDEX
<CAPTION>
PART 1. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets--March 29, 1997 and September 28, 1996 3
Condensed Consolidated Statements of Operations--Quarter and Six Months 4
ended March 29, 1997 and March 30, 1996
Condensed Consolidated Statements of Cash Flows--Six Months ended March 29, 5
1997 and March 30, 1996
Notes to Condensed Consolidated Financial Statements--March 29, 1997 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 10
Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
Page 2 of 16
<PAGE>
BEI ELECTRONICS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 29, September 28,
1997 1996
(Unaudited) (Note)
(dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $6,347 $17,329
Trade receivables, net 19,983 18,945
Inventories, net -- Note B 25,235 22,911
Other current assets 5,451 5,480
Current assets of HYDRA 70 Rocket line of business, net -- Note C -- 4,360
-------- ---------
Total current assets 57,016 69,025
Property, plant and equipment, net 25,322 23,305
Acquired technology 6,458 6,939
Goodwill 4,396 4,542
Other assets, net 9,041 9,571
Non-current assets of HYDRA 70 Rocket line of business -- Note C -- 1,629
-------- ---------
$102,233 $115,011
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $7,928 $6,672
Accrued expenses and other liabilities 11,408 15,163
Current portion of long-term debt 5,809 5,809
Current liabilities of HYDRA 70 Rocket line of business -- Note C -- 3,279
-------- ---------
Total current liabilities 25,145 30,923
Long-term debt, less current portion 18,615 24,348
Deferred income taxes and other liabilities 1,491 2,250
Minority interest in consolidated subsidiary 1,521 1,518
Stockholders' equity less treasury stock 55,461 55,972
-------- ---------
$102,233 $115,011
======== =========
<FN>
See notes to condensed consolidated financial statements.
Note: The balance sheet at September 28, 1996 has been derived from the audited consolidated balance sheet at that
date.
</FN>
</TABLE>
Page 3 of 16
<PAGE>
BEI ELECTRONICS, INC. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Quarter Ended Six Months Ended
------------------------------------------------------------
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
(dollars in thousands except per share amounts)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $28,524 $39,995 $55,605 $74,661
Cost of sales 17,718 28,766 34,805 53,313
------------------------------------------------------------
Gross Profit 10,806 11,229 20,800 21,348
Selling, general and administrative expenses 8,111 8,730 17,573 16,543
Research, development and related expenses 1,538 1,238 2,866 2,458
------------------------------------------------------------
Income from operations 1,157 1,261 361 2,347
Interest expense 495 669 991 1,316
Other income 300 382 501 494
------------------------------------------------------------
Income (loss) before income taxes 962 974 (129) 1,525
Provision (benefit) for income taxes 343 365 (38) 563
------------------------------------------------------------
Net income (loss) $619 $609 ($91) $962
===========================================================
Earnings (loss) per common share and
common share equivalents -- Note D $0.09 $0.09 ($0.01) $0.14
===========================================================
Weighted average shares outstanding 7,220 7,067 7,023 7,015
===========================================================
Dividends per common share $0.02 $0.02 $0.04 $0.04
===========================================================
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
Page 4 of 16
<PAGE>
BEI ELECTRONICS, INC. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
-------------------------------
March 29, March 30,
1997 1996
(dollars in thousands)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net cash used in operating activities ($1,136) ($733)
Cash flows from investing activities:
Purchases of property, plant and
equipment (2,895) (2,490)
Proceeds from sale of BEI Medical Systems,
Inc. stock, net -- 1,475
Purchase of other assets (144) (339)
--------- ---------
Net cash used in investing activities (3,039) (1,354)
Cash flows from financing activities:
Payments on long term debt (6,235) (481)
Proceeds from issuance of common stock 316 280
Purchase of treasury stock (748) --
Payment of cash dividends (140) (138)
--------- ---------
Net cash used in financing activities (6,807) (339)
--------- ---------
Net decrease in cash and cash equivalents (10,982) (2,426)
Cash and cash equivalents at beginning of period 17,329 11,690
--------- ---------
Cash and cash equivalents at end of period $6,347 $9,264
========= =========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
Page 5 of 16
<PAGE>
BEI ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 29, 1997
NOTE A -- 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 adjustments) considered necessary for a fair presentation
have been included. Operating results for the interim periods presented are not
necessarily indicative of the results that may be expected for the year ending
September 27, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto in the Company's annual report on Form 10-K for
the year ended September 28, 1996.
