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 February 27, 1998 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 March 25, 1998, 9,628,045 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
Six Months Ended
February 27, February 28,
(in thousands,
except for per share data) 1998 1997
_______ _______
Net sales $56,743 $50,680
Cost of sales 55,030 45,099
_______ _______
Gross profit 1,713 5,581
_______ _______
Expenses:
Sales and marketing 4,914 4,606
General and administrative 3,942 3,300
Research and development 2,002 2,318
Interest 1,122 296
Restructuring costs 4,000 -
_______ _______
Total expenses 15,980 10,520
_______ _______
Loss before income taxes (14,267) (4,939)
Benefit for income taxes 4,840 1,680
_______ _______
Net loss (9,427) (3,259)
Convertible preferred stock
Dividends (359) -
Net loss applicable to common
shareholders $(9,786) $(3,259)
======= =======
Net loss per common share:
Basic $(1.08) $(0.36)
Diluted $(1.08) $(0.36)
Number of shares outstanding:
Basic 9,084 8,934
Diluted 9,084 8,934
The accompanying notes are an integral part of these statements.
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
Three Months Ended
February 27, February 28,
(in thousands,
except for per share data) 1998 1997
_______ _______
Net sales $27,751 $26,379
Cost of sales 27,681 23,253
_______ _______
Gross profit 70 3,126
_______ _______
Expenses:
Sales and marketing 2,514 2,307
General and administrative 2,092 1,720
Research and development 1,070 1,178
Interest 609 227
Restructuring costs 4,000 -
_______ _______
Total expenses 10,285 5,432
_______ _______
Loss before income taxes (10,215) (2,306)
Benefit for income taxes 3,465 780
_______ _______
Net loss (6,750) (1,526)
Convertible preferred stock
Dividends (172) -
_______ _______
Net loss applicable to common
shareholders $(6,922) $(1,526)
======= =======
Net loss per common share:
Basic $(0.76) $(0.17)
Diluted $(0.76) $(0.17)
Number of shares outstanding:
Basic 9,131 8,956
Diluted 9,131 8,956
The accompanying notes are an integral part of these statements.
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
unaudited
(In thousands) February 27, August 29,
1998 1997
_______ _______
Current assets:
Cash and cash equivalents $ 1,101 $ 5,567
Accounts receivable, net 16,878 15,880
Inventories 14,566 13,078
Prepaid expenses and other
current assets 682 406
Deferred taxes 765 765
_______ ________
Total current assets 33,992 35,696
_______ _______
Construction in process 30,182 19,303
Land and buildings 27,353 26,467
Machinery and equipment 116,302 112,071
Less: accumulated depreciation (65,116) (57,036)
_______ _______
Net plant and equipment 108,721 100,805
_______ _______
Deferred taxes 7,027 2,187
_______ _______
Other assets 625 679
_______ _______
$150,365 $139,367
======= =======
LIABILITIES AND SHAREHOLDERS INVESTMENT
Current liabilities:
Current maturities of
long-term debt $ 44,698 $ 818
Accounts payable 10,888 7,309
Accrued salaries 1,654 1,606
Other accruals 4,893 3,020
_______ _______
Total current liabilities 62,133 12,753
_______ _______
Long-term debt 9,334 40,869
_______ _______
Other non-current liabilities 5,731 2,813
_______ _______
Shareholders investment:
Preferred stock 8 15
Common stock 2,407 2,258
Additional paid-in capital 66,803 66,923
Retained earnings 3,949 13,736
_______ _______
Total shareholders investment 73,167 82,932
_______ _______
$150,365 $139,367
======= =======
The accompanying notes are an integral part of these statements.
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Six Months Ended
(in thousands) February 27, February 28,
1998 1997
_______ _______
Operating activities:
Net loss $ (9,427) $ (3,259)
Adjustments to reconcile net
Loss to net cash provided by
operating activities:
Depreciation and amortization 8,097 4,329
Deferred income taxes (4,840) (1,680)
Net change in other operating
activities:
Accounts receivable (998) 2,035
Inventories (1,488) (690)
Prepaid expenses and other
current assets (276) (43)
Other assets 54 26
Accounts payable and accrued
liabilities 3,406 1,487
Other non-current liabilities 2,918 77
_______ _______
Net cash provided by operating activities (2,554) 2,282
_______ _______
Investing activities:
Capital expenditures, net (14,120) (16,578)
_______ _______
Financing activities:
Borrowings under revolving credit
facilities, net 10,486 14,639
Proceeds from long-term debt 2,334 -
Repayments of long-term debt (475) (233)
Preferred stock issuance costs (300) -
Proceeds of stock option exercises 163 663
_______ _______
Net cash provided by financing activities 12,208 15,069
_______ _______
Increase (decrease) in cash (4,466) 773
Cash at beginning of period 5,567 904
_______ _______
Cash at end of period $ 1,101 $ 1,677
======= =======
Supplemental cash flow information:
Income taxes paid $ 7 $ 206
======= =======
Interest paid $ 1,853 $ 1,159
======= =======
The accompanying notes are an integral part of these statements.
<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):
February 27, 1998 August 29, 1997
Raw materials $3,912 $ 3,069
Work-in-process 6,305 6,484
Finished goods 4,349 3,525
_______ _______
$14,566 $13,078
======= =======
2) Convertible Preferred Stock.
During February 1998, 7,350 shares of preferred stock and related accrued
dividends of $174,643 were converted into 575,149 shares of common stock.
As of February 27, 1998, 7,650 shares of preferred stock remained
outstanding. This preferred stock, with a stated value of $7.7 million, is
convertible to common stock at any time at the option of the holders. The
conversion price fluctuates, subject to a maximum, based on the price of
the Company's common stock during the 30 trading day period immediately
prior to conversion. As of February 27, 1998, the conversion price was
estimated to be $14.225 per share, and if converted in its entirety, the
Series B Preferred Stock would represent approximately 538,000 additional
shares of common stock.
On February 27, 1998, the Company accrued dividends on this preferred stock
of approximately $185,000, which are payable in cash or common stock, at
the Company's option, on the date the preferred stock is converted into
common stock.
3) Restructuring Costs.
