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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1998
---------------------
APPLIED EXTRUSION TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-19188 51-0295865
(State of Incorporation) (Commission File No.) (I.R.S. Employer Identification
No.)
</TABLE>
3 CENTENNIAL DRIVE
PEABODY, MASSACHUSETTS 01960
(Address of Principal Executive Offices)
(978) 538-1500
(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 / /.
The number of shares of the Registrant's Common Stock, $.01 par value per
share, outstanding as of February 10, 1999 was 11,312,989.
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PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APPLIED EXTRUSION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 8,359 $ 2,279
Accounts receivable, net of allowance for doubtful accounts of $1,145 on December
31, 1998 and $1,056 on September 30, 1998....................................... 37,549 38,467
Inventory......................................................................... 37,142 39,192
Prepaid expenses and deferred taxes............................................... 4,955 5,063
------------ -------------
Total current assets............................................................ 88,005 85,001
Property, plant and equipment, net.................................................. 276,713 278,905
Intangibles and deferred finance charges, net....................................... 3,442 3,636
Long-term note receivable and other assets.......................................... 3,277 3,184
------------ -------------
$ 371,437 $ 370,726
------------ -------------
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Accounts payable.................................................................. $ 16,380 $ 15,259
Accrued interest.................................................................. 5,133 9,145
Accrued expenses and other current liabilities.................................... 28,355 27,126
------------ -------------
Total current liabilities....................................................... 49,868 51,530
Long-term debt...................................................................... 196,500 185,500
Deferred taxes and other credits.................................................... 28,147 33,259
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized, 1,000 shares, of which 150 are
designated Junior Preferred Stock; no stock outstanding Common stock, $.01 par
value:
Authorized, 15,000 shares; issued, 11,458 and 11,357 shares at December 31, 1998 and
September 30, 1998, respectively.................................................. 115 114
Additional paid-in capital.......................................................... 96,694 95,867
Retained earnings................................................................... 5,203 9,938
Cumulative translation adjustments.................................................. (2,904) (2,396)
------------ -------------
99,108 103,523
Treasury stock, at cost, and other, 245 and 327 shares at December 31, 1998 and
September 30, 1998, respectively.................................................. (2,186) (3,086)
------------ -------------
Total stockholders' equity.......................................................... 96,922 100,437
------------ -------------
$ 371,437 $ 370,726
------------ -------------
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</TABLE>
See notes to condensed consolidated financial statements.
1
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APPLIED EXTRUSION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
SALES....................................................................................... $ 55,445 $ 56,416
Cost of sales............................................................................... 47,504 44,569
--------- ---------
GROSS PROFIT................................................................................ 7,941 11,847
OPERATING EXPENSES:
Selling, general and administrative....................................................... 5,879 5,816
Research and development.................................................................. 1,639 1,698
Start-up costs............................................................................ 137
--------- ---------
Total operating expenses................................................................ 7,518 7,651
--------- ---------
OPERATING PROFIT............................................................................ 423 4,196
NON-OPERATING EXPENSES:
Interest expense, net..................................................................... 4,852 4,032
Acquisition costs......................................................................... 3,462
--------- ---------
Total non-operating expenses............................................................ 8,314 4,032
--------- ---------
Income (loss) before income taxes and change in accounting.................................. (7,891) 164
Income tax expense (benefit)................................................................ (3,156) 65
--------- ---------
Income (loss) before change in accounting................................................... (4,735) 99
Change in accounting, net of related tax benefits of $568................................... 852
--------- ---------
Net loss.................................................................................... $ (4,735) $ (753)
--------- ---------
--------- ---------
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Before change in accounting $ (0.43) $ .01
Change in accounting...................................................................... (.08)
--------- ---------
Net loss.................................................................................. $ (0.43) $ (.07)
--------- ---------
--------- ---------
AVERAGE COMMON AND POTENTIAL COMMON SHARES OUTSTANDING:
Basic and Diluted......................................................................... 11,112 10,547
</TABLE>
See notes to condensed consolidated financial statements.