NOTE B--INVENTORIES
March 29, September 28,
1997 1996
(dollars in thousands)
- --------------------------------------------------------------------------------
Finished products $2,619 $1,405
Work in process 7,558 6,803
Materials 13,238 11,660
Costs incurred under long-term contracts,
including U.S. Government contracts 3,547 3,840
Unapplied progress payments (1,727) (451)
--------- ----------
Net inventories 25,235 23,257
Inventories included in current assets of HYDRA
70 Rocket line of business, net of progress
payments of $451. -- 346
--------- ----------
$25,235 $22,911
========= ==========
Page 6 of 16
<PAGE>
NOTE C -- HYDRA 70 ROCKET CONTRACT
In September 1995, management of the Company decided to exit the rocket
manufacturing line of business which made up a substantial portion of the
Defense Systems segment. The principal product comprising this line of business
was the HYDRA 70 (H 70) Rocket. The Defense Systems segment was shut down at the
end of fiscal year 1996 and remaining sales of non-H 70 products, which are not
material to the consolidated financial statements, are now classified with the
Sensors & Systems segment. For further information, see Note C to the
Consolidated Financial Statements for the fiscal year ended September 28, 1996.
As a result of the decision to exit the rocket line of business, the Company had
recorded a reserve for employee severance and facility closure costs. At the end
of fiscal year 1996, the balance in the reserve account consisted of $374,000
and $500,000 for employee severance and facility closure costs, respectively.
During the first six months of fiscal 1997, the Company accrued an additional
$32,000 for employee severance costs. Costs incurred during the period for
severance and facilities closure of $297,000 and $235,000, respectively, were
charged against the reserve. The balance in the reserve at the end of the second
quarter of fiscal 1997 consisted of $109,000 for employee severance and $265,000
for facilities closure costs. Management has indicated at this time the reserve
appears adequate to cover future shutdown costs.
<TABLE>
HYDRA 70 SHUTDOWN RESERVE
<CAPTION>
September 28, Adjustments Costs March 29,
1996 Incurred 1997
(dollars in thousands)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee Severance $374 $32 $297 $109
Facilities Costs 500 -- 235 265
-----------------------------------------------------------
Total Reserve $874 $32 $532 $374
===========================================================
</TABLE>
Page 7 of 16
<PAGE>
<TABLE>
NOTE D--EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
<CAPTION>
Quarter Ended Six Months Ended
------------------------- ---------------------------
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
(amounts in thousands except per share data)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding 7,050 6,891 7,023 6,860
Net effect of dilutive stock options
based on the treasury stock method 170 176 -- 155
----------------------------------------------------------
Total weighted average shares outstanding 7,220 7,067 7,023 7,015
==========================================================
Net income (loss) $619 $609 ($91) $962
==========================================================
Earnings (loss) per common share and common
share equivalents $0.09 $0.09 ($0.01) $0.14
==========================================================
</TABLE>
Earnings per common share and common share equivalents are computed by dividing
net income by the weighted average number of shares of common stock and common
stock equivalents outstanding during the period. Loss per common share is based
on the weighted average number of common shares only, as any assumption of
exercise of options would be antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted for the quarter ending
December 27, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Had the Statement been implemented for the quarter and six months ended
March 29, 1997 and March 30, 1996, respectively, the impact on the calculation
of earnings per share would not have been material.
NOTE E--CONTINGENCIES AND LITIGATION
CooperSurgical, Inc. vs. BEI Medical Systems Company, Inc. et al.
In October 1993, CooperSurgical, Inc., a subsidiary of The Cooper Companies,
filed a claim for unspecified damages alleging unfair competition due to actions
by BEI Medical Systems and its president Richard Turner, a former employee of
The Cooper Companies, and others. On May 16, 1994, the Chancery Division for the
Superior Court of New Jersey granted a partial summary judgment in favor of the
plaintiff and issued an injunction against the defendants restraining them from
Page 8 of 16
<PAGE>
selling certain products until June 20, 1996. In September 1994, BEI Medical
Systems filed a motion to vacate the May 16, 1994 order. On November 28, 1994,
the Court vacated the restraint order. On October 16, 1995 the Court clarified
that the partial summary judgment of its May 16, 1994 order remains in effect.
On January 31, 1996, the Court issued a ruling which affirmed the legal basis
for BEI Medical Systems to assert a counterclaim for damages against
CooperSurgical regarding the parties' electrosurgical generator contract.
In June 1996, more than one year after fact and expert discovery closed in May
1995, CooperSurgical's counsel sent to BEI's counsel a letter purporting to
supplement CooperSurgical's previous responses to interrogatories. The June 1996
letter indicated that CooperSurgical's damages for one particular aspect of the
claim were between $24 and $50 million with respect to a claim for which
CooperSurgical's experts had previously estimated damages of $3.4 million. BEI
will vigorously oppose any CooperSurgical attempt whatsoever to introduce at
trial any evidence of a damage claim based upon its June, 1996 purported
supplement.
