SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended May 30, 1997 Commission File Number: 0-45
SHELDAHL, INC.
(exact name of registrant as specified in its charter)
Minnesota 41-0758073
State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
Northfield, Minnesota 55057
Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (507) 663-8000
As of June 12, 1997, 8,991,747 shares of the Registrant's common stock were
outstanding. 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:
<PAGE>
PART I: FINANCIAL INFORMATION
SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
Nine Months Ended
May 30, May 31,
(in thousands, except for per share data) 1997 1996
Net sales $78,273 $84,741
Cost of sales 69,964 66,150
_______ _______
Gross profit 8,309 18,591
_______ _______
Expenses:
Sales and marketing 6,833 6,894
General and administrative 4,997 3,748
Research and development 3,302 1,853
Interest 708 448
_______ _______
Total expenses 15,840 12,943
_______ _______
Income (loss) before income taxes (7,531) 5,648
Benefit (provision) for income taxes 2,560 (1,695)
_______ _______
Net income (loss) $(4,971) $ 3,953
======= =======
Net income (loss) per share $(0.56) $0.46
======= =======
Weighted average common shares and
common share equivalents outstanding 8,952 8,524
======= =======
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SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
Three Months Ended
May 30, May 31,
(in thousands, except for per share data) 1997 1996
Net sales $27,593 $29,690
Cost of sales 24,865 23,219
_______ _______
Gross profit 2,728 6,471
_______ _______
Expenses:
Sales and marketing 2,227 2,359
General and administrative 1,697 1,299
Research and development 983 653
Interest 412 59
_______ _______
Total expenses 5,319 4,370
_______ _______
Income (loss) before income taxes (2,591) 2,101
Benefit (provision) for income taxes 880 (630)
_______ _______
Net income (loss) $(1,711) $1,471
======= =======
Net income (loss) per share $(0.19) $0.16
======= =======
Weighted average common shares and
common share equivalents outstanding 8,989 9,199
======= =======
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SHELDAHL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(unaudited)
(In thousands) May 30, August 30,
1997 1996
Current assets:
Cash and cash equivalents $ 1,292 $ 904
Accounts receivable, net 18,227 21,091
Inventories 12,875 11,525
Prepaid expenses and other current
assets 433 390
Deferred taxes 2,750 1,660
_______ _______
Total current assets 35,577 35,570
_______ _______
Construction in process 29,888 37,650
Land and buildings 26,155 24,718
Machinery and equipment 95,728 64,754
Less: accumulated depreciation (53,852) (47,630)
_______ _______
Net plant and equipment 97,919 79,492
_______ _______
Other assets 824 825
_______ _______
$134,320 $115,887
======= =======
LIABILITIES AND SHAREHOLDERS INVESTMENT
Current liabilities:
Current maturities of long-term debt $ 3,372 $ 466
Accounts payable 10,139 9,824
Accrued compensation 1,464 1,390
Other accruals 2,446 1,839
_______ _______
Total current liabilities 17,421 13,519
_______ _______
Long-term debt 41,934 21,858
_______ _______
Other non-current liabilities 2,305 2,269
_______ _______
Deferred taxes 1,435 2,904
_______ _______
Shareholders investment:
Common stock 2,249 2,228
Additional paid-in capital 52,242 51,404
Retained earnings 16,734 21,705
_______ _______
Total shareholders investment 71,225 75,337
_______ _______
$134,320 $115,887
======= =======
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Nine Months Ended
(in thousands) May 30, May 31,
1997 1996
Operating activities:
Net income (loss) $ (4,971) $ 3,953
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 7,378 4,838
Deferred income taxes (2,559) 724
Net change in other operating activities:
Accounts receivable 2,864 (1,712)
Inventories (1,350) 531
Prepaid expenses and other current
assets (43) 345
Other assets 1 (73)
Accounts payable and accrued
liabilities 996 1,557
Other non-current liabilities 36 (68)
_______ _______
Net cash provided by operating activities 2,352 10,095
_______ _______
Capital expenditures, net (25,805) (20,298)
_______ _______
Financing activities:
Borrowings (repayments) under
revolving credit
facilities, net 22,625 (19,258)
Proceeds of long-term debt 791 -
Repayments of long-term debt (434) (361)
Issuance of common stock - 29,049
Proceeds of stock option exercises 859 776
_______ _______
Net cash provided by financing activities 23,841 10,206
_______ _______
Increase (decrease) in cash 388 3
Cash at beginning of period 904 1,045
_______ _______
Cash at end of period $ 1,292 $ 1,048
======= =======
Supplemental cash flow information:
Income taxes paid $ 266 $ 132
======= =======
Interest paid $ 1,961 $ 1,845
======= =======
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
These condensed and unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, these
condensed unaudited consolidated financial statements reflect all adjustments,
of a normal and recurring nature, necessary for a fair statement of the
interim periods, on a basis consistent with the annual audited financial
statements. Certain information, accounting policies and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although these disclosures should be
considered adequate, the Company strongly suggests that these condensed
unaudited financial statements be read in conjunction with the financial
statements and summary of significant accounting policies and notes thereto
included in the Company's latest annual report on Form 10-K.
1) Inventories, which are valued at the lower of first-in first-out cost or
market, consists of (in thousands):
May 30, 1997 August 30, 1996
Raw materials $ 3,393 $ 2,599
Work-in-process 6,060 5,572
Finished goods 3,422 3,354
_______ _______
$12,875 $11,525
======= =======
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED OPERATING RESULTS AND FINANCIAL CONDITION
Nine Months Ended May 30, 1997 and May 31, 1996
General
________
Sheldahl is a leading producer of advanced laminate materials and materials-
based components, primarily for sale to the electronic segments of the
automotive electronics and datacommunications markets. The Company's basic
materials technology was originally developed for the United States space
program.