In February 1998, a one-time restructuring charge of $4.0 million was
recorded related to the culmination of the Company's business process
design initiative that began two years ago. Due to significant
productivity benefits resulting from the initiative, the Company is
reducing the size of its salaried workforce. The resulting workforce
reduction involves layoffs, early retirement offerings, reassignments and
reclassifications of positions. The restructuring costs provide for
approximately $2.5 million for severance and early retirement salary costs,
approximately $1.3 million for medical, dental and other benefits being
provided to the affected individuals, and approximately $0.2 million for
outplacement and other costs. Approximately 65 people will be affected.
As of February 27, 1998, no employees had been terminated and no costs had
been charged to the accrual.
4) Per Share Information.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share". This new standard replaces prior EPS reporting requirements and
requires a dual presentation of basic and diluted EPS. Basic EPS excludes
dilution and is computed by dividing net income by the weighted average
amount of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. As with
current EPS reporting requirements, the standard requires common equivalent
shares to be excluded in loss periods as they are anti-dilutive. The
Company adopted this standard in the current quarter and restated earnings
per share data for prior periods to conform to this standard.
(in thousands except Six Months Ended Three Months Ended
per share data) 2/27/98 2/28/97 2/27/98 2/28/97
_______ _______ _______ _______
Basic EPS:
Net loss applicable to
Common shareholders $ (9,786) $ (3,259) $ (6,922) $ (1,526)
Weighted average common
Stock outstanding 9,084 8,934 9,131 8,956
Number of shares 9,084 8,934 9,131 8,596
Net income per share $ (1.08) $ (0.36) $ (0.76) $ (0.17)
The Company's outstanding preferred shares and options have been computed
to be anti-dilutive, and therefore, excludes from the calculation of
diluted EPS.
<PAGE>
SHELDAHL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED OPERATING RESULTS AND FINANCIAL CONDITION
Six Months Ended February 27, 1998, and February 28, 1997
Sales
____________________
The Company's net sales increased $6.1 million, or 12%, from $50.7 million for
the six months ended February 28, 1997, to $56.7 million for the six months
ended February 27, 1998. The automotive market sales for the six months ended
February 27, 1998, increased 17% to $40.1 million. This increase in sales
reflects the demand recovery from the numerous automotive industry work
stoppages that affected all of fiscal 1997 and increases in demand of Novaflex
HDr interconnect products to both the automotive and datacom markets.
Sales to the datacom market increased 22% to $6.6 million for the six months
ended February 27, 1998. Sales of Novaflex HDr accounted for approximately
half of the $1.2 million increase. The remainder of the increase in the
datacom market is represented by increased sales of Novacladr and other
laminated materials plus increased sales of $354,000 of high-density ViaThinr
substrates. Sales to all other markets reflect a decrease of $.9 million, or
9%, for the six months ended February 27, 1998, and is detailed below.
Market Six Months Ended Gross Percent
(in thousands) 2/27/98 2/28/97 Change Change
_______ _______ _______ _______
Automotive $40,092 $34,283 $ 5,809 17%
Datacommunications 6,628 5,436 1,192 22%
Aerospace/Defense 4,631 4,786 (155) (3%)
Industrial 3,718 3,934 (216) (5%)
Consumer 1,673 2,241 (568) (25%)
_______ _______ _______ _______
$56,742 $50,680 $ 6,062 12%
======= ======= ======= =======
Gross Profit
____________________
Gross profit declined to 3% of sales, or $1.7 million for the six months ended
February 27, 1998. As reflected in the chart below, the Micro Products gross
loss increased by 74%, or $2.9 million to $6.8 million. The increase relates
primarily to increased depreciation expense. The combined Materials and
Interconnect business units gross profit declined $1.0 million to $8.5
million, or 15% of sales. The primary reasons for the lower gross profit are
related to increased depreciation and labor costs, and unfavorable product mix
due to a higher concentration of Novaflex HD sales, which have less margin.
February 27, 1998 February 28, 1997
__________ _________
(six months ended)
I/C and Micro Total I/C and Micro Total
Mtls Products Company Mtls Products Company
_______ _______ _______ _______ _______ _______
Sales $56,275 $ 468 $56,743 $50,565 $ 115 $50,680
Cost of
Sales 47,792 7,238 55,030 41,086 4,013 45,099
Gross
Profit 8,483 (6,770) 1,713 9,479 (3,898) 5,581
% of Sales 15% N/A 3% 19% N/A 11%
Sales and marketing expense increased $308,000, or 7%, from $4.6 million for
the six months ended February 28, 1997, to $4.9 million for the six months
ended February 27, 1998. Increased sales staffing, travel costs, and
commission expenses were offset by declines in consulting costs.
General and administrative expenses increased $642,000, or 19%, from $3.3
million for the six months ended February 28, 1997, to $3.9 million for the
six months ended February 27, 1998. Increased staffing, salaries, consulting,
depreciation, and outside maintenance cost incurred to support improved
information systems. General and administrative expenses totaled 6.9% of
sales for the six months ended February 27, 1998, and 6.5% of sales for the
six months ended February 28, 1997.
Research and development expenses decreased $316,000, or 14%, from $2.3
million for the six months ended February 28, 1997, to $2.0 million for the
six months ended February 27, 1998. The decrease is a combination of
increased depreciation offset by a decline in outside consulting and testing
services. Research and development expenses totaled 3.5% of sales for the six
months ended February 27, 1998, and 4.6% in sales for the six months ended
February 28, 1997.
Interest costs and activities for the noted periods are detailed below:
Six Months Ended 2/27/98 2/28/97 Change
(in thousands) _______ _______ _______
Gross interest expense $1,922 $1,151 $ 771
Capitalized interest (800) (855) 55
_______ _______ _______
Net interest $1,122 $ 296 $ 826
======= ======= =======
During the current six months, significantly higher borrowings accounted for
the increase in gross interest costs. At February 28, 1997, total borrowings
were $36.7 million, while at February 27, 1998; total borrowings were $54.0
million.
In February 1998, a one-time restructuring charge of $4.0 million was recorded
related to the culmination of the Company's business process design initiative
that began two years ago. Due to significant productivity benefits resulting
from the initiative, the Company is reducing the size of its salaried
workforce. The resulting workforce reduction involves layoffs, early
retirement offerings, reassignments and reclassifications of positions. The
restructuring costs provide for approximately $2.5 million for severance and
early retirement salary costs, approximately $1.3 million for medical, dental
and other benefits being provided to the affected individuals, and
approximately $0.2 million for outplacement and other costs.