Management has vigorously defended its rights in this action and believes after
discussion with legal counsel that the CooperSurgical claims are exaggerated. In
1995 expert witnesses for BEI prepared a formal response to the damage
computations CooperSurgical previously submitted. BEI's experts stated that if
CooperSurgical were entitled to damages, those damages would total less than
$100,000, and would be more than offset by BEI Medical Systems' counterclaims
against CooperSurgical, if BEI Medical Systems were successful in its
counterclaims.
The trial is currently scheduled for June 1997. BEI, after consultation with
counsel, believes that the additional damage figures stated in the June 1996
letter from CooperSurgical's counsel are exaggerated. While the outcome of this
matter cannot be determined at this time, management believes, taking known
factors into account and after consultation with legal counsel, that this matter
will not result in a material adverse impact on the financial position of the
Company.
Other
The Company has pending various legal actions arising in the normal course of
business. None of these legal actions is expected to have a material effect on
the Company's operating results or financial condition.
Page 9 of 16
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this section.
<TABLE>
The following table sets forth, for the fiscal periods indicated, the percentage
of net sales represented by certain items in the Company's Condensed
Consolidated Statements of Operations.
<CAPTION>
Quarter Ended Six Months Ended
--------------------------------------------------------------
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0 % 100.0%
Cost of sales 62.1 71.9 62.6 71.4
---------- -------- --------- ---------
Gross profit 37.9 28.1 37.4 28.6
Selling, general and administrative 28.5 21.8 31.6 22.2
expenses
Research, development and related 5.4 3.1 5.2 3.3
expenses
---------- -------- --------- ---------
Income from operations 4.0 3.2 0.6 3.1
Interest expense 1.7 1.7 1.8 1.8
Other income 1.1 0.9 0.9 0.7
---------- -------- --------- ---------
Income (loss) before income taxes 3.4 2.4 (0.3) 2.0
Provision (benefit) for income taxes 1.2 0.9 (0.1) 0.7
---------- -------- --------- ---------
Net income (loss) 2.2% 1.5% (0.2)% 1.3%
========== ======== ========= =========
</TABLE>
Quarters ended March 29, 1997 and March 30, 1996
Net sales for the quarter ended March 29, 1997 decreased $11.5 million or 28.7%
from the same period in fiscal 1996.
The Defense Systems segment, which was primarily a HYDRA 70 Rocket (H 70)
business, shut down its major product line at the end of fiscal 1996. The
segment's sales declined from $12.8 million in the second quarter of fiscal 1996
to zero in the current quarter of fiscal 1997. H 70 sales represented $11.6
million of the decline. The remaining sales of non-H 70 products, which are not
material to the financial statements, were not significantly changed from the
comparable period in fiscal 1996 and are now classified with the Sensors &
Systems segment.
Page 10 of 16
<PAGE>
Sensors & Systems segment comparable sales in the second quarter of fiscal 1997
remained at the same level as sales in the second quarter of fiscal 1996. The
Medical Systems segment sales increased $0.1 million or 4.3% from the same
period in the prior fiscal year.
Consolidated cost of sales as a percentage of net sales decreased to 62.1% from
71.9% in the second quarter of fiscal 1997 versus the comparable period of
fiscal 1996. The decrease in cost of sales as a percentage of net sales from the
shutdown of the H 70 product line was partly offset by increases in the Sensors
& Systems segment cost of sales as a percentage of net sales. The Sensors &
Systems segment incurred cost overruns on the development of some products for
aerospace applications. In addition, average costs of goods sold as a percentage
of sales for new automotive applications in the segment are higher than for
other commercial products due to start-up efforts.
Selling, general and administrative expenses decreased in total, but increased
as a percentage of net sales from 21.8% in the second quarter of fiscal 1996 to
28.5% in the second quarter of fiscal 1997. This was mainly the result of lower
sales volume due to the shutdown of the H 70 product line in the Defense Systems
segment. Sensors & Systems' selling, general and administrative costs were
reduced in total and declined slightly as a percentage of sales. This was more
than offset by an increase in the Medical Systems' expenses to support new
product efforts which rose significantly as a percent of sales.
Research, development and related expenses as a percentage of net sales for the
second quarter of fiscal 1997 showed an increase from the same period in fiscal
1996 due to increased spending to support sales growth and product development
mainly in the Medical Systems segment and to a lesser degree in the Sensors &
Systems segment.
Six months ended March 29, 1997 and March 30, 1996
Net sales for the first six months of fiscal 1997 decreased $19.1 million or
25.5% from the prior year.
The Defense Systems segment, which was primarily an H 70 business, shut down its
major product line at the end of fiscal 1996. The segment's sales declined from
$23.0 million in the first six months of fiscal 1996 to zero in the same period
of fiscal 1997. H 70 sales represented $20.7 million of the decline. The
remaining sales of non-H 70 products, which are not material to the financial
statements, increased $0.5 million from the comparable period in fiscal 1996 and
are now classified with the Sensors & Systems segment.