2
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APPLIED EXTRUSION TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................................................. $ (4,735) $ (753)
Adjustment to reconcile net income to net cash used in operating activities:
Provision for doubtful accounts....................................................... 89 83
Depreciation and amortization......................................................... 5,045 4,574
Deferred taxes and other credits...................................................... (3,861) 120
Changes in assets and liabilities which provided (used) cash:
Prepaid expenses and other current assets........................................... (28) 281
Accounts payable and accrued expenses............................................... (2,420) (7,981)
Accounts receivable and inventory................................................... 2,879 971
---------- ----------
Net cash used in operating activities............................................. (3,031) (2,705)
INVESTING ACTIVITIES:
Additions to property, plant and equipment.............................................. (2,616) (11,673)
Proceeds from sale/leaseback transaction................................................ 39,559
---------- ----------
Net cash provided by (used in) investing activities............................... (2,616) 27,886
FINANCING ACTIVITIES:
Borrowings (repayments) under line of credit agreement, net............................. 11,000 (25,559)
Proceeds from issuance of stock, net.................................................... 1,235 2,258
---------- ----------
Net cash provided by (used in) financing activities............................... 12,235 (23,301)
Effect of exchange rate changes on cash................................................. (508) (955)
---------- ----------
Increase in cash and cash equivalents, net.............................................. 6,080 925
Cash and cash equivalents, beginning.................................................... 2,279 3,054
---------- ----------
Cash and cash equivalents, ending....................................................... $ 8,359 $ 3,979
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, including capitalized interest of $705 and $1,864, respectively............. $ 9,401 $ 9,812
Income taxes -- --
</TABLE>
See notes to condensed consolidated financial statements.
3
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APPLIED EXTRUSION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)
1. BASIS OF PRESENTATION
The information set forth in these statements is unaudited and may be
subject to normal year-end adjustments. The information reflects all adjustments
that, in the opinion of management, are necessary to present a fair statement of
the results of operations of Applied Extrusion Technologies, Inc. (the "Company"
or "AET") for the periods indicated. Results of operations for the interim
period ended December 31, 1998 are not necessarily indicative of the results of
operations for the full fiscal year.
Certain information in footnote disclosures normally included in financial
statements has been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. These statements should
be read in conjunction with the Company's Annual Report for the year ended
September 30, 1998, filed on Form 10-K with the Securities and Exchange
Commission.
2. INVENTORIES
Inventories are valued at the lower of cost or market, with cost determined
using an average-cost method. Inventories consisted of the following on December
31, 1998 and September 30, 1998:
<TABLE>
<CAPTION>
DECEMBER SEPTEMBER
1998 1998
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<S> <C> <C>
Raw materials.......................................... $ 7,775 $ 8,410
Finished goods......................................... 29,367 30,782
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Total.................................................. $ 37,142 $ 39,192
----------- -----------
----------- -----------
</TABLE>
3. CHANGE IN ACCOUNTING
During the third quarter of 1998, the Company elected early adoption of the
American Institute of Certified Public Accountants' Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"). Effective with the
adoption of SOP 98-5, the Company changed its method of accounting for start-up
costs on major projects to expense these costs as incurred. Prior to this
accounting change, the Company capitalized these costs and amortized them over a
five year period. Amounts included in these financial statements for the quarter
ended December 31, 1997 have been revised to reflect this adoption by recording
charges of $137, representing costs capitalized during the quarter which were
expensed upon adoption, and $852, net of related income tax benefits of $568,
resulting from costs incurred in prior periods. Previously reported net income
for the quarter was $181 and EPS, both basic and diluted, was $0.02.
4. EARNINGS PER SHARE
178,000 and 133,000 potential shares from options at December 31, 1998 and
December 31, 1997, respectively, were excluded from the shares used to calculate
diluted earnings per share as the effect of including these shares in the
calculation would be to decrease the loss per share.
