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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
___ EXCHANGE ACT OF 1934.
For the quarterly period ended April 28, 1996
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OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-23728
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OWOSSO CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2756709
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(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
One Tower Bridge, 100 Front Street, Suite 1400, West Conshohocken, PA 19428
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (610) 834-0222
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Former name, address and former fiscal year, if changed since last report
Indicate by check 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
rquirements for the past 90 days.
Yes X No
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OWOSSO CORPORATION
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INDEX
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PAGE NO.
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PART I - Financial Information:
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
April 28, 1996 (unaudited) and
October 29, 1995
Consolidated Statements of Earnings 4
Six and Three Months Ended April 28, 1996 and
April 30, 1995 (unaudited)
Consolidated Statements of Cash Flows 5
Six Months Ended April 28, 1996 and
April 30, 1995 (unaudited)
Notes to Consolidated Financial Statements 6
(unaudited)
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operation
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 16
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<TABLE>
<CAPTION>
OWOSSO CORPORATION
CONSOLIDATED BALANCE SHEETS
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April 28, October 29,
1996 1995
(Unaudited)
ASSETS ------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 502,959 $ 1,750,236
Receivables, net 19,738,878 18,190,026
Inventories, net 20,693,264 20,564,974
Prepaid expenses and other 1,441,936 1,164,617
Advances and interest receivable from affiliate 21,753 27,807
Deferred taxes 785,000 785,000
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Total current assets 43,183,790 42,482,660
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OTHER ASSETS:
Restricted cash 325,994 352,758
Prepaid pension 413,209 413,209
Other 398,038 398,038
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Total other assets 1,137,241 1,164,005
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PROPERTY, PLANT AND EQUIPMENT, net 25,208,244 25,353,517
INTANGIBLES, net 38,860,861 39,719,089
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TOTAL ASSETS $108,390,136 $108,719,271
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Payables:
Trade $ 5,829,568 $ 6,026,511
Accrued compensation and benefits 3,107,690 3,127,438
Accrued expenses 1,901,371 1,734,491
Accrued interest 405,295 363,827
Current portion of long-term debt 7,065,380 10,665,951
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Total current liabilities 18,309,304 21,918,218
LONG-TERM DEBT, Less current portion 45,841,433 42,132,933
POSTRETIREMENT BENEFITS 1,507,776 1,412,298
DEFERRED TAXES 3,686,000 3,686,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Convertible preferred stock Class A, 5% cumulative, $.01 par value; 10,000,000
shares authorized; 1,071,428 shares issued and outstanding
(aggregate liquidation value at January 28, 1996 - $15,000,000) 13,527,746 13,392,850
Common stock, 15,000,000 authorized; 5,865,000 shares issued and outstanding 58,650 58,650
Preferred stock, 10,000,000 shares authorized
Additional paid-in capital 21,611,701 21,611,701
Retained earnings 3,847,526 4,506,621
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Total stockholders' equity 39,045,623 39,569,822
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $108,390,136 $108,719,271
============ ============
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OWOSSO CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
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Three Months Ended Six Months Ended
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April 28, April 30, April 28, April 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $ 33,442,895 $ 26,819,155 $ 61,362,296 $ 48,312,092
COST OF PRODUCTS SOLD 25,475,827 18,825,641 46,364,544 33,914,629
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GROSS PROFIT 7,967,068 7,993,514 14,997,752 14,397,463
SELLING, GENERAL AND ADMINISTRATIVE 4,819,379 3,172,577 9,362,904 6,104,970
CORPORATE EXPENSES 1,082,231 815,913 2,051,477 1,470,620
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INCOME FROM OPERATIONS 2,065,458 4,005,024 3,583,371 6,821,873
INTEREST EXPENSE 1,099,572 682,068 2,062,348 1,318,644
OTHER INCOME 2,425 58,260 54,394 90,806
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INCOME BEFORE INCOME TAXES 968,311 3,381,216 1,575,417 5,594,035
INCOME TAX PROVISION 429,131 1,284,740 668,938 2,114,545
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NET INCOME 539,180 2,096,476 906,479 3,479,490
DIVIDENDS AND ACCRETION ON PREFERRED
STOCK (255,582) - (509,896) -
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NET INCOME AVAILABLE FOR COMMON
STOCKHOLDERS $ 283,598 $ 2,096,476 396,583 3,479,490
============= ============= ============= =============
NET INCOME PER COMMON SHARE $ 0.05 $ 0.36 $ 0.07 $ 0.59
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,865,000 5,865,000 5,865,000 5,865,000
============= ============= ============= =============
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OWOSSO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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Six Months Ended