Sensors & Systems segment comparable sales in the first six months of fiscal
1997 increased $1.1 million. Sales of automotive and other commercial products
in the segment increased $0.7 million and $1.0 million, respectively, but were
offset by decreases in sales to government contractors or subcontractors of $1.1
million. The remaining increase in Sensors & Systems sales of $0.5 million is
from the increase in sales of the non-H 70 products of Defense Systems. The
Medical Systems
Page 11 of 16
<PAGE>
segment sales increased $0.5 million or 11.6% from the same period in the prior
year.
Consolidated cost of sales as a percentage of net sales decreased to 62.6% from
71.4% in the first six months of fiscal 1997 as compared to the same period of
fiscal 1996. The decrease in cost of sales as a percentage of net sales from the
shutdown of the H 70 product line was slightly offset by increases in the
Sensors & Systems segment cost of sales as a percentage of net sales. Sensors &
Systems segment incurred cost overruns on the development of some products for
aerospace applications. In addition, average costs of goods sold as a percentage
of sales for new automotive applications in the segment are higher than for
other commercial products due to start-up efforts. The Medical Systems segment
cost of sales as a percentage of net sales decreased from 63.3% in the first six
months of fiscal 1996 to 56.3% in the first six months of fiscal 1997.
Selling, general and administrative expenses as a percentage of net sales
increased from 22.2% in the first six months of fiscal 1996 to 31.6% in the
first six months of fiscal 1997. This was mainly the result of lower sales
volume due to the shutdown of the H 70 product line in the Defense Systems
segment. In addition, the one-time settlement and other related charges
associated with the resolution of the arbitration with the former shareholders
of GPI during the first quarter of fiscal 1997 (see Note E to the Condensed
Consolidated Financial Statements for the quarter ended December 28, 1996)
increased the selling, general and administrative expense percentage to sales.
Research, development and related expenses as a percentage of net sales for the
first six months of fiscal 1997 have increased slightly from the same period in
fiscal 1996 due to increased spending to support sales growth and product
development mainly in the Medical Systems segment and to a lesser degree in the
Sensors & Systems segment.
Liquidity and Capital Resources
During the first six months of fiscal 1997, total cash used by operations was
$1.1 million, including the net loss of $0.1 million. Operating cash inflows
consisted primarily of the positive impact of non-cash charges to income from
depreciation and amortization of $3.8 million and receivables collections of
$2.9 million. Offsetting the inflows were inventory purchases of $3.3 million
and reductions in progress payments on government contracts of $1.3 million,
resulting in net cash outflows for inventory of $2.0 million. Payments on trade
payables and accrued expenses used an additional $5.8 million in cash, including
$5.3 million of amounts accrued either in fiscal 1996 or in the first quarter of
fiscal 1997 from the final settlement of the GPI arbitration. For further
information see Note E to the Condensed Consolidated Financial Statements for
the quarter ended December 28, 1996.
Cash used in investing activities consisted primarily of $2.9 million for
capital expenditures in the Sensors & Systems segment, and is consistent with
spending in the first six months of the prior fiscal year and the current
business volume. Capital expenditures may increase or the Company may expand the
use of leasing to support increased product volumes.
Page 12 of 16
<PAGE>
Cash used in financing activities consisted primarily of $6.2 million in
scheduled payments of long-term debt. The Company also used $0.7 million to
purchase treasury stock on the open market. Proceeds from the issuance of common
stock of $0.3 million were partially offset by dividend payments of $0.1
million.
The Company had no material capital commitments at March 29, 1997.
The Internal Revenue Service (IRS) is currently auditing the Company's income
tax returns for fiscal years 1993 through 1995. The Company believes that it
will reach an agreement with the IRS in connection with the audit of these years
and, while it is anticipated that such agreement, if finalized, would not have a
material effect on the Company's results of operations for fiscal 1997, it would
result in the payment of significant additional prior yearstax liabilities
during fiscal 1997.
Based on the financial condition of the Company at March 29, 1997, management
believes that the existing cash balances, cash generated from operations, and
available lines of credit will be sufficient to meet the Company's planned needs
for the foreseeable future. If the Company requires additional capital,
management anticipates that such capital will be provided by bank or other
borrowings, although there can be no assurances that funds will be available on
terms as favorable as those applicable to the Company's currently outstanding
debt.
Effects of Inflation
Management believes that, for the periods presented, inflation has not had a
material effect on the Company's operations.
Page 13 of 16
<PAGE>
BEI ELECTRONICS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
(a) The Annual Meeting of Stockholders (the "meeting") of the Company was
held on March 6, 1997. At the meeting Richard M. Brooks, William G.