In 1989, the Company developed a business strategy focused on achieving a
leading position supplying the automotive electronics market with flexible
interconnects based on the Company's core materials technologies. Management
believed the automotive market provided growth opportunities due to increasing
electronic content of automobiles as manufacturers focused on enhancing
vehicle performance while reducing weight and overall vehicle costs. The
Company targets specific automotive customers that it has identified as
leaders in the drive to increase the electronic content of automobiles. As a
result of this business strategy, the Company's sales to automotive customers
increased from $13.9 million in fiscal 1989 to $79.0 million in fiscal 1996, a
compound annual growth rate of 27%, while the Company's sales to other markets
declined from $57.0 million in fiscal 1989 to $35.1 million in fiscal 1996.
Concurrent with the Company's strategic shift to focus on the automotive
electronics market in 1989, Sheldahl began to focus its research and
development efforts on new opportunities. As a result, in 1992 the Company
patented its Novaclad high performance adhesiveless flexible laminate. The
features of Novacladr allow circuitry designers to increase circuit density
for integrated circuit (IC) packaging and other interconnect solutions. The
Company also developed ViaGrid, a higher-value form of Novaclad with pre-
drilled small holes that allow printed circuit manufacturers to produce
flexible interconnects that are up to six times more dense than current
technology. The Company also uses ViaGrid in the manufacture of chip-carrier
substrates primarily for IC packages.
Background: ARPA and Longmont Financial Impact
_______________________________________________
In fiscal 1994, a consortium was organized by the Advanced Research Projects
Agency (ARPA) of the US Department of Defense to develop a high-density, low-
cost multichip module utilizing Novaclad as the substrate material. The ARPA
consortium, comprised of a vertically-integrated team of non-competing
companies, has achieved various milestones, including validation of each of
the essential processes for production of the Company's chip-carrier
substrates as the base material for low-cost multichip modules.
In June 1994, with the assistance of funding from ARPA, the Company
established a prototype production facility, and late in calendar year 1994,
began construction of its new manufacturing facility in Longmont, Colorado,
for the production of Novaclad, ViaGrid and chip-carrier substrates (Micro
Products) in commercial quantities. The Company expected commercial
production to begin at the Longmont facility by April 1996. However, a
variety of factors, including equipment delivery delays, product specification
changes, and supporting process issues, resulted in a delay in the full
production ramp-up, which is now expected to commence in the fourth quarter of
fiscal 1997.
The Company's fiscal 1997 financial results through the nine months ended May
30, 1997, have been adversely affected by the absorption of overhead and
development expenses without yet achieving commercial scale production and
sales of the new Novaclad-based high-density chip-carrier substrates produced
in Longmont, Colorado. The Company is actively engaged in what is expected to
be the final stages of pre-production and customer validation with substrate
designs for Motorola, ASAT and Texas Instruments. Net of ARPA funding, the
direct impact of fixed facility costs and salary expenses for production and
technical support has adversely impacted pretax operating income by $10.3
million or approximately $0.73 per share on an after tax basis for the nine
months ended May 30, 1997. The pretax impact on operating income for the
three months ending May 30, 1997, was $4.4 million or approximately $0.32 per
share on an after tax basis.
Total Company Performance
_________________________
The Company's net sales decreased $6.5 million or 7.6% to $78.3 million for
the nine months ended May 30, 1997. The decrease is reflected in automotive
market sales, which were adversely affected by inventory adjustments related
to last fall's industry collective bargaining negotiations. The impact to the
Company was realized by above normal shipments in Quarter IV of fiscal 1996
and a sharp reduction in shipments in late Quarter I and early Quarter II as
inventory levels were adjusted. Additionally, there have been numerous
automotive industry work stoppages, particularly over the last three months,
that have impacted the Company's sales of automotive laminate and flex
circuitry products.
Sales By Market
_______________
(in thousands) May 30, May 31, Gross Percent
1997 1996 Change Change
______ ______ ______ ______
Automotive $53,555 $59,541 $(5,986) (10.1%)
Datacommunications 8,670 8,470 200 2.4%
Aerospace/Defense 6,801 7,291 (490) (6.7%)
Industrial 6,047 6,341 (294) (4.6%)
Consumer 3,200 3,098 102 (3.3%)
_______ _______ _______ _______
$78,273 $84,741 $(6,468) (7.6%)
======= ======= ======= =======
The Company enjoys a favorable position in targeted segments of the automotive
market including dash board instrumentation, on-board computers in the engine
compartment, air bags and power distribution. The ability to provide cost
effective designs and low cost production has enabled the Company to enhance
and grow its market position by 27% annually over the last seven years. The
Company will continue to focus resources to service this market with its full
line of products.
The Company's sales to the datacommunications market increased 2.4% to $8.7
million for the first nine months of fiscal 1997. Flexible circuitry and
laminated materials comprised nearly all the product sold to this market. The
Company, through its development of its Novaclad laminate material, has
invested in significant new manufacturing capacity to expand its product
offering by producing high-density chip-carrier substrates for IC packages.
Year-to-date, sales of chip-carriers total $325,000. The Company will
continue its effort to develop a market position in the chip-scale and high-
density segments of this IC packaging market. Product utilization of such IC
packages would include portable hand-held devices such as cellular phones and
pagers as well as high performance product such as work stations and servers.
Sales of the Company's products to the other served markets reflect normal
fluctuations of product mix and order releases by our customers. Through
Quarter III, the sales by all products as a percentage of total sales remained
virtually unchanged with 74% flexible interconnect, 23% laminated materials,
2.5% fabricated devices, and 0.5% chip-carrier substrates.
Gross Profit
____________
The Company's gross profit for the nine months ended May 30, 1997, decreased
$10.3 million or 55% to $8.3 million and 10.6% of sales. Gross profit from
existing businesses was materially affected by the decline in automotive
market sales which adversely impacted gross profit by $3.3 million and changes
in product mix reduced margins by $0.9 million. The remaining decline in
existing business gross profit is attributable to increases in factory
overhead, principally depreciation and maintenance of $3.1 million
attributable, in part, to expanded capacity to manufacture Novaclad laminates.
In total, year-to-date gross margin from existing business declined $7.3
million as compared to last year.