Income taxes were applied at 34% in both periods. Convertible preferred stock
dividends were $359,000 for the six months ended February 27, 1998. A 5%
cumulative preferred stock offering was completed in August 1997 and the
recording of preferred stock dividends started this fiscal year. As a result,
net loss to common shareholders for the six months ended February 27, 1998,
was $9.8 million, or $1.08 per share. This compares to a net loss of $3.3
million, or $0.55 per share, for the six months ended February 28, 1997.
____________________________________________________________________________
Three Months Ended February 27, 1998, and February 28, 1997
____________________________________________________________________________
Sales
____________________
The Company's net sales increased $1.4 million, or 5%, from $26.4 million for
the three months ended February 28, 1997, to $27.8 million for the three
months ended February 27, 1998. The automotive market sales for the three
months ended February 27, 1998, increased 11% to $19.8 million. This increase
in sales reflects the demand recovery from the labor unrest that affected the
three months ended February 28, 1997, and increased demand for Novaflex HDr
ECU products in the automotive market.
Sales to the datacom market remained unchanged at $3.1 million for the three
months ended February 27, 1998, and February 28, 1997. Sales to all other
market reflect a decrease of 12%, or $0.7 million.
Market Three Months Ended Gross Percent
(in thousands) 2/27/98 2/28/97 Change Change
_______ _______ _______ _______
Automotive $19,795 $17,759 $ 2,036 11%
Datacommunications 3,058 3,057 1 0%
Aerospace/Defense 2,130 2,429 (299) (12%)
Industrial 1,739 2,019 (280) (14%)
Consumer 1,029 1,115 (86) (8%)
_______ _______ _______ _______
Consumer $27,751 $26,379 $ 1,372 5%
======= ======= ======= =======
Gross Profit
____________________
Gross profit declined to 0.3% of sales, or $70,000 for the three months ended
February 27, 1998. As reflected in the chart below, the Micro Products
business gross loss increased by 34%, or $804,000, to $3.4 million. Increased
depreciation expense is the primary cause of the increase. The combined
Materials and Interconnect business units gross profit declined to $3.5
million, or 13%, of sales. The primary reasons for the lower gross profit are
related to increased depreciation and labor costs, and unfavorable product mix
due to higher concentration of Novaflex HD sales, which have less margins.
February 27, 1998 February 28, 1997
__________ _________
(Three months ended)
I/C and Micro Total I/C and Micro Total
Mtls Products Company Mtls Products Company
_______ _______ _______ _______ _______ _______
Sales $27,507 $ 244 $27,751 $26,264 $ 115 $26,379
Cost of
Sales 24,013 3,668 27,681 20,578 2,675 23,253
Gross
Profit 3,494 (3,424) 70 5,686 (2,560) 3,126
% of Sale s 13% N/A 0% 22% N/A 12%
Sales and marketing expenses increased $207,000, or 9%, from $2.3 million for
the three months ended February 28, 1997, to $2.5 million for the three months
ended February 27, 1998. Sales and marketing expenses totaled 9% of sales for
quarters ended February 27, 1998, and February 28, 1997.
General and administrative expenses increased $372,000, or 22%, from $1.7
million for the three months ended February 28, 1997, to $2.1 million for the
three months ended February 27, 1998. The increases were due to a variety of
expenses including salaries, maintenance, and depreciation expense primarily
incurred to support improved information systems. General and administrative
expenses totaled 8% of sales for the three months ended February 27, 1998, and
7% of sales for the three months ended February 28, 1997.
Research and development expenses decreased $108,000, or 9%, from $1,178,000
for the three months ended February 28, 1997, to $1,070,000 for the three
months ended February 27, 1998. The decrease is a combination of increased
salaries and depreciation offset by a decline in outside consulting and travel
cost. Research and development expenses totaled 3.9% of sales for the three
months ended February 27, 1998, and 4.5% in sales for the three months ended
February 28, 1997.
Interest costs and activities for the noted period are detailed below:
Three Months Ended 2/27/98 2/28/97 Change
(in thousands) _______ _______ _______
Gross interest expense $1,062 $ 670 $ 392
Capitalized interest (453) (443) (10)
_______ _______ _______
Net interest $ 609 $ 227 $ 382
======= ======= =======
During the current quarter, significantly higher borrowings accounted for the
increase in gross interest costs. At February 28, 1997, total borrowings were
$36.7 million, while at February 27, 1998; total borrowings were $54.0
million.
In February 1998, a one-time restructuring charge of $4.0 million was recorded
related to the culmination of the Company's business process design initiative
that began two years ago. Due to significant productivity benefits resulting
from the initiative, the Company is reducing the size of its salaried
workforce. The resulting workforce reduction involves layoffs, early
retirement offerings, reassignments and reclassifications of positions. The
restructuring costs provide for approximately $2.5 million for severance and
early retirement salary costs, approximately $1.3 million for medical, dental
and other benefits being provided to the affected individuals, and
approximately $0.2 million for outplacement and other costs.
Income taxes were applied at 34% in both periods. Convertible preferred stock
dividends were $172,000 for the three months ended February 27, 1998. This is
the second quarter that preferred stock dividends were recorded after the
preferred stock offering was completed in August 1997. As a result, net loss
to common shareholders for the three months ended February 27, 1998, was $6.9
million, or $0.76 per share. This compares to a net loss of $1.5 million, or
$0.36 per share, for the three months ended February 28, 1997.
Financial Condition
____________________
The Company's credit lines total $47 million. The $12 million of the credit
facility has been extended to expire on May 31, 1998; $35 million expires on
December 31, 1998. Total borrowings as of February 27, 1998, were $43.0 million
and $3.1 million was available to the Company. Interest rates on borrowings
under these facilities averaged 8.68% on February 27, 1998. The current
ratio declined from 2.80 at August 29, 1997, to .55 at February 27, 1998,
reflecting the nearly $43 million of credit facility borrowings recorded as
a current liability.
During February 1998, the Company executed a $2.3 million installment note
payable. This note payable over sixty months has a fixed interest rate of
9.69% and is secured by certain computer hardware and software.
During February 1998, 7,350 shares of preferred stock and related accrued
dividends of $174,643 were converted into 575,149 shares of common stock.
As of February 27, 1998, 7,650 shares of preferred stock remained
outstanding. This preferred stock, with a stated value of $7.7 million,
is convertible to common stock at any time at the option of the holders.