Howard, Jr., and Peter G. Paraskos were elected to the Company's Board
of Directors for a three-year term expiring at the Company's 2000
Annual Meeting.
In addition, the following directors continued in office as directors
of the Company following the Annual Meeting: Charles Crocker and George
S. Brown (until the Company's 1998 Annual Meeting);C. Joseph Giroir,
Jr, and Gary D. Wrench (until the Company's 1999 Annual Meeting).
(b) The other matters presented at the meeting and the voting of
stockholders with respect thereto are as follows:
(i) Amendments to the Company's 1987 Incentive Stock Option Plan were
approved which changed the Plan's name to the Amended 1987 Stock Option
Plan and provided that both incentive stock options and nonstatutory
stock options may be granted under the Plan, that consultants to the
Company may be granted stock options, that the Plan's term be extended
to January 15, 2007, that the aggregate number of shares that may be
granted under the Plan be increased by 100,000 shares, and added
provisions to the Plan with respect to Section 162(m) of the Internal
Revenue Code of 1986 and Section 16 of the Securities Exchange Act of
1934, as amended.
Shares voted:
For Against Abstained Broker Non-Votes
---------- ------------ ----------- ------------------
3,578,917 1,036,714 36,325 1,408,657
(ii) Amendments to the Company's 1992 Restricted Stock Plan were
approved which provided that the Plan's term be extended to January 15,
2007, that the aggregate number of shares that may be granted under the
Plan be increased by 350,000 shares, and added provisions to the Plan
with respect to Section 162(m) of the Internal Revenue Code of 1986 and
Section 16 of the Securities Exchange Act of 1934, as amended.
Page 14 of 16
<PAGE>
Shares voted:
For Against Abstained Broker Non-Votes
---------- ------------ ----------- ------------------
3,989,149 569,123 36,362 1,465,979
(iii) The Board of Directors selected Ernst & Young LLP as the
Company's independent public accountants for the fiscal year ending
September 27, 1997 and such selection was ratified by the stockholders
at the Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.23 Fourth Amendment to Note Agreement, dated March 27, 1997, between
BEI Electronics, Inc. and Principal Mutual Life Insurance Company,
Berkshire Life Insurance Company, and TMG Life Insurance Company
10.24 Seventh Amendment to Credit Agreement, dated February 28, 1997
between BEI Electronics, Inc., BEI Sensors & Systems Company, Inc.,
Defense Systems Company, Inc., BEI Medical Systems Company, Inc. and
CIBC Inc., and Canadian Imperial Bank of Commerce
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended March 29, 1997.
Page 15 of 16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the City of San
Francisco, County of San Francisco, State of California, on April 28, 1997.
BEI ELECTRONICS, INC.
By: /s/ Robert R. Corr
----------------------------------------
Robert R. Corr
Secretary, Treasurer and Controller
(Principal Accounting Officer)
Page 16 of 16
<PAGE>
FOURTH AMENDMENT TO NOTE AGREEMENT
This Fourth Amendment to Note Agreement (the "Agreement") is entered into as of
the 27th day of March, 1997 between BEI Electronics, Inc., a Delaware
corporation (the "Company"), having its principal place of business at One Post
Street Suite 2500, San Francisco, California 94104, and Principal Mutual Life
Insurance Company, Berkshire Life Insurance Company and TMG Life Insurance
Company (each a "Holder" and together the "Holders").
RECITALS
The Company entered into a Note Agreement dated as of August 15, 1993 (the
"Original Note Agreement") with the Holders and Principal National Life
Insurance Company. In accordance with the terms of the Original Note Agreement
the Company issued its 6.73% Series A Senior Notes due October 1, 2000 (the
"Notes") in the original principal amount of $16,800,000 and its 6.73% Series B
Senior Notes due November 15, 2000 in the original principal amount of
$11,200,000. The Holders are the owners and registered holders of the entire
outstanding principal balance of Notes. Capitalized terms used but not defined
in this Agreement have the meanings set forth in the Note Agreement.
The Original Note Agreement was amended by First Amendment to Note Agreement
dated as of April 1, 1994 (the "First Amendment"), by Second Amendment to Note
Agreement dated as of September 30, 1994 (the "Second Amendment") and by Third
Amendment to Note Agreement dated as of December 19, 1995 (the "Third
Amendment"). The Original Note Agreement as amended by the First Amendment, the
Second Amendment and the Third Amendment is hereinafter referred to as the "Note
Agreement".
The Company has requested, and the Holders have agreed, that the Note Agreement
be amended in certain particulars as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises set forth above, and in
consideration of the sum of $5,000 paid by the Company ratably to the Holders,
the receipt and sufficiency of which is hereby acknowledged, the Company and the
Holders agree as follows:
1. Recitals Incorporated. The Recitals set forth above are incorporated
herein by reference.