May 30, 1997 May 31, 1996
_____________ ____________
(in Existing Micro Total Existing Micro Total
millions) Business Products Company Business Products Company
________ ________ _______ ________ ________ _______
Sales $78.0 $ 0.3 $78.3 $84.6 $ 0.1 $84.7
Cost of sales 62.3 7.6 70.0 61.7 4.4 66.1
_____ _____ _____ _____ _____ _____
Gross profit $15.7 $(7.3) $ 8.3 $22.9 $(4.3) $18.6
===== ===== ===== ===== ===== =====
20.1% - 10.6% 27.0% - 21.9%
===== ===== ===== ===== ===== =====
Micro Product business provides chip-carrier substrates to the IC packaging
industry. Through fiscal 1997, the Company has completed installing and
validating each manufacturing process. Further initial pre-production volume
of high-density chip-carrier substrates are at levels below breakeven. Year-
to-date, overhead costs total $7.6 million. Since fiscal 1994, the Company has
received funding through an ARPA consortium to assist in developing base
material and manufacturing processes for high-density substrates for IC
packages and multi-chip modules. ARPA funding credited to overhead declined
$1.3 million from $1.4 million for the nine months ended May 31, 1996, to
$75,000 for the nine months ended May 30, 1997. On a forward looking basis,
minimal additional ARPA funding is anticipated to offset factory related costs
since the ARPA milestones are substantially completed. Based on anticipated
product mix and projected variable cost of high density substrates, the
Company projects production cost breakeven at approximately $6 million in
sales per quarter for the Micro Products business.
Sales and Marketing Expense
___________________________
Sales and marketing expense for the nine months ended May 30, 1997, totaled
$6.8 million, virtually unchanged from $6.9 million for the same period last
year. The Company expects to increase its sales expense in support of Micro
Products in periods ahead as demand for sales support and design services
escalate. As a percent of net sales, expenses increased to 8.7% from 8.1% for
the nine months ended in fiscal years 1997 and 1996, respectively.
General and Administrative
__________________________
Gross general and administrative expenses increased $1.0 million or 26% for
the nine months ended May 30, 1997, over the same period for fiscal 1996. The
principal areas of increase were in salary expense of $488,000 in support of
improving the Company's information systems plus added expense for insurance,
travel, education, and depreciation. As a percent of sales, general and
administrative expenses were 6.4% of sales in 1997 compared to 4.4% in 1996.
(in thousands) May 30, 1997 May 31, 1996
____________ ____________
Gross expenses - G & A $ 4,997 $ 3,961
ARPA funding - (213)
_______ _______
Net expenses $ 4,997 $ 3,748
======= =======
% of sales 6.4% 4.4%
======= =======
Research and Development
________________________
Gross research and development expenses increased $1.2 million or 44% for the
nine months ended May 30, 1997, as compared to the nine months ended May 31,
1996. ARPA credits from the consortium and other ARPA related projects
totaled $509,000 for the current year-to-date versus $791,000 for the
comparable period in 1996. The increase in research and development expenses
was principally due to additional staffing, outside testing and consulting,
and travel, primarily in support of the Company's Micro Products business and
ARPA consortium milestones. On a forward looking basis, additional ARPA
funding of $240,000 in support of development efforts is anticipated through
November 1997.
(in thousands) May 30, 1997 May 31, 1996
____________ ____________
Gross expenses - R & D $ 3,811 $ 2,644
ARPA funding (509) (791)
_______ _______
Net expenses $ 3,302 $ 1,853
======= =======
% of sales 4.2% 2.2%
======= =======
Interest Expense
________________
Approximately 60% of interest capitalized during the construction period
relates to the Longmont facility. Total capital expenditures through May 30,
1997, total $25.8 million compared to $20.3 million for the nine months ended
May 31, 1996. Interest expense is shown in the table below.
(in thousands) May 30, 1997 May 31, 1996
____________ ____________
Gross interest $ 1,961 $ 1,947
Capitalized interest (1,253) (1,255)
Investment income - (244)
_______ _______
Net expenses $ 708 $ 448
======= =======
% of sales 0.9% 0.5%
======= =======
Income taxes were provided at 34% for the nine months ended May 30, 1997, and
30% for the nine months ended May 31, 1996. As a result, net loss for the
nine months ended May 30, 1997, was $5.0 million or $0.56 per share. This
compares to net income for the nine months ended May 31, 1996, of $4.0 million
or $0.46 per share. Of this $1.02 per share decline, approximately $0.53 is
related to Longmont operations and related ARPA activities and $0.49 is
related to the fall off of existing business performance.
Three Months Ended May 30, 1997 and May 31, 1996
The Company's net sales decreased $2.1 million or 7% to $28.0 million for the
three months ended May 30, 1997. Work stoppages primarily at certain Chrysler
and General Motors factories caused a reduction in automotive market sales.
The Company believes the affect of these work stoppages may continue into the
fourth quarter.
The Company's sales to the datacommunications market increased 14% to $3.3
million for the three months ended May 30, 1997. Chip-carrier substrates
increased $135,000 or 177% to $211,000. The Company's standard flexible
circuitry and laminated materials products accounted for the remaining
increase. Sales to all other markets reflect normal quarterly demand
fluctuations.
Sales By Market
_______________
(in thousands) May 30, May 31, Gross Percent
1997 1996 Change Change
______ ______ ______ ______
Automotive $19,272 $20,628 $(1,356) (7%)
Datacommunications 3,233 2,842 391 14%
Aerospace/Defense 2,015 2,684 (669) (25%)
Industrial 2,019 2,146 (156) (7%)
Consumer 1,054 1,390 (336) (24%)
_______ _______ _______ _______
$27,593 $29,690 $(2,096) (7%)
======= ======= ======= =======
Gross Profit
____________
Gross profit for the quarter decreased $3.7 million or 58% from $6.5 million
for the three months ended May 31, 1996, to $2.7 million for the three months
ended May 30, 1997. As a percentage of sales, gross profit was 22.6% in 1996
and 9.8% in 1997. As explained in the nine month analysis, two major factors
accounted for the decline in gross profit. The first factor is the $2.2
million in additional operating expenses incurred by the Company's Micro
Products facility. The second factor is the reduced level of existing
business sales principally to the automotive market and a slight increase in
facility and depreciation costs.