The conversion price fluctuates, subject to a maximum price of $25.34,
based on the price of the Company's common stock during the 30 trading
day period immediately prior to conversion. As of February 27, 1998, the
conversion price was estimated to be $14.225 per share, and if converted
in its entirety, the Series B Preferred Stock would represent approximately
538,000 additional shares of common stock.
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
business unit.
Margins in the core businesses have been unacceptably weak. The Company
is taking specific steps to increase gross margin dollars by attacking
factory costs and increasing throughput and related revenues. Demand for
the Company's Novaflex HD products is expected to increase over the near
term. The Company has the capacity in place to meet this demand and
expects greater revenue to result in greater gross margin dollars from
this family of products.
The Company is pursuing additional financing and has signed a term sheet with a
group of four lenders, lead by Norwest Bank Minnesota, N.A. Although not a
commitment to lend, the term sheet outlines the intent of the lenders and the
structure of the proposed credit facility. The proposed credit facility
provides a revolving loan agreement of up to $20 million and a term loan
agreement of up to $60 million. The revolving loan will have a borrowing
based tied to the Company's working capital. The term loan has an initial
borrowing based tied to the appraised value of the Company's unencumbered
equipment. In addition, the term loan provides for additional advances
based on eligible equipment purchases. The total facility will be secured
by the Company's accounts receivables, inventory, and fixed assets. At
the time of this filing, the appraisal of the Company's equipment is in
progress and is expected to be completed by approximately April 15, 1998.
The loan closing is anticipated to be in late April or early May. There
can be no assurance that the Company will complete this financing, or
complete the financing on terms acceptable to the Company.
The Company is aware of computer programming problems associated with the
year 2000 and has elected to install new year 2000 compliant systems which
is expected to be in full use by early fiscal 1999. The Company anticipates
additional costs related to year 2000 computer systems associated with
certain computer programs will not be material.
<PAGE>
PART II - OTHER INFORMATION
SHELDAHL, INC. AND SUBSIDIARY
FORM 10-Q
Item 4. Submission of Matters to a Vote of Securities Holders
On January 14, 1998, Sheldahl, Inc. held its Annual Meeting of
Shareholders. Of the 9,045,480 shares of common stock eligible to vote,
8,109,464 shares were represented at the meeting and votes were taken on the
following matters:
1. The votes cast to reduce the number of Directors from eight to
seven:
For: 6,570,224 Against: 32,671 Not Voted: 9,821
2. The votes cast to elect each of the seven Directors who had been
nominated: Not less than 8,084,062 shares voted in favor of the
election of each of the seven incumbent Directors.
3. The votes cast to approve and adopt Employee Stock Purchase Plan:
For: 7,738,767 Against: 176,225 Not Voted: 40,654
4. The votes cast to amend the Stock Plan:
For: 6,457,988 Against: 1,457,467 Not Voted: 53,997
5. The votes cast to approve Arthur Andersen LLP as auditors:
For: 8,054,780 Against: 18,696 Not Voted: 35,988
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits
10.1 Loan Agreement, dated February 26, 1998, between the
Company and Relational Funding Corporation.
10.2 Promissory Note dated February 26, 1998, between the
Company and Relational Funding Corporation.
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 February 27, 1998.
<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 April 13, 1998 By /s/ James E. Donaghy
Chief Executive Officer
Dated April 13, 1998 By /s/ Edward L. Lundstrom
President
Dated April 13, 1998 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 Six Months Ended
February 27, February 28,
1998 1997
Basic earnings per share
Weighted average number of issued
shares outstanding 9,084 8,934
======= =======
Net loss $(9,427) $(3,259)
Convertible preferred dividends
accrued (359) -
_______ _______
Net loss applicable to common
shareholders $(9,786) $(3,259)
======= =======
Net loss per common share $(1.08) $(0.36)
======= =======
Diluted earnings per share
Weighted average number of issued
shares outstanding 9,084 8,934
Effect of preferred stock under
treasury method - -
Effect of exercise of stock options
under the treasury stock method - -
_______ _______
Weighted average shares
outstanding used to compute
basic earnings per share 9,084 8,934
======= =======
Net loss $(9,427) $(3,259)
Convertible preferred dividends
accrued (359) -
_______ _______
Net loss applicable to common
shareholders $(9,786) $(3,259)
======= =======
Net loss per common share $(1.08) $(0.36)
======= =======
<PAGE>
Exhibit 11
SHELDAHL, INC. AND SUBSIDIARY
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
For The Three Months Ended
February 27, February 28,
1998 1997
Basic earnings per share
Weighted average number of issued
shares outstanding 9,131 8,956
======= =======
Net loss $(6,750) $(1,526)
Convertible preferred dividends
accrued (172) -
_______ _______
Net loss applicable to common
shareholders $(6,922) $(1,526)
======= =======
Net loss per common share $(0.76) $(0.17)
======= =======
Diluted earnings per share
Weighted average number of issued
shares outstanding 9,131 8,956
Effect of preferred stock under
treasury method - -
Effect of exercise of stock options
under the treasury stock method - -
_______ _______
Weighted average shares
outstanding used to compute
basic earnings per share 9,131 8,956
======= =======
Net loss $(6,750) $(1,526)
Convertible preferred dividends
accrued (172) -
_______ _______
Net loss applicable to common
shareholders $(6,922) $(1,526)
======= =======
Net loss per common share $(0.76) $(0.17)
======= =======
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FEBRUARY
27, 1998, FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> AUG-28-1998 AUG-28-1998
<PERIOD-END> FEB-27-1998 FEB-27-1998
<CASH> 1101 1101
<SECURITIES> 0 0
<RECEIVABLES> 16878 16878
<ALLOWANCES> 0 0
<INVENTORY> 14566 14566
<CURRENT-ASSETS> 33992 33992
<PP&E> 173837 173837
<DEPRECIATION> 65116 65116
<TOTAL-ASSETS> 150365 150365
<CURRENT-LIABILITIES> 62133 62133
<BONDS> 0 0
0 0
8 8
<COMMON> 2407 2407
<OTHER-SE> 66803 66803
<TOTAL-LIABILITY-AND-EQUITY> 70752 70752
<SALES> 27751 56743
<TOTAL-REVENUES> 27751 56743
<CGS> 27681 55030
<TOTAL-COSTS> 9676 14858
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 609 1122
<INCOME-PRETAX> 10215 14267
<INCOME-TAX> 3465 4840
<INCOME-CONTINUING> 6750 9427
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6750 9427
<EPS-PRIMARY> .76 1.08
<EPS-DILUTED> .76 1.08
</TABLE>
LOAN AGREEMENT
This Loan Agreement ("Loan Agreement") is made and given as of this
twenty-sixth (26th) day of February, 1998, by SHELDAHL INC., a Minnesota
corporation (hereinafter called "Sheldahl" or "Borrower"), with its chief
executive office at 1150 Sheldahl Road, Northfield, Minnesota 55057-9444, in
favor RELATIONAL FUNDING CORPORATION, whose address is 3701 Algonquin Road,
Suite 450, Rolling Meadows, Illinois 60008-3118 (hereinafter called "Lender").