5. COMMITMENTS AND FOREIGN EXCHANGE CONTRACTS
The Company has entered into foreign exchange contracts, the last of which
expires in January, 1999, to hedge firm purchase commitments for the purchase of
equipment denominated in German Marks. Gains and losses on the contracts which
result from market risk associated with changes in the market
4
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APPLIED EXTRUSION TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)
values of the underlying currencies are deferred and reported as part of the
capitalized asset. In entering into these contracts, the Company has assumed the
risk which might arise from the possible inability of counterparties to meet the
terms of their contracts. The Company does not expect any losses as a result of
counterparty defaults. At December 31, 1998, the Company had outstanding foreign
exchange contracts with notional values of $2,161. These contracts had no
carrying value and a net unrealized loss of $299. The Company does not enter
into foreign exchange contracts for trading purposes.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARATIVE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
WITH THE THREE MONTHS ENDED DECEMBER 31, 1997
INTRODUCTION
AET is the largest producer of oriented polypropylene ("OPP") films in North
America. Consumer product companies worldwide use our OPP films in labeling,
packaging and overwrap applications that often require special attributes such
as high gloss, vivid graphics, exceptional clarity and barriers to air, light
and moisture to preserve freshness. We generally sell our film products to
"converters," which are companies that specialize in processes such as
laminating multiple films or other materials together and printing text and
graphics to form the final label or packaging material for end-users.
Certain of the end-use markets for the Company's OPP films are seasonal. For
example, demand in the snack food, soft drink and candy markets is generally
higher in the spring and summer. As a result, sales and net income are generally
higher in those periods.
For the purposes of this discussion and analysis, the periods ended December
31, 1998 and 1997 are referred to as the first quarters of 1999 and 1998,
respectively.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentages
of the Company's sales represented by certain income and expense items in its
income statement:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1998 1997
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Sales.............................................................. 100.0% 100.0%
Cost of sales...................................................... 85.7 79.0
Gross profit....................................................... 14.3 21.0
Selling, general and administrative................................ 10.6 10.3
Research and development........................................... 3.0 3.0
Operating profit................................................... 0.1 7.4
Interest expense................................................... 8.8 7.1
Net loss........................................................... (8.5) (1.3)
</TABLE>
Sales for the first quarter of 1999 were $55,445 versus $56,416 for the
comparable period of fiscal 1998. The $971, or 1.7 percent, decrease is due to
divestitures of certain non-core businesses during fiscal 1998. Exclusive of
these divestitures, sales increased 8.8 percent over the first quarter of fiscal
1998 as a result of a 35 percent increase in sales volume, offset by
significantly lower selling prices. These lower selling prices, particularly in
low-end products, were the result of continued competitive pressures which were
primarily due to overcapacity throughout the OPP films industry. Sales outside
of the United States accounted for approximately 19.3 percent of total 1999
sales during the first quarter, and operating profit from sales outside the
United States was 8.5 percent of total operating profit. Sales outside the
United States and operating profit from those sales for the first quarter of
fiscal 1998 accounted for approximately 18.5 percent of total sales and 22.7
percent of total operating profit.
Gross profit for the first quarter of 1999 was $7,941, or 14.3 percent of
total sales, versus $11,847, or 21 percent of sales for the same quarter of
fiscal 1998. This decrease is primarily the result of approximately $2.9 million
in costs related to a scheduled two week shutdown of the OPP manufacturing
plants, beginning in late December 1998. Exclusive of these shutdown costs,
gross profit for the first quarter of 1999 was $10,846, or 19.6 percent of
sales. The remaining decrease in gross profit from the first quarter of
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1998 is primarily the result of lower average selling prices offset in part by
improved manufacturing efficiencies achieved in the quarter.
Total operating expenses of $7,518 for the first quarter of fiscal 1999 were
flat compared to the first quarter of 1998, exclusive of the $137 write-off of
start-up costs during the first quarter of 1998. This is consistent with the
anticipated leveling off of both research and development expenses and selling,
general and administrative expenses.
During the quarter the Company terminated acquisition discussions with two
of the largest European-based worldwide OPP film producers. The parties were
unable to reach a mutually agreeable price at which the Company would acquire
either of these businesses, given recent deterioration in the European OPP films
market caused primarily by the recent start-up of ten new OPP film lines in that
region. Costs associated with both of these acquisition projects and related due
diligence efforts were $3,462, or $2,078 after taxes, and were recorded as
non-operating expenses for the quarter.