May 30, 1997 May 31, 1996
_____________ ____________
(in Existing Micro Total Existing Micro Total
millions) Business Products Company Business Products Company
________ ________ _______ ________ ________ _______
Sales $27.4 $ 0.2 $27.6 $29.6 $ 0.1 $29.7
Cost of sales 21.2 3.7 24.9 21.7 1.5 23.2
_____ _____ _____ _____ _____ _____
Gross profit $ 6.2 $(3.5) $ 2.7 $ 7.9 $(1.4) $ 6.5
===== ===== ===== ===== ===== =====
22.6% - 9.8% 26.7% - 21.9%
===== ===== ===== ===== ===== =====
The Company's existing business performance to gross margin by quarter are as
follows:
Three months Ended Ended Nine Months Ended
_________________________ ________
Nov 29, Feb 28, May 30, May 30,
(in millions) 1996 1997 1997 1997
______ ______ ______ ______
Sales $24.3 $26.3 $27.4 $78.0
Cost of sales 20.5 20.6 21.2 62.3
_______ _______ _______ _______
Gross profit $ 3.8 $ 5.7 $ 6.2 $15.7
======= ======= ======= =======
15.6% 21.6% 22.7% 20.1%
As seen on the above chart, existing business revenues, as well as gross
margins, have continued to improve. The increase in sales volume plus
improving manufacturing performance contributes to improved gross profit.
Sales and marketing expenses decreased $132,000 or 6% from $2.3 million for
the three months ended May 31, 1996, to $2.2 million for the three months
ended May 30, 1997. Sales and marketing expenses totaled 8% of sales in both
periods.
General and administrative expenses increased $398,000 or 31% from $1.3
million for the three months ended May 31, 1996, to $1.7 million for the three
months ended May 30, 1996. The increases were due to a variety of expenses
including salaries, consulting, and depreciation primarily incurred to support
improved information systems. General and administrative expenses total 6% of
sales for the three months ended May 30, 1997, and 4.3% of sales for the three
months ended May 31, 1996.
Research and development expenses increased $330,000 or 51% from $652,000 for
the three months ended May 31, 1996, to $983,000 for the three months ended
May 30, 1997. The increase is a combination of increased salaries and outside
consulting and testing services supporting the Micro Products business and
final ARPA milestones. Research and development expenses totaled 3.5% of
sales for the three months ended May 30, 1997, and 2.2% in sales for the three
months ended May 31, 1996.
Interest costs and activities for the noted period are detailed below:
(in thousands)
May 30, 1997 May 31, 1996 Change
____________ ____________ ______
Gross interest expense $ 811 $ 398 $ 413
Capitalized interest (399) (339) (60)
______ ______ ______
$ 412 $ 59 $ 353
====== ====== ======
During the current quarter, significantly higher borrowings accounted for the
increase in gross interest costs. At May 31, 1996, total borrowings were
$18.4 million while at May 30, 1997, total borrowings were $45.3 million.
Income taxes were applied at 34% in the three months ended May 30, 1997, and
at 29% in the three months ended May 31, 1996.
As a result, net loss for the three months ended May 30, 1997 was $1.7 million
or $0.19 per share. This compares to net income of $1.5 million or $0.16 per
share for the three months ended May 31, 1996. Of this $0.35 per share
change, approximately $0.24 is attributable to Longmont operations and related
ARPA consortium activities, and approximately $0.11 is attributable to the
decline in performance of the existing business.
Financial Condition
___________________
During the quarter ended May 30, 1997, the Company's lenders authorized the
Company to borrow an additional $12 million in the form of a separate
revolving note. Except for expiring on December 31, 1997, all terms and
conditions of this "extended" facility are the same as those of the primary
revolving facility. Combined, the Company's credit lines total $47 million.
$12 million expires on December 31, 1997, while $35 million expires on
December 31, 1998. Total borrowings as of May 30, 1997, were $37.9 million
and $9.1 million was available to the Company. Interest rates on borrowings
under these facilities averaged 8.5% on May 30, 1997. The Company is pursuing
additional debt financing and in conjunction with the additional debt, it is
anticipated the revolving credit facility will be restructured. The current
ratio declined from 2.63 at August 30, 1996, to 2.04 at May 30, 1997,
reflecting the nearly $3 million of credit facility borrowings recorded as a
current liability.
Prospective Information
_______________________
Significant events are currently taking place and will continue to take place
during the next several months. The most significant will be the expected
production ramp up at the Micro Products business. The Company's ability to
generate significant revenues with acceptable production costs will be
critical. Failure to do so will result in continued losses from this
facility.
The ARPA funded consortium will be completing its purpose and minimal
additional funding is expected throughout the remainder of fiscal 1997. The
Company has no obligation to any member after the consortium objectives and
related ARPA fundings are completed. Only normal business relationships will
remain among the members of the ARPA consortium.
Finally, the Company has begun a complete upgrade and replacement of all
information technology systems. This renewal is required to support the
Company's plans for growth and changes in major business processes. The
approximately $12-15 million program is expected to be completed by the end of
fiscal 1998. The Company plans to finance this program by executing
capitalized lease instruments and debt financing as well as cash generated
from operations.
Other Factors
_____________
The Company has foreign currency risks from some of its international sales.
Major contracts have "risk sharing" arrangements with the customer, allowing
repricing in the event of long-term and/or significant foreign currency
fluctuations.
To deal with short-term fluctuations, the Company, from time-to-time, will use
a variety of natural and contractual hedging techniques to prudently reduce,
but not eliminate, its exposure to foreign currency fluctuations. Historical
transactions have not been material in nature. The Company expects its foreign
currency contracts to increase and will increase its hedging activities
accordingly. The recent strength of the dollar against the German Mark and
the French Franc has caused reduced margins on sales contracted in these
currencies. These reduced margins may continue through fiscal 1997.