RECITALS
A. Sheldahl is requesting that Lender lend the principal sum of
$2,334,764.13 to Sheldahl on a full recourse basis (the "Sheldahl Loan") and
Lender desires to make such loan on the terms and conditions provided herein.
B. Sheldahl has entered into that certain Software License and Services
Agreement (the "Software License Agreement"), dated April 1, 1997, between
Sheldahl and Oracle Corporation ("Oracle") as amended by Amendment One to
Software License and Service Agreement, dated April 1, 1997, pursuant to which
Oracle has licensed to Sheldahl certain software and related products
including the disks and all other media on which it is contained and all
printed matter relating thereto (the "Software") and provided to Sheldahl
certain related services (the "Services"). A full and complete list of the
Software and Services is attached hereto as Exhibit A.
C. As a condition for making the Sheldahl Loan, Lender has required that
Borrower execute and deliver to Lender this Agreement granting certain rights
to Lender with respect to the Software. In addition, Lender has required that
Borrower execute and deliver a Security Agreement (the "Security Agreement")
granting a first priority security interest in certain personal computers as
identified in the Security Agreement (the "PC's") to Lender as additional
security for the Sheldahl Loan.
D. In order to grant a first priority security interest in the PC's to
Lender, Sheldahl has obtained a Subordination Agreement (the "Subordination
Agreement") from Norwest Bank Minnesota, N.A. ("Norwest"), pursuant to
which Norwest has subordinated its interest in the PC's to the interest
granted to the Lender pursuant to the Security Agreement.
TERMS AND CONDITIONS
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by Borrower, it is agreed as
follows:
1. Recourse Loan. Subject to the terms and conditions set forth in
this Agreement, Lender shall lend to Sheldahl the original
principal amount of the Sheldahl Loan.
2. Promissory Note. The obligation of Sheldahl to repay the Sheldahl
Loan shall be evidenced by the Promissory Note of Sheldahl to
Lender of even date herewith in the principal amount of
$2,334,764.13 (the "Note"). The Note, this Loan Agreement, the
Security Agreement, the Subordination Agreement and any other
instruments or documents given as security for the Sheldahl Loan
are herein referred to as the "Loan Documents."
3. Representations, Warranties and Covenants of Borrower. Borrower
represents, warrants, covenants and agrees:
(a) Incorporation. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Minnesota and has all requisite power and authority to execute,
deliver and perform the Loan Documents.
(b) Authorization. The execution, delivery and performance of the
Loan Documents have been duly authorized by all necessary
corporate action and will not (i) require any consent or approval
of any entity which has not been obtained; (ii) violate any
provision of any indenture, agreement or instrument to which it is
a party or by which it is bound.
(c) Certifications. The representations and warranties of Borrower
contained in the Acceptance Certificate of Borrower, of even date,
are true and correct and are incorporated herein by reference.
(d) Title to Software. Borrower has a valid and enforceable license
to the Software and none of the Borrower's interest in the
Software is subject to any sublicense, lien, security interest or
other right, except for the rights granted under this Loan
Agreement or to Norwest. Except for the rights granted under this
Loan Agreement and to Norwest, Borrower has not granted, and will
not grant or permit to exist, any sublicense, lien or security
interests in all or a portion of the Borrower's interest in the
Software. Borrower shall not sell, assign, transfer or otherwise
dispose of the Borrower's interest in the Software prior to
payment in full of the Note without Lender's prior written
consent. Borrower shall defend its interest in the Software
against all claims and demands of all and any other persons at any
time claiming any interest therein adverse to Lender.
(e) Title To PC's and Priority of Lien. Borrower has granted to
Lender, pursuant to the Security Agreement, a security interest in
the PC's. Except for the security interest of Norwest, which has
been subordinated to the security interest granted pursuant to the
Security Agreement, the PC's are free and clear of liens, security
interests and encumbrances (except for the interest of Lender
granted hereunder). Other than the liens to Norwest and the
Lender, the Borrower has not granted, and will not grant or permit
to exist, any lien or security interest in all or a portion of the
PC's. The Borrower shall defend the PC's against all claims and
demands of all and any other person at any time claiming any
interest therein adverse to the Lender.
(f) Actions and Proceedings. There are no actions at law, suits in
equity or by other proceedings before any governmental agency,
commission, bureau, tribunal or other arbitration proceedings
against or affecting Borrower that if adversely determined would
adversely affect the rights of Borrower to enter into the Loan
Documents.
(g) Insurance. Borrower agrees it will keep the Software and the PC's
insured at all times against loss by fire and/or other hazards
concerning which, in the judgment of Lender, insurance protection
is reasonably necessary, in a company or companies reasonably
satisfactory to Lender and in amounts sufficient to protect
against loss or damage of the Software and the PC's and will pay
the premiums therefor. A Certificate of Insurance, and other
reasonable evidence of insurable coverage in form acceptable to
Lender which names Lender as loss payee and additional insured
shall be delivered to Lender.
(h) Costs of Collection. In the event of any action or proceeding to
enforce any of Lender's rights hereunder, Borrower shall pay
Lenders reasonable attorneys' fees and legal expenses incurred by
Lender in connection with or arising out of such action or
proceeding.
(i) Location of Software and PC's. The Software and the majority of
the PC's are located at the Borrower's facilities at the following
address:
801 North Highway 3
Northfield, Minnesota 55057
and will not be moved without 30 days prior written notice to
Lender.
The remainder of the PC's are located at the Borrower's facilities
at the following addresses:
1150 Sheldahl Road 805 North Highway 3 1285 S. Fordham
Northfield, MN 55057 Northfield, MN 55057 Longmont, CO 80501
East Hwy. 10, 715 N. County Road 19 6060 Dixie Hwy.