Net interest expense for the first quarter of 1999 of $4,852 was $820 higher
than the first quarter of 1998 due to the higher average debt balance and lower
capitalized interest levels in the first quarter of 1999 as a result of the
project completion for the new ten-meter wide manufacturing line in fiscal 1998.
Income tax as a percent of before-tax income remained constant for the first
quarter of fiscal 1999 and 1998.
LIQUIDITY AND CAPITAL RESOURCES
In conjunction with the Company's 1994 acquisition of the OPP films
business, AET entered into a Credit Agreement with a group of lenders to provide
the Company with senior bank financing. In January 1998, AET amended and
restated this Credit Agreement and combined the revolving credit facility and
revolving term facility thereunder into a $70,000 revolving credit facility (the
"Credit Facility") with a final maturity of the earlier of (i) November 1, 2001,
if the AET Senior Notes are not refinanced prior to such date, or (ii) January
29, 2003. The Credit Facility is secured by all the assets of AET. It includes
covenants which, among other things, limit borrowings based on certain asset
levels, requires AET to maintain a minimum tangible net worth and specified
interest coverage and leverage ratios, and establishes maximum capital
expenditure levels. It also contains other covenants customary in documents
relating to transactions of this type. The Company was not in compliance with
two of these covenants at December 31, 1998 and has received a waiver from the
banks. At December 31, 1998 the Company had $40,000 outstanding under the credit
facility. The Company also has $150,000 of Senior Notes, which bear interest at
11.5 percent payable semi-annually, which mature in full in 2002 and $6,500 of
Industrial Revenue Bonds outstanding, which are due November 4, 2004.
Operating activities in the first quarter of 1999 used $3,031 of cash, which
was the result of a net loss of $3,462 before depreciation and amortization and
other non-cash expenditures offset slightly by an increase in working capital of
$431. The net working capital increase was primarily the result of decreases in
accounts payable and accrued expenses of $2,420, and decreases in inventory,
accounts receivable and prepaid expenses of $2,050, $829, and $28, respectively.
Accounts payable and accrued expenses decreased primarily due to payment of the
Company's semi-annual interest on its Senior Notes and the Company's annual
contributions to employee benefit plans. In addition, during the quarter
payments against restructuring reserves reduced such accounts by $2,466 to
$16,114 at December 31, 1998. The decrease in inventory reflects the effect of
the previously discussed two week shutdown of the OPP manufacturing plants. The
remainder of the decreases in accounts payable, accruals, and receivables since
September 30, 1998 are primarily the result of seasonality of the business.
YEAR 2000
AET's company-wide Year 2000 project, which is addressing the issue of
computer programs and embedded computer chips being unable to distinguish
between the year 1900 and the year 2000, is
7
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proceeding on schedule. The project is comprised of five major phases: (1)
taking inventory of systems potentially impacted by the Year 2000 issue; (2)
assessing the Year 2000 compliance or capability of systems determined to be
material to the company; (3) repairing or replacing material systems that are
determined not to be Year 2000 compliant or capable; (4) testing the critical
repaired or replaced systems; and (5) designing and implementing contingency and
business continuation plans.
At December 31, 1998, AET had completed the inventory and assessment phases
of the project. Those systems with identified Year 2000 compliance or capability
issues are currently being repaired or replaced, as required. The largest part
of this effort is the continuing implementation of a new enterprise-wide
information system which commenced in 1996. The financial, sales, order entry,
electronic data interchange, and administrative portions of the implementation
are complete. The inventory, shop floor and related manufacturing portions of
the system have been implemented at two production sites, with the remaining two
plants expected to be completed by the end of the fiscal year.