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April 28, April 30,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 906,479 $ 3,479,490
Adjustments to reconcile net income to net cash provided by operating
activities:
Loss on sale of assets 92,060 1,200
Depreciation 1,931,830 1,339,984
Amortization 1,223,711 593,689
Amortization of deferred gain on sale and leaseback (38,591)
Changes in assets and liabilities which provided (used) cash:
Accounts receivable (1,548,852) (393,966)
Inventories (128,290) (2,360,451)
Prepaid expenses and other (271,265) (222,645)
Deferred taxes (89,915)
Accounts payable (196,943) 512,790
Accrued expenses 96,577 (347,893)
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Net cash (used in) provided by operating activities 2,105,307 2,473,692
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INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,878,594) (2,341,802)
(Increase) decrease in other assets (338,719) 78,146
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Net cash used in investing activities (2,217,313) (2,263,656)
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FINANCING ACTIVITIES:
Payments on amounts due to/from affiliates (205,991)
Proceeds from long-term debt 150,000
Borrowings from line of credit 5,900,000 3,400,000
Payments on long-term debt (5,942,071) (3,018,627)
Dividends paid (1,243,200) (938,400)
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Net cash used in financing activities (1,135,271) (763,018)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,247,277) (552,982)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,750,236 1,508,037
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 502,959 $ 955,055
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for interest $ 2,020,880 $ 994,234
============== ==============
Cash paid during the period for taxes $ 300,000 $ 2,233,000
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SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITY -
Accrual of preferred stock dividends $ 187,500
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See notes to consolidated financial statements.
</TABLE>
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OWOSSO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. THE COMPANY
Business - The consolidated financial statements represent the
consolidated financial position, results of operations and cash flows of
Owosso Corporation (the "Company") and its subsidiaries (collectively, the
subsidiaries): Motor Products - Owosso Corporation (Motor Products), Motor
Products Ohio Corporation: (MP - Ohio), Sooner Trailer Manufacturing Co.
(Sooner), Cramer Company (Cramer), DewEze Manufacturing, Inc.,
including Parker (DewEze), Snowmax Incorporated (Snowmax), The Landover
Company (Dura-Bond), Ahab Investment Company ("Ahab"), Great Bend
Manufacturing, Inc. (Great Bend) and Stature Electric, Inc. (Stature
Electric). Certain of the Company's subsidiaries were previously
affiliated with the Brynavon Group, due to those entities being under
common control and common management.
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the financial statements do not include all of the information
and notes normally included with financial statements prepared in
accordance with generally accepted accounting principles. In the opinion
of management, all adjustments (consisting of a normal recurring nature)
considered necessary for a fair presentation of results for interim
periods have been made. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
October 29, 1995.
2. PRO FORMA INFORMATION
The following unaudited pro forma financial information shows the results
of the Company's operations for the periods presented as though the
purchase of Great Bend and Stature Electric had been made at the beginning
of the period.
Six Months
Ended
April 30,
1995
Net sales $ 64,597,000
Income from operations 8,734,000
Net income 3,917,000
Dividends and accretion on preferred stock 510,000
Net income available for common stockholders 3,407,000
Net income per common share $ 0.58
Number of shares 5,865,000
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3. INVENTORIES
Inventories are summarized as follows:
April 28, April 30,
1996 1995
Raw materials and purchased parts $ 8,919,469 $ 7,114,748
Work in process 4,633,206 4,098,030
Finished goods 7,140,589 6,733,227
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Total $20,693,264 $17,946,005
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4. LONG-TERM DEBT
Long-term debt consists of the following:
April 28, April 30,
1996 1995
Banks $28,579,201 $19,093,539
Industrial revenue bonds 9,493,006 6,701,155
Former and current stockholders 14,575,947 5,987,999
Other 258,659 404,862
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Total long-term debt 52,906,813 32,187,555
Less portion due within one year 7,065,380 1,959,463
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Total $45,841,433 $30,228,092
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Concurrent with the Offering, the Company entered into a $40,000,000
unsecured revolving credit agreement with two banks, which expires on
March 31, 2000. In connection with the Stature Electric acquisition, the
Company increased its credit line to $55,000,000 and amended certain
financial covenants. Interest is payable, at the Company's option, at
either the bank's prime rate (8.25% at April 28, 1996) or a variable
spread (1.75% at April 28, 1996) over the London Interbank Offered Rate.
The agreement includes financial and other covenants, including leverage,
fixed charge, cash flow and net worth ratios, restrictions on certain
asset sales, mergers and other significant transactions, and a negative
pledge on fixed assets. Repayment of the Industrial Revenue Bonds of
certain of the subsidiaries has been guaranteed by the Company.