Britton, SD 57430 Aberdeen, SD 57401 Clarkston, MI 48346
and will not be moved without 30 days prior written notice to
Lender.
(j) Certificates and Opinions. The Borrower has delivered herewith a
Certificate of Officer of Sheldahl certifying as to the truth of
the representations and warranties contained herein and the
performance of the covenants contained herein and certifying as to
the Articles of Incorporation and Bylaws of Sheldahl, the
resolutions of the Board of Directors approving the transactions
contemplated herein and the incumbency of the signatories hereto.
The Borrower shall cause to be delivered to Lender an opinion of
counsel to the Borrower with respect to the good standing of
Sheldahl, the authorization and enforceability of the Loan
Documents, the creation and priority of the security interest
granted under the Security Agreement, and that the transactions
contemplated herein do not violate the Articles, Bylaws or any
agreement to which Sheldahl is a party. All such certifications
and opinions shall be as are reasonably acceptable to Lender.
4. Event of Default. It shall be an Event of Default under the Loan
Documents upon the happening of any of the following:
(a) failure to make any payment on the Note, whether principal or
interest, or any other payment under the Loan Documents, when and
as the same becomes due (whether at the stated maturity or at a
date fixed for any installment payment or any accelerated payment
date or otherwise) and such failure shall continue unremedied for
a period of five (5) days after written notice from Lender to
Sheldahl;
(b) failure to comply with or perform any of the terms, conditions or
covenants of the Loan Documents and such failure shall continue
unremedied for a period of thirty (30) days after written notice
from Lender to Sheldahl;
(c) any material representation or warranty made by Borrower herein or
in any document, instrument, certificate, financial statements or
reports given in connection with the Note shall be false or
misleading when made;
(d) Borrower shall fail to pay its respective debts as they become
due, shall make an assignment for the benefit of its creditors,
shall admit in writing its respective inability to pay its
respective debts as they become due, shall file a petition under
any chapter of the Federal Bankruptcy Code or any similar law,
state or federal, now or hereafter existing, shall become
"insolvent" as that term is generally defined under the Federal
Bankruptcy Code, shall have any involuntary bankruptcy case
commenced against it or be the subject of an order for relief in
such bankruptcy case, or be adjudicated a bankrupt or insolvent,
or shall have a custodian, trustee or receiver appointed for, or
have any court take jurisdiction of its property, or any part
thereof, in any proceeding for the purpose of reorganization,
arrangement, dissolution or liquidation, and such custodian,
trustee or receiver shall not be discharged, or such jurisdiction
shall not be relinquished, vacated or stayed within thirty (30)
days of the appointment;
(e) Borrower shall be dissolved, liquidated or wound up or shall fail
to maintain its existence as a going concern in good standing
(excepting, however, reorganizations, consolidations and/or
mergers into or with affiliates owned by, owning or under common
control of or with such entity or into the parent of such entity,
providing the succeeding organization assumes and accepts such
entity's obligations hereunder); or
(f) An event of default occurs under any other lease or any other
agreement between Borrower and Lender.
5. Remedies. Upon an Event of Default, Lender may declare all
obligations of Borrower under the Loan Documents immediately due and
payable, and may, at its option, do any one or more of the following:
(a) notify Borrower that Borrower must discontinue use of the
Software. Within thirty (30) days of receipt of such notice,
Borrower will discontinue use of the Software throughout its
entire organization and all copies of the Software, including all
disks and all other media on which it is contained and all printed
matter relating thereto will be delivered to Oracle;
(b) exercise any of the remedies available to it under applicable
state law;
(c) proceed immediately to exercise each and all of the powers, rights
and privileges reserved or granted to Lender under the Loan
Documents;
(d) proceed to protect and enforce the Loan Documents by suits or
proceedings or otherwise, and for the enforcement of any other
legal or equity available to Lender.
6. Further Assurances. Borrower shall execute and deliver to Lender,
promptly and at Borrower's expense, such other documents and assurances, and
take such further action as Lender may reasonably require, in order to
effectively carry out the intent and purpose of the Loan Documents, and to
establish and protect the rights, interest and remedies of Lender under the
Loan Documents.
7. Cumulative Remedies. All of Borrower's rights and remedies herein
are cumulative and in addition to any rights or remedies available at law or
in equity, and may be exercised concurrently or separately. Borrower shall
pay all costs, expenses, losses, damages and legal costs (including reasonable
attorneys' fees) incurred by Lender as a result of enforcing any terms or
conditions of the Loan Documents.
8. No Liability Imposed on Lender. Lender shall not be obligated to
perform or discharge, nor does it hereby undertake to perform or discharge any
obligation, duty or liability under the Software License Agreement, nor shall
this Agreement operate to place responsibility for control, care, management
or repair of the Software upon Lender nor for the carrying out of any of the
terms and conditions of the Software License Agreement, nor shall it operate
to make Lender responsible for any dangerous or defective condition of the
Software.
9. Indemnification. Borrower shall and does hereby agree to
indemnify against and to hold Lender harmless from any and all liability, loss
or damage which it may or might incur under the Software License Agreement or
under or by reason of this Agreement and of and from any and all claims and
demands whatsoever which may be asserted against it by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in the Software License Agreement.
Should Lender incur any such liability, should Lender be required to defend
against any such claims or demand or should a judgment be entered against
Lender, the amount hereof, including costs, expenses and reasonable attorney's
fees, shall bear interest thereon at the rate then in effect on the Note,
shall be secured hereby, shall be added to the obligations of Borrower
hereunder and Borrower shall reimburse Lender for the same immediately upon
demand, and upon the failure of Borrower so to do, Lender may declare all
obligations of Borrower immediately due and payable. In no event shall
Sheldahl have any indemnification or other obligations to Lender with respect
to the Software License Agreement for actions taken by Lender in connection
with the sale or possession of the PC's.
10. Attorney-in-Fact. Upon the occurrence of any Event of Default and
at any time during the continuance thereof, Borrower hereby irrevocably
appoints Lender and its successors and assigns as its agent and attorney-in-
fact, irrevocable, which appointment is coupled with and interest, to exercise
any rights or remedies with respect to the Software and the PC's.