Once Year 2000 compliance repairs or replacements have been made, AET plans
to test critical systems to verify that compliance has been achieved. Third
parties will validate the Year 2000 compliance of our manufacturing control
systems, and internal resources will validate the compliance of the remainder of
our systems. The target completion date for the systems testing is September 30,
1999.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. The Company's
contingency planning process for Year 2000 problems is ongoing. Contingency
plans could include having arrangements for alternate suppliers when available,
re-running certain processes if errors occur, using manual intervention to
ensure the continuation of operations where possible, and scheduling activity in
December 1999 that would normally occur at the beginning of January 2000. If it
becomes necessary for the Company to take corrective actions, it is uncertain
whether this would result in significant delays in business operations or have a
material adverse effect on the company's results of operations, financial
position or cash flow. AET believes that with the completion of the Year 2000
project as scheduled the possibility of significant interruptions of normal
operations should be substantially reduced.
The total cost associated with Year 2000 compliance activities is estimated
to be $10,000, of which $8,000 will be spent on the new enterprise-wide system
which offers many other enhancements in comparison to our current systems.
Approximately $6,500 has been spent to date, and cash flow from operations is
expected to fund the balance of the project. No critical information technology
projects have been deferred due to our Year 2000 compliance efforts.
INFLATION
Management reviews the prices charged for its products on a regular basis.
When market conditions allow, adjustments are made to reflect changes in product
costs due to fluctuations in the cost of materials and labor as well as
inflation. The costs of raw materials make up a significant portion of AET's
costs and have historically fluctuated. There can be no assurance, however, that
future market conditions will support any direct correlation between raw
material cost fluctuations and finished product films pricing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN EXCHANGE CONTRACTS
See Note 5, "Commitments and Foreign Exchange Contracts" on page 5.
SHORT-TERM AND LONG-TERM DEBT
The Company is exposed to interest rate risk primarily through its borrowing
activities. The Company's policy has been to utilize United States dollar
denominated borrowings to fund its working capital
8
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and investment needs. Short-term debt, if required, is used to meet working
capital requirements, while long term debt is generally used to finance long
term investments. There is inherent roll-over risk for borrowings as they mature
and are renewed at current market rates. The extent of this risk is not
quantifiable or predictable because of the variability of future interest rates
and the Company's future financing requirements. At December 31,1998, the
Company had no short term debt outstanding and had long term debt outstanding of
$196,500, of which $40,000 was outstanding on its revolving credit facility,
which has a variable interest rate, based on either LIBOR or prime rates.
The Company does not enter into financial instrument transactions for
trading or other speculative purposes or to manage interest rate exposure.
With respect to the foreign exchange contracts, an adverse change in the
underlying exchange rates would not have a significant effect on the Company's
reported results, as any gain or loss on the contract would be offset by changes
in the value of the firm purchase commitment. A 10% adverse change in interest
rates on the portion of the Company's debt bearing interest at a variable rate
would result in an increase in interest expense of approximately $318.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
IN THE FORWARD-LOOKING STATEMENTS, INCLUDING THOSE RELATED TO THE TIMELY
DEVELOPMENT AND ACCEPTANCE OF NEW PRODUCTS, FLUCTUATIONS IN RAW MATERIALS AND
OTHER PRODUCTION COSTS, THE LOSS OF ONE OR MORE SIGNIFICANT CUSTOMERS, THE
IMPACT OF COMPETITIVE PRODUCTS AND PRICING, THE TIMELY COMPLETION OF CAPITAL
PROJECTS, THE SUCCESS OF THE COMPANY'S EFFORTS TO EXPAND INTO NEW MARKETS AND
OTHER RISKS DETAILED IN EXHIBIT 99 OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND FROM TIME TO TIME IN THE COMPANY'S
OTHER REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which have arisen in
the ordinary course of its business and have not been fully adjudicated. These
actions, when ultimately concluded and determined, will not, in the opinion of
management, have a material adverse effect upon the financial position or
results of operations of the Company.
9
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
3.1(a) Amended and Restated Certificate of Incorporation.
3.2(i) Amendment dated February 26, 1992 to Amended and Restated Certificate of
Incorporation.
3.3(i) Amended and Restated By-Laws.
4.1(d) Indenture dated as of April 7,1994 between the Registrant and United States Trust
Company of New York, Trustee.