Cautionary Statement
____________________
The statements included herein which are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
the Private Securities Reform Act of 1995. Factors which could cause actual
results to differ materially from those anticipated by some of the statements
made herein include, but are not limited to, the Company's ability to achieve
full volume production at its Micro Products facility and other factors
detailed from time to time in the Company's SEC reports, including the report
on Form 10-K for the year ended August 30, 1996.
<PAGE>
PART II - OTHER INFORMATION
SHELDAHL, INC. AND SUBSIDIARY
FORM 10-Q
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits
10.1 Sixth Amendment to Amended and Restated Credit and
Security Agreement dated November 1, 1996, among Norwest
Bank, Harris Bank, NBD Bank and Sheldahl, Inc.
10.2 Seventh Amendment to Amended and restated Credit and
Security Agreement dated April 4, 1997, among Norwest
Bank, Harris Bank, NBD Bank and Sheldahl, Inc.
11 Statement regarding computation of earnings per share
27 Financial data schedule
B) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
quarter ended May 30, 1997.
<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.
SHELDAHL, INC.
(Registrant)
Dated: June 23, 1997 By /s/ James E. Donaghy
President and Chief Executive Officer
Dated: June 23, 1997 By /s/ John V. McManus
Vice President, Finance
<PAGE>
Exhibit 11
SHELDAHL, INC. AND SUBSIDIARY
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
For The Nine Months Ended
May 30, May 31,
1997 1996
_______ _______
Primary Earnings Per Share:
Weighted average number of issued
shares outstanding 8,952 8,247
Effect of exercise of stock options
under the treasury stock method - 277
_______ _______
Weighted average shares outstanding used
to compute primary earnings per share 8,952 8,524
======= =======
Net income (loss) $(4,971) $3,953
======= =======
Net income (loss) per share $ (0.56) $ 0.46
======= =======
Fully Diluted Earnings Per Share:
Weighted average number of issued
shares outstanding 8,952 8,247
Effect of exercise of stock options
under the treasury stock method - 397
_______ _______
Weighted average shares outstanding used
to compute fully diluted earnings per
share 8,952 8,644
======= =======
Net income (loss) $(4,971) $ 3,953
======= =======
Net income (loss) per share $ (0.56) $ 0.46
======= =======
<PAGE>
For The Three Months Ended
May 30, May 31,
1997 1996
_______ _______
Primary Earnings Per Share:
Weighted average number of issued
shares outstanding 8,989 8,892
Effect of exercise of stock options
under the treasury stock method - 307
_______ _______
Weighted average shares outstanding used
to compute primary earnings per share 8,989 9,199
======= =======
Net income (loss) $(1,711) $ 1,471
======= =======
Net income (loss) per share $ (0.19) $ 0.16
======= =======
Fully Diluted Earnings Per Share:
Weighted average number of issued
shares outstanding 8,989 8,892
Effect of exercise of stock options
under the treasury stock method - 397
_______ _______
Weighted average shares outstanding used
to compute fully diluted earnings per
share 8,989 9,289
======= =======
Net income (loss) $(1,711) $ 1,471
======= =======
Net income (loss) per share $ (0.19) $ 0.16
======= =======
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the May 30,
1997 financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> AUG-30-1996 AUG-30-1996
<PERIOD-END> MAY-30-1997 MAY-30-1997
<CASH> 1292 1292
<SECURITIES> 0 0
<RECEIVABLES> 18227 18227
<ALLOWANCES> 0 0
<INVENTORY> 12875 12875
<CURRENT-ASSETS> 35577 35577
<PP&E> 151771 151771
<DEPRECIATION> 53852 53852
<TOTAL-ASSETS> 134320 134320
<CURRENT-LIABILITIES> 17421 17421
<BONDS> 0 0
0 0
0 0
<COMMON> 2249 2249
<OTHER-SE> 52242 52242
<TOTAL-LIABILITY-AND-EQUITY> 134320 134320
<SALES> 78273 27593
<TOTAL-REVENUES> 78273 27593
<CGS> 69964 24865
<TOTAL-COSTS> 69964 24865
<OTHER-EXPENSES> 15132 4907
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 708 412
<INCOME-PRETAX> 7531 2591
<INCOME-TAX> 2560 880
<INCOME-CONTINUING> 4971 1711
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4971 1711
<EPS-PRIMARY> .56 .19
<EPS-DILUTED> .56 .19
</TABLE>
SIXTH AMENDMENT
TO
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
This Sixth Amendment is made as of the 1st day of November, 1996,
by and among SHELDAHL, INC., a Minnesota corporation (the "Borrower"),
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association
("Norwest"), HARRIS TRUST AND SAVINGS BANK, a bank organized and existing
under the laws of the State of Illinois ("Harris"), and NBD BANK, a Michigan
banking corporation ("NBD"; NBD, Norwest and Harris, collectively the
"Lenders" and each a "Lender"), and Norwest as Agent for and on behalf of
the Lenders (in such capacity, the "Agent").
Recitals
The Borrower, Norwest and Harris entered into an Amended and
Restated Credit and Security Agreement dated as of November 24, 1993, as
amended by a First Amendment to Amended and Restated Credit and Security
Agreement dated as of December 2, 1993, a Second Amendment to Amended and
Restated Credit and Security Agreement dated as of May 12, 1994, a Third
Amendment to Amended and Restated Credit and Security Agreement dated as of
January 24, 1995, a Fourth Amendment to Amended and Restated Credit and
Security Agreement dated as of January 29, 1996 and a Fifth Amendment to
Amended and Restated Credit and Security Agreement dated as of March 12, 1996
(as amended, the "Credit Agreement") under which the Lenders agreed to make
certain revolving credit and term loans available to the Borrower.