11. Expenses of Lender. All expenses of Lender, not to exceed five
thousand dollars ($5,000.00), in connection with the execution and delivery
of, and the closing with respect to, the Loan Documents and instruments
executed and delivered therewith, including Lender's attorneys' fees and
expenses, shall be paid upon demand by Borrower. All expenses in protecting,
storing, warehousing, insuring, handling and shipping of the Software and the
PC's, all costs of keeping the Borrower's interest in the Software and the
PC's free of liens, encumbrances and security interests, except for those of
Norwest and the Lender, and the removing of the same and all excise, property,
sales and use taxes imposed by state, federal or local authority on any of the
Software or with respect to the sale thereof, shall be borne and paid for by
Borrower and if Borrower fails to promptly pay any amounts thereof when due,
Lender may, at its option, but shall not be required to pay the same, or upon
the same shall constitute obligations of the Borrower hereunder and shall bear
interest at the rate specified in the Note.
12. Continuing Rights. The rights and powers of Lender or receiver
hereunder shall continue and remain in full force and effect until all
obligations of Borrower to Lender are paid in full.
13. Books and Records. Borrower will permit Lender and its
representatives to examine Borrower's books and records (including data
processing records and systems), with respect to the Software and the PC's and
make copies thereof, to the extent permitted under the Software License
Agreement, at any reasonable time and from time to time and Borrower will
furnish such information reports to Lender and its representatives regarding
the Software and the PC's as Lender and its representatives may from time to
time request. Lender shall have the authority, at any time, to require
Borrower to place upon Borrower's books and records relating to the Software
and the PC's a notation stating that any such Software or the PC's are subject
to certain rights in favor of the Lender and cannot be sublicensed,
transferred, sold, assigned or otherwise disposed of without the Lender's
prior written consent.
14. Chief Executive Office. The location of the chief executive
office of Borrower is set forth in the preamble hereto and will not be changed
without thirty (30) days' prior written notice to Lender. Borrower represents
that its books and records concerning accounts and chattel paper are located
at its chief executive office.
15. Name of Borrower. Borrower's true name is as set forth in the
preamble hereto. Borrower has not used any other name within the past five
(5) years. Borrower agrees that it will not change its name without thirty
(30) days' written notice to Lender.
16. Annual and Quarterly Statements. Borrower shall deliver or cause
to be delivered to Lender, within one hundred twenty (120) days following the
end of Borrower's fiscal years, an annual audited financial statement for
Borrower prepared in accordance with generally accepted accounting principles
certified by the certified public accountants of Borrower, and quarterly
financial statements within 45 days of the end of Borrower's fiscal quarters.
Lender agrees that Borrower's timely filing of Securities and Exchange
Commission forms 10K (annual) and forms 10Q (quarterly) through the "EDGAR"
filing system as satisfactory delivery of financial statements in accordance
with this paragraph.
17. Successors and Assigns. This Agreement and each and every
covenants, agreement and provision hereof shall be binding upon Borrower and
its successors and assigns and shall inure to the benefit of Lender and its
successors and assigns. Borrower acknowledges that Lender intends to assign
its rights under the Loan Documents to Miller & Schroeder Investments
Corporation ("M&S") and shall execute a Notice and Acknowledgment of
Assignment in the form acceptable to M&S.
18. Governing Law. This Agreement is executed pursuant to and shall
be governed by the laws of the State of Minnesota.
19. Severability. It is the intent of this Agreement to confer to
Lender the rights and benefits hereunder to the full extent allowable by law.
The unenforceability or invalidity of any provisions hereof shall not render
any other provision or provisions herein contained unenforceable or invalid.
Any provisions found to be unenforceable shall be severable from this
Agreement.
20. Notices. Any notices and other communications permitted or
required by the provisions of this Agreement (except for telephonic notice
expressly permitted) shall be in writing and shall be deemed to have been
properly given or served by depositing the same with the United States Postal
Service, or any official successor thereto, designated as Registered or
Certified Mail, Return Receipt Requested, bearing adequate postage or delivery
by reputable private carrier such as Federal Express, Airborne, DHL or similar
overnight delivery service, and addressed as hereinafter provided. Each such
notice shall be effective upon being deposited as aforesaid. The time period
within which a response to any such notice must be given, however, shall
commence to run from the date of receipt of the notice by the addressee
thereof. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall be deemed to be
receipt of the notice sent. By giving to the other party hereto at least ten
(10) days' notice thereof, either party hereto shall have the right from time
to time and at any time during the term of this Agreement to change its
address and shall have the right to specify as its address any other address
within the United States of America. Each notice shall be addressed to the
address of the recipient as set forth in the preamble to this Agreement.
21. Captions and Headings. The captions and headings of the various
sections of this Agreement are for convenience only and are not to be
construed as confining or limiting in any way the scope or intent of the
provisions hereof. Whenever the context requires or permits, the singular
shall include the plural, the plural shall include the singular and the
masculine, feminine and neuter shall be freely interchangeable.
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
executed as of the date first above written.
SHELDAHL, INC. RELATIONAL FUNDING CORPORATION
By: _________________________ By: _________________________
Its: _________________________ Its: _________________________
<PAGE>
PROMISSORY NOTE
February 26, 1998
$2,334,764.13
Minneapolis, Minnesota
FOR VALUE RECEIVED, the undersigned, SHELDAHL, INC., a corporation
organized and existing under the laws of the State of Minnesota (the
"Borrower"), agrees and promises to pay to the order of RELATIONAL FUNDING
CORPORATION, its endorsees, successors and assigns (the "Holder"), in lawful
money of the United States at its principal office at 3701 Algonquin Road,
Suite 450, Rolling Meadows, Illinois 60008-3118, or such other place as
the Holder may from time to time designate, the principal sum of Two
Million Three Hundred Thirty Four Thousand Seven Hundred Sixty Four
Dollars and Thirteen Cents ($2,334,764.13), in installments, according
to the schedule set forth below, together with interest on the unpaid
principal balance at the annual rate of 9.69% used in computing the
payment schedule below.
Commencing on February 26, 1998 and on the same day of each month
thereafter for fifty-nine (59) months, Borrower shall pay this Note in lawful
money of the United States in consecutive equal monthly installments of
principal and interest in the amount of Forty Eight Thousand Eight Hundred
Sixty Dollars ($48,860.00).
On February 25, 2003 ("Maturity Date"), the entire unpaid principal
together with all accrued interest shall become due and payable in full.