2. Amendment to the Note Agreement. Section 5.8 of the Note Agreement is
hereby deleted in its entirety and the following inserted in lieu
thereof:
Section 5.8. Fixed Charges Coverage Ratio. For each period of four
consecutive fiscal quarters ending on a date listed below, the
Company shall keep and maintain the ratio of Net Income Available
for Fixed Charges to Fixed Charges at not less than the ratio set
forth below:
March 29, 1997 2.0 to 1.0
June 28, 1997 2.0 to 1.0
<PAGE>
Page 2
Beginning with the fiscal quarter ending on September 27, 1997, the
Company shall keep and maintain the ratio of Net Income Available for
Fixed Charges to Fixed Charges for each period of four consecutive
fiscal quarters at not less than 2.5 to 1.0.
3. Representations and Warranties. The Company represents and warrants to
each Holder as of the date of this Agreement that, upon execution of this
Agreement, all of the following statements will be true and correct:
3.1 As of the date of this Agreement, no Default or Event of Default
under the Note Agreement, as amended, or under any other
agreement for borrowed money to which the Company is subject,
exists or is continuing.
3.2 Except as set forth in the Company's Quarterly Report on Form
10-Q for the quarter ended December 28, 1996 filed with the
Securities and Exchange Commission, the representations and
warranties of the Company referred to in Section 3.1 of the Note
Agreement are true and correct and complete in all material
respects as if made on the date hereof, except as to those
representations and warranties made as of a specific date, which
are true and correct and materially complete as of such date.
3.3 No dissolution proceedings with respect to the Company have been
commenced or are contemplated, and, except as previously
disclosed in 10Q or 10K reports delivered to each holder of the
Notes, there has been no material adverse change in the
business, condition or operations (financial or otherwise) of
the Company, taken as a whole, since August 15, 1993.
3.4 This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a legal, valid and binding
obligation of the Company.
3.5 The Company has not made any modification of any material
agreement with any creditor of the Company, other than by this
Agreement, unless the Company has disclosed the terms of such
modification to each Holder in writing.
3.6 The Company has not paid or caused to be paid, and will not pay
or cause to be paid, directly or indirectly, any remuneration,
whether by way of supplemental or additional interest, fee or
otherwise, to any Holder as consideration for or as an
inducement to entering into by such Holder of this Agreement,
except as set forth herein.
4. Effective Date. This Agreement shall become effective as of the date
first written above upon receipt by each of the Holders of a counterpart
of this Agreement duly executed by the Company and the other Holders.
5. Miscellaneous
5.1 Except as specifically amended in this Agreement all of the
terms, conditions and covenants of the Note Agreement and the
Notes shall remain unaltered and in full force
<PAGE>
Page 3
and effect and shall be binding on the Company. The Note
Agreement is hereby ratified, confirmed and approved.
5.2 Except as expressly set forth in this Agreement the terms of
this Agreement shall not operate as a waiver by the Holders of
any provisions of, or otherwise prejudice the rights or remedies
of the Holders under the Note Agreement, the Notes or applicable
law and shall not operate as a waiver of or otherwise prejudice
any rights the Holders may have against any other Person. This
Agreement shall not be construed as establishing a course of
conduct on the part of the Holders upon which the Company may
rely in the future.
5.3 All headings and captions preceding the text of the several
sections of this Agreement are intended solely for convenience
of reference and shall not constitute a part of this Agreement,
nor shall they alter its meaning, construction or effect.
5.4 This Agreement embodies the entire agreement and understanding
between the Company and the Holders with regard to the matters
set forth herein, and supersedes all prior agreements and
undertakings relating to such matters.
5.5 This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed shall be deemed an
original and all of which taken together shall constitute one
and the same agreement.
5.6 This Agreement shall be governed by, and construed and enforced
in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
by their authorized officers as of the date first above written.
BEI ELECTRONICS, INC.
By /s/ Robert R. Corr
-----------------------------------
Tres.
By
-----------------------------------
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ Austin Ramzy
-----------------------------------
Austin Ramzy
Assistant Director
Securities Investment
By: /s/ Jon M. Davidson
-----------------------------------
Jon M. Davidson
Director - Securities Investment
<PAGE>
Page 4
BERKSHIRE LIFE INSURANCE COMPANY
By:
-----------------------------------
TMG LIFE INSURANCE COMPANY
By: THE MUTUAL GROUP, its Agent
By:
-----------------------------------
By:
-----------------------------------
<PAGE>
BEI ELECTRONICS, INC.