The Borrower and the Lenders have agreed to amend the Credit
Agreement to (i) allow the Borrower to increase the number of different
Interest Periods which may be in effect at one time, (ii) increase the Capital
Expenditure Limit for fiscal year 1997, (iii) decrease the Minimum Net Income
covenant for fiscal year 1997 and (iv) increase the permitted Lien amount.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Sixth
Amendment which are defined in the Credit Agreement shall have the same
meanings as defined therein, unless otherwise defined herein.
2. Amended Definitions. Section 1.1 of the Credit Agreement is
hereby amended by amending and restating in their entirety the following
definitions:
"`Interest Period' means, relative to any Eurodollar Advance, the
period beginning on (and including) the date on which such Eurodollar
Advance is made or continued as, or converted into, a Eurodollar Advance
pursuant to Sections 2.1(a), (b) or (c) and shall end on (but exclude)
the day which numerically corresponds to such date one (1), two (2),
three (3) or six (6) months thereafter (or, if such month has no
numerically corresponding day, on the last Banking Day of such month),
as the Borrower may select in its relevant notice pursuant to Sections
2.1(a), (b) or (c); provided, however, that:
(a) the Borrower shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration
dates occurring on more than four (4) different dates;
(b) if an Interest Period would otherwise end on a day
which is not a Banking Day, such Interest Period shall end on the
next following Banking Day (unless such next following Banking Day
is the first Banking Day of a calendar month, in which case such
Interest Period shall end on the next preceding Banking Day); and
(c) no Interest Period may end later than the Maturity
Date."
"`Capital Expenditure Limit' means $30,000,000 for the Borrower's
fiscal year 1997 and, for each subsequent fiscal year, an amount
mutually agreed upon by the Borrower and the Required Lenders; provided,
however, that if on or prior to the sixtieth (60th) day following the
end of the prior fiscal year, the Borrower and the Required Lenders are
unable to agree, in writing, upon the appropriate level of Capital
Expenditures for the immediately succeeding fiscal year, the Required
Lenders may, in their discretion, declare an Event of Default as of such
date."
3. Minimum Net Income. Section 6.15 of the Credit Agreement is
hereby amended by deleting the reference to "$5,000,000" and inserting in
place thereof the figure "$4,500,000".
4. Liens. Section 7.1(e) of the Credit Agreement is amended
in its entirety to read as follows:
"(e) purchase money security interests relating to the
acquisition of Equipment of the Borrower securing indebtedness not in
excess of $5,000,000, in the aggregate, at any time outstanding, so long
as the Borrower is in, and maintains, compliance with every other
provision of this Agreement."
5. Conditions Precedent. This Sixth Amendment shall become
effective when the Lender has received an original hereof, duly executed on
behalf of each party hereto.
6. Representations and Warranties. To induce the Lenders to
enter into this Sixth Amendment, the Borrower hereby represents and warrants
to the Lenders as follows:
(a) The Borrower has all requisite power and authority to
execute this Amendment and to perform all of its obligations hereunder.
(b) The execution, delivery and performance by the Borrower of
this Amendment has been duly authorized by all necessary corporate
action and does not (1) require any authorization, consent or approval
by any governmental department, commissions, board, bureau, agency or
instrumentality, domestic or foreign, (2) violate (A) any provision of
any law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrower or (B) the
articles of incorporation or by-laws of the Borrower, or (3) result in
the breach or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or
affected.
(c) The representations and warranties contained in Article V of
the Credit Agreement are true and correct as of the date hereof as
though made on and as of this date, except to the extent that such
representations and warranties relate solely to an earlier date.
7. Release. The Borrower hereby releases and forever
discharges the Lenders and each of their respective former and present
directors, officers, employees, agents and representatives of and from every
and all claims, demands, causes of action (at law or in equity) and
liabilities, of any kind or nature, whether known or unknown, liquidated or
unliquidated, absolute or contingent, which the Borrower ever had, presently
has or claims to have against a Lender or any of its respective directors,
officers, employees, agents or representatives of or relating to events,
occurrences, actions, inactions or any other matters occurring prior to the
date of this Amendment.
8. No Waiver. The execution of this Amendment shall not be
deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document
or other document held by the Lenders, whether or not known to the Lenders and
whether or not existing on the date of this Amendment.
9. Costs and Expenses. The Borrower hereby reaffirms its
agreement under Section 10.7 of the Credit Agreement to pay or reimburse the
Agent, among other costs and expenses, all expenses incurred by the Agent in
connection with the amendment, performance or enforcement of the Loan
Documents, including without limitation, all reasonable fees and disbursements
of legal counsel to the Agent.
10. References. Except as expressly amended hereby, all
provisions of the Loan Documents shall remain in full force and effect. After
the effective date hereof, each reference to any Loan Document or any other
document executed in connection with the Credit Agreement to the "Credit
Agreement" or to "this Agreement", "hereunder" or "hereof" or words of
like import referring to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.
11. Execution in Counterparts. This Amendment may be executed
in any number of counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one in the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Sixth
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
SHELDAHL, INC.
/S/ John V. McManus
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
Lender and Agent
/s/ Laura Oberst
HARRIS TRUST AND SAVINGS BANK
/s/ Cathy Ciolek
NBD BANK
/s/ Marguerite Mullins
<PAGE>
SEVENTH AMENDMENT
TO
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
This Seventh Amendment is made as of the 4th day of April, 1997,
by and among SHELDAHL, INC., a Minnesota corporation (the "Borrower"),
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association
("Norwest"), HARRIS TRUST AND SAVINGS BANK, a bank organized and existing
under the laws of the State of Illinois ("Harris"), and NBD BANK, a Michigan
banking corporation ("NBD"; NBD, Norwest and Harris, collectively the
"Lenders" and each a "Lender"), and Norwest as Agent for and on behalf of
the Lenders (in such capacity, the "Agent").