4.2(d) Form of 11 1/2 percent Senior Note due 2002 (included in Exhibit 4.2).
4.3(a) Specimen Common Stock Certificate.
4.4(l) Rights Agreement dated as of March 2, 1998 between the Company and BankBoston,
N.A., as Rights Agent.
10.1(i) Credit Agreement dated as of April 7, 1994 and Amended and Restated as of January
29, 1998 by and between the Registrant and The Chase Manhattan Bank as
Administrative Agent and LaSalle Business Credit, Inc. as Co-Agent.
10.1.1(h) Waiver and Amendment No. 1 dated as of December 16, 1998 to Amended and Restated
Credit Agreement dated as of January 29, 1998 between the Registrant and The
Chase Manhattan Bank as Administrative Agent.
10.1.2* Waiver and Amendment No. 2 dated as of December 31, 1998 to Amended and Restated
Credit Agreement dated as of January 29, 1998 between the Registrant and The
Chase Manhattan Bank as Administrative Agent.
10.2(b) 1986 Stock Option Plan, as amended.
10.3(c) 1991 Stock Option Plan, as amended.
10.4(b) 1991 Stock Option Plan for Directors, as amended.
10.5(d) 1994 Stock Option Plan, as amended.
10.6(f) Employment Agreement dated as of June 1, 1996 between the Registrant and Mark S.
Abrahams.
10.7(f) Employment Agreement dated as of February 1, 1996 between the Registrant and
David N. Terhune, as amended.
10.8(j) Letter Agreement dated May 18, 1998 between the Registrant and David N. Terhune.
10.9(g) Agreement dated as of August 22, 1997 between the Registrant and Anthony J.
Allott.
10.10(j) Letter Agreement dated May 18, 1998 between the Registrant and Anthony J. Allott.
10.11(f) Employment Agreement dated as of April 26, 1994 between the Registrant and Amin
J. Khoury, as amended.
10.12(j) Letter Agreement dated May 18, 1998 between the Registrant and Amin J. Khoury.
10.13(f) Employment Agreement dated as of April 26, 1994 between the Registrant and Thomas
E. Williams, as amended.
</TABLE>
10
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<TABLE>
<CAPTION>
10.14(j) Letter Agreement dated May 18, 1998 between the Registrant and Thomas E.
Williams.
<S> <C>
10.15(h) Employment Agreement dated as of August 15, 1998 between the Registrant and
Anthony J. Allott.
10.16(h) Employment Agreement dated as of September 19, 1998 between the Registrant and
Gerald M. Haines II.
10.17(e) Executive Deferred Compensation Plan dated as of September 1, 1994.
10.18(k) Equipment Lease Agreement dated as of December 29, 1997 between Registrant and
LaSalle National Leasing Corporation.
10.19(j) Asset Purchase and Sale Agreement dated as of April 6, 1998 between the
Registrant and ProNet Corporation.
24(h) Powers of Attorney.
27* Financial Data Schedule.
99(g) Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995.
</TABLE>
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* Filed herewith
(a) Contained in Exhibits to the Registrant's Registration Statement on Form
S-1, as amended (No. 33-40145), filed with the Commission on April 24, 1991.
(b) Contained in Exhibits to the Registrant's Registration Statement on Form S-8
(No. 33-44449), filed with the Commission on December 18, 1991.
(c) Contained in Exhibits to the Registrant's Registration Statement on Form S-8
(No. 33-48841), filed with the Commission on June 25, 1992.
(d) Contained in Exhibits to the Registrant's Registration Statement on Form S-4
(No. 33-78006), filed with the Commission on April 21, 1994.
(e) Contained in Exhibits to the Registrant's Form 10-K for the fiscal year
ended September 30, 1994.
(f) Contained in Exhibits to the Registrant's Form 10-K for the fiscal year
ended September 30, 1996.
(g) Contained in Exhibits to the Registrant's Form 10-K for the fiscal year
ended September 30, 1997.
(h) Contained in Exhibits to the Registrant's Form 10-K for the fiscal year
ended September 30, 1998.
(i) Contained in Exhibits to the Registrant's Form 10-Q for the fiscal quarter
ended December 31, 1997.