5. TAXES ON INCOME
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109. The effective income tax rate
differs from the federal statutory tax rate due to adjustments for
amortization of goodwill, officers' life insurance premiums, state income
taxes, and meals and entertainment. The increase in the effective tax rate
for the quarter ended April 28, 1996 as compared to April 29, 1995 results
from the additional amortization of goodwill related to the acquisitions
of Great Bend and Stature Electric.
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6. CONTINGENCIES
The Company is subject to federal, state and local environmental
regulation with respect to their operations. The Company believes that it
is operating in substantial compliance with applicable environmental
regulations.
In December 1990, Dura-Bond was issued a nonbinding request for certain
investigative and remediation measures by the California Regional Water
Quality Control Board relating to a facility it formerly operated. Since
the issuance of the request, the State has taken no further action against
Dura-Bond. In the event the State were to seek further remediation,
Dura-Bond may face claims from the State or claims for contribution to its
former lessor. Dura-Bond believes that it has substantial defenses to any
such claim. The cost of any such additional investigation and remediation,
if required, cannot be reasonably estimated.
Motor Products is currently engaged in negotiations with the Michigan
Department of Natural Resources regarding the applicable requirements for
closure of a belowground containment structure at Motor Products'
facility. Depending on the outcome of these negotiations, Motor Products
may incur the cost of closure and cleanup which is not expected to be
significant.
The lessor of Cramer's facility is engaged in negotiations with the State
of Connecticut regarding additional investigative or remedial measures at
this facility. Cramer may be required to bear a portion of the costs of
any such investigative or remedial measures, the amount of which cannot
currently be reasonably estimated. Cramer is also engaged in the closure
of waste handling facilities at this location in accordance with State
regulations. Closure is expected to be completed in 1996 at a cost which
is not expected to be significant.
Cramer has been named as a potentially responsible party with respect to a
hazardous substance disposal site being cleaned up by the U.S.
Environmental Protection Agency under its "Superfund" program, which they
expect to settle through the payment of minor amounts.
A portion of Sooner's manufacturing facility was used in the past to store
containers of waste oil and solvents, and an aboveground diesel fuel
storage tank is currently located at the facility. The Company intends to
establish a well at the facility for the purpose of monitoring the ground
water for any contamination, and the Company estimates such monitoring
will cost approximately $12,500 per year.
Current historic manufacturing and other operations at the Company's
various facilities may result, and may have resulted, in the discharge and
release of hazardous substances and waste from time to time. The Company
routinely responds to such incidents as deemed appropriate pursuant to
applicable federal, state and local environmental regulations.
In addition to the matters reported herein, the Company is involved in
litigation dealing with the numerous aspects of its business operations.
The Company believes that settlement of such litigation will not have a
material effect on its financial position or results of operations.
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<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
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Three months ended April 28, 1996 compared to three months ended April 30, 1995
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Net Sales. Net sales for the Company's second quarter of 1996 totaled $33.4
million as compared to $26.8 million in the second quarter of fiscal 1995, an
increase of 25%. The inclusion of the results of Great Bend Manufacturing
company ("Great Bend") which was acquired in May 1995 and Stature Electric, Inc.
("Stature"), acquired at the end of the Company's 1995 fiscal year, was
responsible for the increase. Without the acquisitions, net sales for the
quarter would have decreased 4% compared to the second quarter of fiscal 1995.
Net sales in the Company's Engineered Component Products segment increased 22%
to $18.7 million from $15.4 million. The addition of Stature more than offset
declines in net sales at the Company's other businesses in this segment which
suffered an overall decline of 10% due to a slower manufacturing economy than in
the year earlier period, and due to Dura-Bond no longer selling its replacement
camshaft bearings through Federal-Mogul. Net sales at Dura-Bond are expected to
remain below last year's level in the second half of fiscal 1996, but Stature's
additional sales, as well as comparisons to a slower second half of fiscal 1995
are expected to cause sales in this segment to remain above prior year levels.
In the Company's Specialized Equipment segment, the addition of Great Bend led
to a 29% increase in net sales to $14.7 million in the second quarter of fiscal
1996 from $11.4 million in the second quarter of fiscal 1995. Net sales in this
segment would have increased 5% without Great Bend, as sales of the Company's
agricultural equipment increased and sales of horse trailers remained level with
the prior year's quarter. Sales in this segment are expected to remain above
last year's level, although results for the second half of 1995 included Great
Bend, so the increase is expected to be less than that seen in the first half of
fiscal 1996.