Recitals
The Borrower, Norwest and Harris entered into an Amended and
Restated Credit and Security Agreement dated as of November 24, 1993, as
amended by a First Amendment to Amended and Restated Credit and Security
Agreement dated as of December 2, 1993, a Second Amendment to Amended and
Restated Credit and Security Agreement dated as of May 12, 1994, a Third
Amendment to Amended and Restated Credit and Security Agreement dated as of
January 24, 1995, a Fourth Amendment to Amended and Restated Credit and
Security Agreement dated as of January 29, 1996 and a Fifth Amendment to
Amended and Restated Credit and Security Agreement dated as of March 12, 1996
and a Sixth Amendment to Amended and Restated Credit and Security Agreement
dated as of November 1, 1996 (as amended, the "Credit Agreement") under
which the Lenders agreed to make certain revolving credit and term loans
available to the Borrower.
The Borrower and the Lenders have agreed to amend the Credit
Agreement to provide for a supplemental $12,000,000 revolving line of credit
facility and to make certain other changes thereto.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Seventh
Amendment which are defined in the Credit Agreement shall have the same
meanings as defined therein, unless otherwise defined herein.
2. Amended Definitions. Section 1.1 of the Credit Agreement is
hereby amended by adding, or amending and restating in their entirety, as the
case may be, the following definitions:
"Borrowing Base" means, at any time, the lesser of:
(a) the aggregate Revolving Commitment Amounts of the Lenders,
or
(b) the sum of:
(i) eighty percent (80%) of Eligible Accounts, plus
(ii) sixty percent (60%) of Eligible Raw Materials
Inventory, plus
(iii) fifty percent (50%) of Eligible Finished Goods
Inventory, plus
(iv) twenty percent (20%) of Eligible Other Inventory, plus
(v) fifty percent (50%) of the net book value of Eligible
Equipment, in no event, however, to exceed $30,000,000.
"Capital Expenditure Limit" means $33,000,000 for the Borrower's
fiscal year 1997 and, for each subsequent fiscal year, an amount
mutually agreed upon by the Borrower and the Required Lenders; provided,
however, that if on or prior to the sixtieth (60th) day following the
end of the prior fiscal year, the Borrower and the Required Lenders are
unable to agree, in writing, upon the appropriate level of Capital
Expenditures for the immediately succeeding fiscal year, the Required
Lenders may, in their discretion, declare an Event of Default as of such
date.
"Eligible Equipment" means all Equipment owned by the Borrower
free and clear of any other lien, security interest or encumbrance, and
also including all Equipment being acquired and installed by the
Borrower and shown as "construction in progress" on the Borrower's
financial statements; provided, however, that after the Maturity Date
with respect to Facility B, "construction in progress" will no longer
be included.
"Facility A" is the $35,000,000 revolving credit facility
evidenced by the Borrower's Revolving Notes to the Lenders dated March
12, 1996.
"Facility A Notes" means those promissory notes of the Borrower
to the Lenders dated March 12, 1996, as the same may be amended,
supplemented or replaced from time to time.
"Facility B" means the $12,000,000 revolving credit facility
evidenced by the Borrower's Revolving Notes to the Lenders dated as of
the date of the Seventh Amendment.
"Facility B Notes" means those certain promissory notes from the
Borrower to the Lenders dated as of the date of the Seventh Amendment,
as the same may be amended, supplemented or replaced from time to time.
"Maturity Date" means (i) December 31, 1998, with respect to
Facility A and (ii) December 31, 1997, with respect to Facility B.
"Revolving Advance" means an Advance under Facility A or
Facility B, as the case may be, as specified in Section 2.1 hereof.
"Revolving Commitment Amount" means, with respect to each
Lender, the aggregate amount of such Lender's Commitments for Facility A
and Facility B, as set forth in the Seventh Amendment, unless said
amount is reduced pursuant to Section 2.11(b) hereof, in which event,
such amount shall be reduced by the aggregate amount of such reductions
pursuant to Section 2.11(b).
"Revolving Notes" means the Borrower's promissory notes payable
to the order of each of the Lenders, including both Facility A Notes and
Facility B Notes.
"Seventh Amendment" means the Seventh Amendment to Amended and
Restated Credit and Security Agreement dated April 4, 1997.
3. Eligible Accounts. Section 1.1 of the Credit Agreement is
further amended by deleting item (5) from the definition of "Eligible
Accounts" and replacing it with the following new item (5):
"(5) Accounts owed by an account debtor located outside the
United States which are not backed by a bank letter of credit
assigned to the Agent (if such assignment is required by the
Agent), in the possession of the Agent and acceptable to the Agent
in all respects, in its sole discretion; provided, however, that,
subject to clause (12) below, Accounts due and owing from Siemens,
Bosch, Delco, Ford, Texas Instruments, Polaroid, 3M and Motorola
shall be allowed;"
4. Revolving Advances. Section 2.1 of the Credit Agreement is
modified by adding the following thereto:
"All requests for Borrowings under this Section 2.1 shall
be deemed a request for Revolving Advances under Facility A,
until such time as Facility A has been fully funded, and
thereafter shall be deemed a request for Borrowings under
Facility B. Revolving Advances made under Facility A shall
be evidenced by and repayable in accordance with the
Facility A Notes and Revolving Advances made under Facility
B shall be evidenced by and repayable in accordance with the
Facility B Notes. Repayments of Revolving Advances shall be
applied (i) first, against the outstanding principal balance
of Facility B and (ii) next, against the outstanding
principal balance of Facility A."
5. Revolving Commitments. The Commitments of the Lenders and
their respective Percentages as set forth on the signature page of the Credit
Agreement are hereby amended in their entirety to read as follows:
Norwest Facility A Commitment Amount $11,666, 666.67
Facility B Commitment Amount $4,000,000
Total Revolving Commitment Amount $15,666,666.67
Percentage of Total Revolving
Commitment Amount 33 1/3%
Harris Facility A Commitment Amount $11,666, 666.67
Facility B Commitment Amount $4,000,000
Total Revolving Commitment Amount $15,666,666.67
Percentage of Total Revolving
Commitment Amount 33 1/3%
NBD Facility A Commitment Amount $11,666, 666.67
Facility B Commitment Amount $4,000,000
Total Revolving Commitment Amount $15,666,666.67
Percentage of Total Revolving
Commitment Amount 33 1/3%
6. Issuance of New Promissory Notes. To evidence the Facility
B Commitments of the Lenders, the Borrower agrees to issue and deliver to each
Lender a new promissory note, of even date herewith, payable to the order of
such Lender in the original principal amount of $4,000,000 (collectively, the
"New Notes"). Upon issuance thereof, all references in the Credit Agreement
and in each other Loan Document to the "Notes" or the "Revolving Notes"
shall be deemed references to the Notes previously issued pursuant to the
Credit Agreement, together with the New Notes.