(j) Contained in Exhibits to the Registrant's Form 10-Q for the fiscal quarter
ended June 30, 1998.
(k) Contained in Exhibits to the Registrant's Form 8-K dated January 2, 1998.
(l) Contained in Exhibits to the Registrant's Form 8-K dated March 6, 1998.
The above referenced exhibits are, as indicated, either filed herewith or
have heretofore been filed with the Commission under the Securities Act and the
Exchange Act and are referred to and incorporated herein by reference to such
filings.
B. REPORTS ON FORM 8-K
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
APPLIED EXTRUSION TECHNOLOGIES, INC.
(REGISTRANT)
By: /s/ ANTHONY J. ALLOTT
-----------------------------------------
Anthony J. Allott
Vice President, Chief Financial
Officer and Treasurer
February 12, 1999
</TABLE>
12
<PAGE>
[CONFORMED COPY]
WAIVER
WAIVER (the "WAIVER") dated as of December 31, 1998 of the Credit
Agreement dated as of April 7, 1994 and amended and restated as of January
29, 1998, as amended by Waiver and Amendment No. 1 dated as of December 16,
1998 (the "CREDIT AGREEMENT"), among APPLIED EXTRUSION TECHNOLOGIES, INC.
(the "COMPANY"), the LENDERS party thereto (the "LENDERS") and THE CHASE
MANHATTAN BANK, as Administrative Agent (the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, the Company and the Lenders have agreed to waive compliance
with the interest coverage ratio and the leverage ratio required for the
period ended on December 31, 1998;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically
defined in the recitals above, each term used herein which is defined in the
Credit Agreement shall have the meaning assigned to such term in the Credit
Agreement.
SECTION 2. WAIVER OF SECTIONS 9.10 AND 9.11. The Lenders hereby waive
compliance with Section 9.10 and 9.11 of the Credit Agreement for the period
(and only for the period) ended on December 31, 1998.
SECTION 3. REPRESENTATIONS OF COMPANY. The Company represents and
warrants that (i) the representations and warranties of the Company and its
Subsidiaries made in each Basic Document shall be true (or, in the case of
Basic Documents which are not Financing Documents, true in all material
respects) on and as of the Waiver Effective Date to the same extent as they
would be required to be under Section 7.01(b) on the occasion of any Loan or
issuance of any Letter of Credit and (ii) no Default will have occurred and
be continuing on such date.
SECTION 4. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
SECTION 5. COUNTERPARTS; EFFECTIVENESS. This Waiver may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Waiver shall become effective as of the date first above written (the
"WAIVER EFFECTIVE DATE") when the Administrative Agent shall have received
counterparts of this Waiver executed and delivered by or on behalf of the
Majority Lenders and the Company (or, in the case of any Lender as to which
the Administrative Agent shall not have received such a counterpart, the
Administrative Agent shall have received evidence satisfactory to it of the
execution and delivery by such Lender of a counterpart hereof).
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
APPLIED EXTRUSION TECHNOLOGIES, INC.
By /s/ ANTHONY J. ALLOTT
---------------------------------
Title: Vice President and Chief
Financial Officer
THE CHASE MANHATTAN BANK
By /s/ MARY ELISABETH SWERZ
---------------------------------
Title: Vice President
LASALLE BUSINESS CREDIT, INC.
By /s/ JOHN C. BAIER
---------------------------------
Title: Vice President
FLEET NATIONAL BANK
By /s/ H. ELLERY PERKINSON
---------------------------------
Title: Vice President
PNC BANK, N.A.
By /s/ CRAIG T. SHEETZ
---------------------------------
Title: Vice-President
3
<PAGE>
FIRST UNION NATIONAL BANK
By /s/ JOHN T. TRAINOR
---------------------------------
Title: Vice President
4
<TABLE> <S> <C>
<PAGE>
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<NAME> APPLIED EXTRUSION TECHNOLOGIES
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<S> <C>
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<FISCAL-YEAR-END> SEP-30-1999
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<PERIOD-END> DEC-31-1998
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0
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