Gross Profit. Gross profit was $8.0 million, level with last year's second
quarter, but representing a reduction to 23.8% of net sales from 29.8% of net
sales in the second quarter of fiscal 1995. The decrease in gross profit margin
resulted primarily from lower gross margins in the motor businesses because of
the absorption of fixed manufacturing costs over a lower sales volume and a
decrease in margins in the Company's aluminum trailer business, where gross
margins were diminished by an adjustment in inventory valuation, reduced
productivity during a union organization attempt and increased overhead in
anticipation of higher sales than actually occurred.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $4.8 million, or 14.4% of sales in the second
quarter of fiscal 1996, as compared to $3.2 million, or 11.8% of sales in the
second quarter of fiscal 1995. The increase in selling, general and
administrative expenses can be attributed to the addition of selling, general
and administrative expenses of Great Bend and Stature, including the
amortization of intangible assets resulting from the acquisitions. These
expenses increased approximately 10% for the Company's other businesses,
primarily for increased sales and marketing costs in the company's aluminum
trailer business and higher selling and engineering expenses in its grain
handling equipment business commensurate with that unit's increased sales.
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Corporate Expenses. Corporate expenses were $1.1 million, or 3.2% of net sales
in the second quarter of fiscal 1996, as compared to $0.8 million, or 3.0% of
net sales in the prior year period. The increase in corporate expenses was
primarily due to increased personnel and data processing expenses incurred
commensurate with the growth in net sales.
Income from Operations. Income from operations decreased 48% to $2.1 million, or
6.2% of net sales, in the second quarter of fiscal 1996 from $4.0 million, or
14.9% of net sales, in the prior year period. Income from operations in the
Company's Engineered Component Products segment decreased 28% to $2.2 million
(before allocation of corporate expenses) in the second quarter of fiscal 1996
from $3.0 million in the 1995 period. The addition of Stature's results was more
than offset by reduced sales volume in the Company's historical motor
businesses, taken as a whole, reduced sales at its Dura-Bond subsidiary due to
that business no longer selling its products through Federal-Mogul's
distribution network, and an increase in the operating loss at its new Ohio
manufacturing facility. In the Specialized Equipment segment, income from
operations (before allocation of corporate expenses) decreased 46% to $1.0
million in the second quarter of fiscal 1996 from $1.8 million in the second
quarter of fiscal 1995. Reduced margins in the aluminum trailer business and the
bale handling equipment business more than offset the addition of Great Bend's
results and increased income from operations in the grain handling equipment
business.
Interest Expense, net. Net interest expense increased to $1.1 million, or 3.3%
of sales, in the second quarter of fiscal 1996 from $0.7 million, or 2.5% of
sales in the second quarter of fiscal 1995, primarily due to increased
indebtedness incurred in connection with the acquisitions of Great Bend and
Stature.
Income Tax Expense. Income tax expense was $0.4 million in the second quarter of
fiscal 1996, representing an effective rate of 44%. The effective tax rate is
higher than the statutory federal rate due to non-deductible expenses and the
effect of state income taxes. Non-deductible expenses, primarily amortization of
intangible assets connected with acquisitions, were higher as a proportion of
pretax income in the second quarter, resulting in an increased effective tax
rate. Income tax expense in the second quarter of fiscal 1995 was $1.3 million,
representing an effective tax rate of 38%. The Company expects the higher
effective tax rate seen in the fiscal second quarter to continue for the
remainder of fiscal 1996.
Net Income. Net income was $0.5 million, or 1.6% of net sales in the second
quarter of fiscal 1996, as compared to $2.1 million, or 7.8% of net sales in the
prior year period. The decrease in net income was a result of the lower income
from operations, higher net interest expense and the increase in the effective
tax rate.
Earnings Per Share. Earnings per share of $0.05 in the second quarter of 1996
are calculated after deduction of preferred stock dividends and accretion in
preferred stock value totaling $0.3 million, whereas there was no preferred
stock outstanding in the prior year period. Earnings per share in the second
quarter of 1995 were $0.36. The Company's acquisition of Stature was dilutive to
earnings per share in the second quarter of fiscal 1996. The effects of the
accretion on preferred stock on earnings per share will be approximately $0.05
for the full year of 1996.
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Six months ended April 28, 1996 compared to six months ended April 30, 1995
- - ---------------------------------------------------------------------------
Net Sales. Net sales for the Company's first six months of 1996 totaled $61.4
million as compared to $48.3 million in the first six months of fiscal 1995, an
increase of 27%, due to the inclusion of the results of Great Bend and Stature,
without which net sales would have declined 2%. Net sales in the Company's
Engineered Component Products segment increased 17% to $34.5 million from $29.5
million, as the addition of Stature Electric and the beginning of shipments from
the Company's new Ohio motor manufacturing facility more than offset declines in
net sales at each of the other businesses in this segment. This decline can be
attributed to a slower manufacturing economy than in the year earlier period,
and Dura-Bond no longer selling its replacement camshaft bearings through
Federal-Mogul.