All payments shall be applied first to interest and then to principal.
In the event that any payment required under this Note is not paid on its
due date, the Borrower agrees to pay a late charge at the rate of one and one-
half percent (1.5%) of the unpaid payment per month until the date payment is
received by the Holder to defray the cost of the Holder incident to collecting
such late payment. This late charge shall not be deemed to excuse a late
payment or be deemed a waiver of any other rights the Holder may have,
including the right to declare the entire unpaid principal and interest
under this Note immediately due and payable.
Upon ten (10) days advance written notice, this Note may be prepaid in
whole at any time prior to the Maturity Date at the prepayment price, expressed
as a percentage of the principal balance outstanding, together with interest
accrued to the date of prepayment, as follows:
Prepayment Date Prepayment Price
February 26, 1998 through January 25, 1999 104%
February 26, 1999 through January 25, 2000 103%
February 26, 2000 through January 25, 2001 102%
February 26, 2001 through January 25, 2002 101%
February 26, 2002 through January 25, 2003 100%
This Note is made pursuant to the laws of the State of Minnesota and
pursuant to the provisions of a Loan Agreement (the "Loan Agreement") of even
date herewith between the Borrower and the Holder. This Note is subject to the
terms of the Loan Agreement. This Note is secured by a first priority security
interest in the PC's as defined in the Loan Agreement and in the Security
Agreement dated as of February 26, 1998 between the Holder and the Borrower.
If an Event of Default occurs (as defined in the Loan Agreement), the
entire unpaid principal balance together with accrued interest thereon shall
become immediately due and payable at the option of the Holder hereof. Upon the
occurrence of an Event of Default the Borrower agrees to pay the costs of
collection including reasonable attorneys' fees. No delay or omission on the
part of the Holder in exercising any right hereunder shall operate as a waiver
of such right or of any other remedy under this Note. A waiver on any one
occasion shall not be construed as a bar to or waiver of any such right or
remedy on a future occasion.
Presentment for payment, protest and notice of non-payment are waived.
Consent is given to any extension or alteration of the time or terms of
payment hereof, any renewal, any release of any or all part of the security
given for the payment hereof, any acceptance of additional security of any
kind, and any releases of, or resort to any party liable for payment hereof.
Executed as of the date first above written.
SHELDAHL, INC.
By: _________________________
Its: _________________________
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE IS RESTATED PURSUANT TO REG S-K, ITEM 601 (c) 2 (III), TO
COMPLY WITH SEC REQUIREMENTS CONCERNING THE FASB NO. 128 EARNINGS PER SHARE.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> AUG-30-1996 AUG-30-1996
<PERIOD-END> MAR-01-1996 MAR-01-1996
<CASH> 693 693
<SECURITIES> 0 0
<RECEIVABLES> 18982 18982
<ALLOWANCES> 0 0
<INVENTORY> 11409 11409
<CURRENT-ASSETS> 33270 33270
<PP&E> 113258 113258
<DEPRECIATION> 44336 44336
<TOTAL-ASSETS> 103588 103588
<CURRENT-LIABILITIES> 13968 13968
<BONDS> 0 0
2219 2219
0 0
<COMMON> 0 0
<OTHER-SE> 70392 70392
<TOTAL-LIABILITY-AND-EQUITY> 103588 103588
<SALES> 28954 55051
<TOTAL-REVENUES> 28954 55051
<CGS> 22520 42930
<TOTAL-COSTS> 4104 8185
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6 389
<INCOME-PRETAX> 2324 3547
<INCOME-TAX> 700 1065
<INCOME-CONTINUING> 1624 2482
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1624 2482
<EPS-PRIMARY> .18 .36
<EPS-DILUTED> .18 .30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE IS RESTATED PURSUANT TO REG S-K, ITEM 601 (c) 2 (III) TO
COMPLY WITH SEC REQUIREMENTS FOR FASB NO. 128 EARNINGS PER SHARE.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> AUG-30-1996 SEP-01-1995
<PERIOD-END> AUG-30-1996 SEP-01-1995
<CASH> 904 1045
<SECURITIES> 0 0
<RECEIVABLES> 21091 17637
<ALLOWANCES> 0 0
<INVENTORY> 11525 12509
<CURRENT-ASSETS> 35570 32772
<PP&E> 127122 101326
<DEPRECIATION> 47630 41471
<TOTAL-ASSETS> 115887 94186
<CURRENT-LIABILITIES> 13519 16440
<BONDS> 0 0
0 0
0 0
<COMMON> 2228 1708
<OTHER-SE> 73109 39244
<TOTAL-LIABILITY-AND-EQUITY> 115887 94186
<SALES> 114120 95216
<TOTAL-REVENUES> 114120 95216
<CGS> 89171 74752
<TOTAL-COSTS> 17138 15255
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 539 875
<INCOME-PRETAX> 7272 4334
<INCOME-TAX> 2500 1200
<INCOME-CONTINUING> 4772 3134
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4772 3134
<EPS-PRIMARY> .57 .47
<EPS-DILUTED> .55 .45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE IS RESTATED PURSUANT TO REG S-K, ITEM 601 (c) 2 (III) TO
COMPLY WITH SEC REQUIREMENTS FOR FASB NO. 128 EARNINGS PER SHARE.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> AUG-30-1996 AUG-30-1996
<PERIOD-END> MAY-31-1996 MAY-31-1996
<CASH> 1048 1048
<SECURITIES> 0 0
<RECEIVABLES> 19349 19349
<ALLOWANCES> 0 0
<INVENTORY> 11978 11978
<CURRENT-ASSETS> 33611 33611
<PP&E> 121201 121201
<DEPRECIATION> 45781 45781
<TOTAL-ASSETS> 110359 110359
<CURRENT-LIABILITIES> 14293 14293
<BONDS> 0 0
0 0
0 0
<COMMON> 2228 2228
<OTHER-SE> 72502 72502
<TOTAL-LIABILITY-AND-EQUITY> 110359 110359
<SALES> 29690 84741
<TOTAL-REVENUES> 29690 84741
<CGS> 23219 66150
<TOTAL-COSTS> 4311 12495
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 59 448
<INCOME-PRETAX> 2101 5648
<INCOME-TAX> 630 1695
<INCOME-CONTINUING> 1471 3953
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1471 3953
<EPS-PRIMARY> .17 .48
<EPS-DILUTED> .16 .46
</TABLE>