SEVENTH AMENDMENT TO CREDIT AGREEMENT
This SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated
as of February 28, 1997 and entered into by and among BEI Electronics, Inc., a
Delaware corporation, BEI Sensors & Systems Company, Inc., a Delaware
corporation, Defense Systems Company, Inc., a Delaware corporation, and BEI
Medical Systems Company, Inc., a Delaware corporation (each a "Borrower" and
collectively the "Borrowers"), the financial institutions listed on the
signature pages hereof (each a "Lender" and collectively the "Lenders"), CIBC
Inc., as agent for the Lenders (the "Agent"), and Canadian Imperial Bank of
Commerce, as the Designated Issuer, and is made with reference to that certain
Credit Agreement dated as of June 1, 1993, as amended by the First Amendment to
Credit Agreement dated as of September 3, 1993, as amended by the Second
Amendment to Credit Agreement and Limited Waiver dated as of April 1, 1994, as
amended by the Third Amendment to Credit Agreement dated as of September 30,
1994, as amended by the Fourth Amendment to Credit Agreement dated as of June 1,
1995, as amended by the Fifth Amendment to Credit Agreement dated as of June 1,
1996 and as amended by the Sixth Amendment to Credit Agreement dated as of
October 31, 1996 (as so amended, the "Credit Agreement") by and among the
Borrowers, the Lenders, the Agent and the Designated Issuer. Capitalized terms
used herein without definition shall have the same meanings herein as set forth
in the Credit Agreement.
RECITALS
WHEREAS, the Borrowers have requested an extension of the Maturity Date
of the Credit Agreement, and the Lenders, the Agent and the Designated Issuer
have so agreed;
WHEREAS, the Borrowers, the Lenders, the Agent and the Designated
Issuer desire to amend the Credit Agreement as set forth below;
NOW, THEREFORE, in consideration of the premises and agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
1. Amendments to the Credit Agreement.
1.1. Amendments to Section 1.01: Defined Terms. The following
definitions in Section 1.01 of the Credit Agreement are hereby
amended in to read in their entirety as follows:
"'Maturity Date': July 31, 1997, or, if earlier, the
day immediately prior to the distribution date of a tax free
spin-off of any of the Borrowers' Subsidiaries."
1
<PAGE>
"'Revolving Commitment': The amount of $15,000,000
as such amount may be reduced pursuant to Sections 2.1(c) and
2.1(d). As of the Maturity Date, the Lenders' obligation to
make Revolving Loans after such date shall expire and the
amount of the Revolving Commitment shall be reduced to an
amount equal to the Letter of Credit Usage as of such date."
1.2. Amendments to Section 2.5: Letters of Credit. Subsection (a)
of Section 2.5 is hereby amended to read in its entirety as
follows:
"(a) Letters of Credit. The Borrowers may request
from time to time during the period from the date hereof
through the Maturity Date that the Issuing Bank issue Letters
of Credit for the account of any of the Borrowers, provided
that in no event shall the Issuing Bank issue any Letter of
Credit having an expiration date beyond the Maturity Date,
except for any Letters of Credit outstanding as February 28,
1997 which, in the event the Lenders' obligation to make
Revolving Loans expires, shall be immediately cash-
collateralized by the Borrowers.
2. Conditions to Effectiveness. This Amendment shall be deemed effective
as of February 28, 1997 (the "Seventh Amendment Effective Date") upon
the satisfaction of all of the following conditions precedent:
2.1. The Agent shall have received for each Lender and the
Designated Issuer counterparts hereof duly executed on behalf
of the Borrowers, the Agent and the Lenders (or notice of the
approval of this Amendment by the Lenders satisfactory to the
Agent shall have been received by the Agent).
2.2 The Agent shall have received a closing fee in the amount of
US $12,500.
2.3. All corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable
by the Agent, acting on behalf of the Lenders, and its counsel
shall be satisfactory in form and substance to the Agent and
such counsel, and the Agent and such counsel shall have
received all such counterpart originals or certified copies of
such documents as the Agent may reasonably request.
3. Borrowers' Representations and Warranties. In order to induce the
Lenders to enter into this Amendment and to amend the Credit Agreement
in the manner provided herein, the Borrowers represent and warrant to
each Lender that the following statement are true, correct and
complete:
3.1. Corporate Power and Authority. The Borrowers have all
requisite corporate power and authority to enter into this
Amendment and to carry out the transactions contemplated by,
and perform their respective obligations under, the Credit
Agreement as amended by this Amendment (the "Amended
Agreement"). The Certificate of Incorporation and Bylaws of
each of the
2
<PAGE>
Borrowers have not been amended since September 30, 1994,
except for the bylaws of BEI Electronics, Inc. which were
amended as of April 1, 1996 (a copy of the amended bylaws have
been delivered to Agent).