Increased demand for the Company's agricultural equipment, higher sales of
aluminum trailers in the first quarter and the addition of the results of Great
Bend led to a 43% increase in net sales in the Specialized Equipment segment, to
$26.9 million in the first six months of fiscal 1996 from $18.8 million in the
first six months of fiscal 1995. Sales in this segment are expected to remain
above last year's level, although results for the second half of 1995 included
Great Bend, so the increase is expected to be less than that seen in the first
half of fiscal 1996.
Gross Profit. Gross profit was $15.0 million, or 24.4% of net sales in the first
six months of fiscal 1996 as compared to $14.4 million, or 29.8% of net sales in
the year earlier period. The increase in gross profit is attributable to the
increase in net sales. The decrease in gross profit margin resulted from lower
gross margins in the motor businesses because of the absorption of fixed
manufacturing costs over a lower sales volume and a decrease in margins in the
Company's aluminum trailer business, where gross margins were diminished by an
adjustment in inventory valuation, reduced productivity during a union
organization attempt and increased overhead in anticipation of higher sales than
actually occurred. The Company anticipates that the gross margin in its motor
businesses will increase in the second half of fiscal 1996 alongside anticipated
net sales growth, and that the factors described above influencing reduced gross
margins in its trailer business will diminish, leading to a higher gross margin
in the second half of fiscal 1996 as compared to the first six months of fiscal
1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $9.4 million, or 15.3% of net sales in the first
six months of fiscal 1996, as compared to $6.1 million, or 12.6% of net sales in
the first six months of fiscal 1995. The increase in selling, general and
administrative expenses can be attributed to the addition of selling, general
and administrative expenses of Great Bend and Stature, including the
amortization of intangible assets resulting from the acquisitions. These
expenses increased approximately 10% for the Company's other businesses,
primarily for increased sales and marketing costs in the company's replacement
camshaft bearing business and aluminum trailer business, as well as increases in
selling expenses at the new Ohio operation and the Company's grain handling
equipment businesses, commensurate with their increased sales.
Corporate Expenses. Corporate expenses were $2.1 million, or 3.4% of net sales
in the first half of fiscal 1996, as compared to $1.5 million, or 3.0% of net
sales in the prior year period. The increase in corporate expenses was primarily
due to higher personnel and data processing expenses incurred commensurate with
the growth in net sales.
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Income from Operations. Income from operations decreased 47% to $3.6 million, or
5.8% of sales, in the first six months of fiscal 1996 from $6.8 million, or
14.1% of sales, in the prior year period. Income from operations in the
Company's Engineered Component Products segment decreased 30% to $3.7 million
(before allocation of corporate expenses) in the first six months of fiscal 1996
from $5.3 million in the 1995 period. As with the second quarter results,
reduced sales volume in the Company's historical motor businesses, taken as a
whole, reduced sales at its Dura-Bond subsidiary, and an increase in the
operating loss at its new Ohio manufacturing facility exceeded the effect of the
addition of Stature's results. In the Specialized Equipment segment, income from
operations (before allocation of corporate expenses) decreased 35% to $2.0
million in the first half of fiscal 1996 from $3.0 million in the fiscal 1995
period. Reduced margins in the aluminum trailer business and the bale handling
equipment business more than offset the addition of Great Bend's results and
increased income from operations in the grain handling equipment business.
Interest Expense, net. Net interest expense increased to $2.1 million, or 3.4%
of sales, in the first half of fiscal 1996 from $1.3 million, or 2.7% of sales
in the first half of fiscal 1995, primarily due to increased indebtedness
incurred in connection with the acquisitions of Great Bend and Stature.
Income Tax Expense. Income tax expense was $0.7 million in the first six months
of fiscal 1996, representing an effective rate of 42.5%. The effective tax rate
is higher than the statutory federal rate due to non-deductible expenses and the
effect of state income taxes. Non-deductible expenses, primarily amortization of
intangible assets connected with acquisitions, were higher as a proportion of
pretax income in the second quarter, resulting in an increased effective tax
rate. Income tax expense in the first half of fiscal 1995 was $2.1 million,
representing an effective tax rate of 38%. The Company expects the higher
effective tax rate seen in the fiscal second quarter to continue for the
remainder of fiscal 1996.