7. Fee. The Borrower hereby agrees to pay to the Lenders a
non-refundable fee of $15,000, to be divided pro-rata among the Lenders, to
induce the Lenders to enter into this Seventh Amendment, payable upon
execution and delivery hereof.
8. Minimum Net Income. Section 6.15 of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Section 6.15 Minimum Net Income. The Borrower and its
Subsidiaries will have Net Income for each fiscal year subsequent to
fiscal year 1997, at a level mutually agreed upon by the Borrower and
the Required Lenders; provided, however, that if on or prior to the
sixtieth (60th) day following the end of the prior fiscal year, the
Borrower and the Required Lenders are unable to agree, in writing, upon
the appropriate level of Net Income for any subsequent fiscal year, the
Required Lenders may, in their sole discretion, declare an Event of
Default as of such date. There is no Minimum Net Income requirement in
effect for fiscal year 1997."
9. Liens. Section 7.1(e) of the Credit Agreement is amended
in its entirety to read as follows:
"(e) purchase money security interests relating to the
acquisition of Equipment of the Borrower securing indebtedness not in
excess of $10,000,000, in the aggregate, at any time outstanding, so
long as the Borrower is in, and maintains, compliance with every other
provision of this Agreement."
10. Conditions Precedent. This Seventh Amendment shall become
effective on the business day on which the Agent shall have received the
following, each in form and substance satisfactory to the Agent, but in no
event shall the Agent receive the same later than the close of business on
April 4, 1997:
(a) This Seventh Amendment, duly executed on behalf of the
Borrower and each Lender.
(b) The New Notes, duly executed on behalf of the Borrower.
(c) A certified copy of the Resolutions adopted by the Board of
Directors of the Borrower approving the execution and delivery of this
Seventh Amendment, the New Notes and such other documents as are
contemplated hereby.
(d) An opinion of the Borrower's counsel as to such matters as
the Agent may reasonably request.
(e) Evidence satisfactory to the Agent of payment by the
Borrower of all fees contemplated in paragraph 6 above, together with
such costs and expenses incurred by the Agent, including attorneys fees
and expenses, in connection with the preparation and negotiation of this
Seventh Amendment and other matters as contemplated hereby.
11. Representations and Warranties. To induce the Lenders to
enter into this Seventh Amendment, the Borrower hereby represents and warrants
to the Lenders as follows:
(a) The Borrower has all requisite power and authority to
execute this Amendment and to perform all of its obligations hereunder.
(b) The execution, delivery and performance by the Borrower of
this Amendment has been duly authorized by all necessary corporate
action and does not (i) require any authorization, consent or approval
by any governmental department, commissions, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate (A) any provision of
any law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrower or (B) the
articles of incorporation or by-laws of the Borrower, or (ii) result in
the breach or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or
affected.
(c) Subject to the modifications set forth in Schedule I
attached hereto, the representations and warranties contained in Article
V of the Credit Agreement are true and correct as of the date hereof as
though made on and as of this date, except to the extent that such
representations and warranties relate solely to an earlier date.
12. Release. The Borrower hereby releases and forever
discharges the Lenders and each of their respective former and present
directors, officers, employees, agents and representatives of and from every
and all claims, demands, causes of action (at law or in equity) and
liabilities, of any kind or nature, whether known or unknown, liquidated or
unliquidated, absolute or contingent, which the Borrower ever had, presently
has or claims to have against a Lender or any of its respective directors,
officers, employees, agents or representatives of or relating to events,
occurrences, actions, inactions or any other matters occurring prior to the
date of this Amendment.
13. No Waiver. The execution of this Amendment shall not be
deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document
or other document held by the Lenders, whether or not known to the Lenders and
whether or not existing on the date of this Amendment.
14. Costs and Expenses. The Borrower hereby reaffirms its
agreement under Section 10.7 of the Credit Agreement to pay or reimburse the
Agent, among other costs and expenses, all expenses incurred by the Agent in
connection with the amendment, performance or enforcement of the Loan
Documents, including without limitation, all reasonable fees and disbursements
of legal counsel to the Agent.
15. References. Except as expressly amended hereby, all
provisions of the Loan Documents shall remain in full force and effect. After
the effective date hereof, each reference to any Loan Document or any other
document executed in connection with the Credit Agreement to the "Credit
Agreement" or to "this Agreement", "hereunder" or "hereof" or words of
like import referring to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.
16. Execution in Counterparts. This Amendment may be executed
in any number of counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which counterparts, taken
together, shall constitute but one in the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
SHELDAHL, INC.
/s/ John V. McManus
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as
Lender and Agent
/s/ Laura Oberst
HARRIS TRUST AND SAVINGS BANK
/s/ Cathy Ciolek
NBD BANK
/s/ Marguerite Mullins
<PAGE>
SCHEDULE I TO SEVENTH AMENDMENT
Sheldahl has received notice from the U.S. Environmental Protection Agency
that it may have contributed materials containing hazardous substances to the
Revere Chemical Corporation in Bucks County, Pennsylvania and, consequently,
may be responsible, along with other entities, for environmental contamination
at the Revere Chemical Corporation property. An attorney from the EPA, in
response to information provided by Sheldahl, has informally indicated that no
further action would be pursued against Sheldahl with respect to this matter.
That attorney, however, would provide no written assurances to Sheldahl.
<PAGE>