3.2. Authorization of Agreements. The execution and delivery of
this Amendment and the performance of the Amended Agreement
have been duly authorized by all necessary corporate action on
the part of the Borrowers.
3.3. No Conflict. The execution and delivery by the Borrowers of
this Amendment and the performance by the Borrowers of the
Amended Agreement do not and will not contravene (i) any law
or regulation binding on or affecting any of the Borrowers or
any of their respective Subsidiaries, (ii) the Certificate of
Incorporation or Bylaws of any of the Borrowers, (iii) any
order, judgment or decree of any court of other agency of
government binding on any of the Borrowers or any of their
respective Subsidiaries or (iv) any contractual restriction
binding on or affecting any of the Borrowers or any of their
respective Subsidiaries.
3.4. Governmental Consents. The execution and delivery by the
Borrowers of this Amendment and the performance by the
Borrowers of the Amended Agreement do not and will not require
any authorization or approval of, or other action by, or
notice to or filing with any governmental authority or
regulatory body.
3.5. Binding Obligation. This Amendment and the Amended Agreement
have been duly executed and delivered by the Borrowers and are
the binding obligations of the Borrowers, enforceable against
the Borrowers in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other
similar laws of general application and equitable principles
relating to or affecting creditors' rights.
3.6. Absence of Default. No event has occurred and is continuing or
will result from the consummation of the transactions
contemplated by this Amendment that would constitute an Event
of Default or a Potential Event of Default.
4. Miscellaneous.
4.1. Reference to and Effect on the Credit Agreement and the Other
Loan Documents.
4.1.1. On and after the Seventh Amendment Effective Date,
each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein", or words
of like import referring to the Credit Agreement, and
each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words
of like import referring to the Credit Agreement
shall mean and be a reference to the Amended
Agreement.
3
<PAGE>
4.1.2. Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall
remain in full force and effect and are hereby
ratified and confirmed.
4.1.3. Without limiting the generality of the provisions of
Section 10.01 of the Credit Agreement, nothing in
this Amendment shall be deemed to (a) constitute a
waiver of compliance by the Borrowers with respect to
any term, provision or condition of the Credit
Agreement or any other instrument or agreement
referred to therein or (b) prejudice any right or
remedy that the Agent or any Lender may now have or
may have in the future under or in connection with
the Credit Agreement or any other instrument or
agreement referred to therein.
4.2. Fees and Expenses. The Borrowers acknowledge that all costs,
fees and expenses as described in Section 10.05 of the Credit
Agreement incurred by the Agent and its counsel with respect
to this Amendment and the documents and transactions
contemplated hereby shall be for the account of the Borrowers.
4.3. Headings. Section and subsection headings in this Amendment
are included herein for convenience of reference only and
shall not constitute a part of this Amendment for any other
purpose or be given any substantive effect.
4.4. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES.
4.5. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument,
signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.
BEI ELECTRONICS, INC.
By: /s/ Robert R. Corr
-----------------------------------------
Title: Tres
-----------------------------------------
4
<PAGE>
BEI SENSORS & SYSTEMS
COMPANY, INC.
By: /s/ Robert R. Corr
-----------------------------------------
Title: Tres
-----------------------------------------
DEFENSE SYSTEMS COMPANY, INC.
By: /s/ Robert R. Corr
-----------------------------------------
Title: Asst Tres
-----------------------------------------
BEI MEDICAL SYSTEMS COMPANY, INC.
By: /s/ Robert R. Corr
-----------------------------------------
Title: Tres
-----------------------------------------
CIBC INC., Individually and as Agent
By: /s/ Cyd Petre
-----------------------------------------
Title: Authorized Signatory
-----------------------------------------
CANADIAN IMPERIAL BANK of
COMMERCE, as the Designated Issuer
By: /s/ Cyd Petre
-----------------------------------------
Title: Authorized Signatory
-----------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial
information extracted from the financial
statements for the period ending March 29, 1997
and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000851478
<NAME> BEI ELECTRONICS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-29-1997
<CASH> 6,347
<SECURITIES> 0
<RECEIVABLES> 19,938
<ALLOWANCES> 0
<INVENTORY> 25,235
<CURRENT-ASSETS> 57,016
<PP&E> 25,322
<DEPRECIATION> 0
<TOTAL-ASSETS> 102,233
<CURRENT-LIABILITIES> 25,145
<BONDS> 18,615
<COMMON> 9
0
0
<OTHER-SE> 55,452
<TOTAL-LIABILITY-AND-EQUITY> 102,233
<SALES> 28,524
<TOTAL-REVENUES> 28,824
<CGS> 17,718
<TOTAL-COSTS> 17,718
<OTHER-EXPENSES> 9,649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 495
<INCOME-PRETAX> 962
<INCOME-TAX> 343
<INCOME-CONTINUING> 619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 619
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