Net Income. Net income was $0.9 million, or 1.5% of net sales in the first six
months of fiscal 1996, as compared to $3.5 million, or 7.2% of net sales in the
prior year period. The decrease in net income was a result of the lower income
from operations, higher net interest expense and the increase in the effective
tax rate.
Earnings Per Share. Earnings per share of $0.07 for the first six months of 1996
are calculated after deduction of preferred stock dividends and accretion in
preferred stock value totaling $0.5 million, whereas there was no preferred
stock outstanding in the prior year period. Earnings per share in the first six
months of 1995 were $0.59. The Company's acquisitions of Great Bend and Stature
were dilutive to earnings per share in the first half of fiscal 1996. The
effects of the accretion on preferred stock on earnings per share will be
approximately $0.05 for the full year of 1996. Although earnings per share for
the second half of 1996 are expected to reflect a substantial improvement over
earnings per share for the first half of fiscal 1996, the Company believes that
because of its lower net income in the first half of fiscal 1996, combined with
the effect of the preferred stock, earnings per share for the full 1996 fiscal
year will be significantly lower than the $1.09 earned in fiscal 1995.
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Liquidity and Capital Resources
- - -------------------------------
Cash and cash equivalents decreased to $0.5 million at April 28, 1996 from $1.8
million at October 29, 1995. In addition to cash and cash equivalents at April
28, 1996 was $0.3 million in cash and equivalents which is restricted under
industrial revenue bond financings. Through more efficient use of its cash, the
Company expects to be able to keep a lower level of cash and cash equivalents in
relation to its total assets than at October 29, 1995.
Net cash provided by operating activities was $2.1 million in the first six
months of fiscal 1996 as compared to $2.5 million in the first six months of
fiscal 1995. This decrease was less than the decrease in net income because of
higher non-cash expenses recorded before calculation of net income in the fiscal
1996 period and lower cash used to finance net working capital needs. Cash
provided from net income before deduction of non-cash expenses, along with
borrowings on the Company's $55 million revolving line of credit with two banks
were used to finance increased net working capital in the first half of fiscal
1996, as well as capital expenditures, dividends and retirement of other debt,
including a portion of the debt incurred in the acquisition of Stature.
Working capital increased to $24.9 million at April 28, 1996 from $20.6 million
at October 29, 1995. Repayment of current indebtedness owed in connection with
the acquisition of Stature using funds from the Company's bank line of credit
and a seasonal increase in accounts receivable were the principal factors in the
increase. At April 28, 1996, the Company had borrowed $27.0 million under this
credit agreement. During the second quarter of fiscal 1996 the expiration date
of the credit agreement was extended to March 31, 2000 from November 1, 1998.
See Note 4 of Notes to Consolidated Financial Statements.
Capital expenditures were $1.9 million in the first quarter of fiscal 1996,
compared to $2.3 million in the prior year period. In the prior year period, the
Company had completed an expansion of its grain handling equipment business,
which was primarily responsible for the higher level in that period. The Company
expects to invest a greater amount in capital expenditures in the second half of
fiscal 1996, primarily for production equipment, than in the first part of the
year, but it expects capital expenditures for the full fiscal year to be below
the $4.4 million spent in fiscal 1995.
The Company regularly evaluates potential acquisitions, and the completion of
any such acquisition could involve the incidence of additional indebtedness by
the Company, which could in turn result in a high degree of financial leverage
that might inhibit the Company's ability to obtain additional financing on terms
similar to existing credit facilities. In addition, any such acquisition could
involve issuance of securities of the Company, including common stock or
securities convertible into common stock, which could have the effect of
diluting the interests of existing stockholders.
The Company believes that borrowing under its existing line of credit is its
most cost-effective financing option in the near term, having actively pursued
other financing alternatives during the first half of fiscal 1996. Cash from
operations, along with the bank line of credit, will continue to be required to
refinance indebtedness related to the Stature acquisition of approximately $3.8
million during the next year. The Company believes that bank credit facilities
and funds from operations will be sufficient to refinance that indebtedness and
to fund the Company's normal operations for the foreseeable future.
- 13 -
<PAGE>
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The Company wishes to take advantage of the new "Safe Harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Certain statements in
Management's Discussion and Analysis of this Form 10-Q are "forward-looking
statements" made pursuant to these provisions.
The Company cautions readers that the following important factors, among others,
have in the past affected and could in the future affect the Company's actual
results of operations and cause the Company's actual results to differ
materially from the results expressed in any forward-looking statements made by
or on behalf of the Company:
The Company's results have been and can be expected to continue to be
affected by the general economic conditions in the United States and
specific economic factors influencing the manufacturing and agricultural
sectors of the economy. Lower demand for the Company's products can lower
revenues as well as cause underutilization of the Company's plants, leading
to reduced gross margins.
Commodity prices can have a material influence on the Company's results.
Grain prices and cattle prices can affect demand for certain agricultural
equipment sold by the businesses in the Company's Specialized Equipment
segment. Metal prices, particularly aluminum, copper and steel, can affect
the Company's costs as well as demand for the Company's products and the
value of inventory held at the end of a reporting period. Lack of
availability of certain commodities could also disrupt the Company's
production.
Weather can affect the success of the grain harvest in the United States,
which can directly affect demand for the Company's grain handling equipment
business.
The start-up of the Company's new Ohio plant has affected results of
operations. Acceptance of this plant's products and manufacturing
difficulties could lead to continuing losses from that operation.
Changes in demand that change product mix may reduce operating margins by
shifting demand toward less profitable products.
Loss of a substantial customer may affect results of operations. For
example, the Company's replacement camshaft bearing business no longer
regularly sells its products through Federal-Mogul Corporation, which had
been that business unit's largest customer.
The Company's results can be affected by engineering difficulties in
designing new products or applications for existing products to meet the
requirements of its customers.
Obsolescence or quality problems leading to returned goods in need of
repair can also affect the value of the Company's inventories and its
profitability.
- 14 -
<PAGE>
The Company's results are dependent on the hiring and retention of
qualified executive and local management. For example, the Company is
currently involved in a search for a new chief operating officer who is
expected to play a large role in the Company's strategic direction and
internal growth prospects. There can be no assurance that the Company will
be able to find a qualified candidate in the near future.
The Company has a substantial amount of floating rate debt. Increases in
short term interest rates could be expected to increase the Company's
interest expense.
Acquisitions are an important part of the Company's growth strategy.
Acquisitions may have a dilutive effect on the Company's earnings and could
affect the Company's available credit and interest costs. Conversely, the
Company may from time to time divest of product lines or business units.
Any such divestiture may involve costs of disposition or losses on the
disposition that could reduce the Company's results.
The Company is subject to various federal and state environmental laws
which could be costly to adhere to if changed materially.
- 15 -
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
---------
Exhibit No. Description
- - ----------- -----------
10.71 Fourth Amendment to Credit Agreement by and among Owosso
Corporation, its subsidiaries, NBD Bank, PNC Bank, N.A., and
NBD Bank, as Agent, dated as of March 8, 1996.
(b) No Current Reports on Form 8-K were filed during the quarter
for which this report is filed.
<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 hereunto duly authorized.
OWOSSO CORPORATION
By: /s/ George B. Lemmon Jr.
-------------------------------------
George B. Lemmon, Jr.
Chief Executive Officer
By: /s/ John H. Wert Jr.
-------------------------------------
John H. Wert, Jr.,
Senior Vice President - Finance and
Chief Financial Officer
Date: June 11, 1996
<PAGE>
EXHIBIT 10.71
Fourth Amendment to Credit Agreement by and among Owosso Corporation, its
subsidiaries, NBD Bank, PNC Bank, N.A. and NBD Bank, as Agent, dated as of
March 8, 1996
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT, dated as of March 8, 1996 (this
"Amendment"), is by and among OWOSSO CORPORATION, a Pennsylvania corporation
("Owosso"), AHAB INVESTMENT COMPANY, a Delaware corporation ("Ahab"), CRAMER
COMPANY, a Delaware corporation ("Cramer"), DEWEZE MANUFACTURING, INC., a
Pennsylvania corporation ("DewEze"), THE LANDOVER COMPANY, a Pennsylvania
corporation ("Landover"), MOTOR PRODUCTS-OWOSSO CORPORATION, a Delaware
corporation ("Motor Products"), SNOWMAX, INCORPORATED, a Pennsylvania
corporation ("Snowmax"), SOONER TRAILER MANUFACTURING CO., a Delaware
corporation ("Sooner"), MOTOR PRODUCTS-OHIO CORPORATION, a Delaware corporation
("Motor Products-Ohio"), GREAT BEND MANUFACTURING COMPANY, INC., a Kansas
corporation, STATURE ELECTRIC, INC., a New York corporation ("Stature" and,
together with Owosso, Ahab, Cramer, DewEze, Landover, Motor Products, Snowmax,
Sooner, Motor Products-Ohio and Great Bend, collectively the "Borrowers" and
individually a "Borrower"), NBD BANK, a Michigan banking corporation formerly
known as NBD Bank, N.A. ("NBD"), PNC BANK, NATIONAL ASSOCIATION, a national
banking association ("PNC" and, together with NBD, collectively the "Banks" and
individually a "Bank"), and NBD BANK, as agent (in such capacity, the "Agent")
for the Banks.
INTRODUCTION
A. The Borrowers, the Banks and the Agent are parties to the Credit
Agreement, dated as of October 31, 1994, as amended by the First Amendment to
Credit Agreement, dated as of August 1, 1995, the Second Amendment to Credit
Agreement, dated as of September 1, 1995, and the Third Amendment to Credit
Agreement, dated as of October 31, 1995 (the "Credit Agreement"), pursuant to
which the Banks provide to the Borrowers, on a joint and several liability
basis, a revolving credit facility in the aggregate principal amount of
$55,000,000.
B. The Borrowers now desire that, among other things, (1) the expiration
date of the revolving credit facility provided under the Credit Agreement be
extended to March 31, 2000, (2) the amount of the available portion of such
facility be increased to $35,000,000, and (3) certain covenants of the Borrowers
and related defined terms under the Credit Agreement be modified, and the Banks
and the Agent are willing to so amend the Credit Agreement on the terms and
conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual agreements herein and in the
Credit Agreement contained, the parties hereto agree as follows:
<PAGE>
ARTICLE 1. CREDIT AGREEMENT AMENDMENTS
Effective upon the date (the "Amendment Date") that the conditions precedent
set forth in Article 2 of this Amendment are satisfied, which satisfaction shall
be determined by the Agent in its sole discretion, the Credit Agreement hereby
is amended as follows:
1.1 The first sentence of the definition of the term "Applicable Margin" in
Section 1.1 is amended to read in full as follows:
"Applicable Margin" shall mean, for purposes of determining the Eurodollar
Rate applicable to Eurodollar Rate Loans outstanding during any fiscal quarter
of the Borrowers (the "Applicable Quarter") (a) if the ratio of (i) the
Consolidated Total Debt of the Borrowers and their Subsidiaries to (ii) the
Consolidated EBITDA of the Borrowers and their Subsidiaries determined as of the
last day of the fiscal quarter of the Borrowers (the "Determinative Quarter")
immediately preceding the Applicable Quarter (hereinafter, the "Relevant Ratio")
is equal to or greater than 2.50 to 1.00, one and one-half of one percent (1 and
1/2 of 1%), (b) if the Relevant Ratio is equal to or greater than 2.00 to 1.00
but less than 2.50 to 1.00, one and one-quarter of one percent (1 and 1/4 of
1%), (c) if the Relevant Ratio is equal to or greater than 1.50 to 1.00 but less
than 2.00 to 1.00, one percent (1%), and (d) if the Relevant Ratio is less than
1.50 to 1.00, three-quarters of one percent (3/4 of 1%); provided, however, that
if the Consolidated Tangible Net Worth of the Borrowers and their Subsidiaries
as of the end of the Determinative Quarter is less than $14,000,000, each of the
various levels of the Applicable Margin as provided above will be increased by
one-quarter of one percent (1/4 of 1%).
1.2 The following definitions of the terms "Available Facility Coverage",
"Excludable Other Borrower Indebtedness", "Excludable Stature Indebtedness" and
"Excluded Indebtedness" are added to Section 1.1 in alphabetical order:
"Available Facility Coverage" shall mean, as of the end of any fiscal
quarter of the Borrowers, the lesser of (a) the daily average, during the period
of the four fiscal quarters of the Borrowers then ended, of the difference
between (i) the maximum aggregate amount of the commitments of the Banks to make
Loans under this Agreement and (ii) the aggregate principal amount of Loans
outstanding and (b) the difference, as of the end of such fiscal quarter,
between (i) the maximum aggregate amount of the commitments of the Banks to make
Loans under this Agreement and (ii) the aggregate principal amount of Loans
outstanding as of such day.
<PAGE>
"Excludable Other Indebtedness" shall mean, with respect to any period of
four fiscal quarters of the Borrowers, all Indebtedness of the Borrowers other
than the Excludable Stature Acquisition Indebtedness to the extent the maximum
aggregate scheduled amount of principal or other sums required to be paid by the
Borrowers during such period with respect to such Indebtedness does not exceed
$4,000,000.
"Excludable Stature Acquisition Indebtedness" shall mean all Indebtedness of
Stature Electric, Inc. to its former shareholders arising in connection with its
acquisition by Owosso.
"Excluded Indebtedness" shall mean, with respect to any period of four
fiscal quarters of the Borrowers, the Excludable Stature Acquisition
Indebtedness and the Excludable Other Borrower Indebtedness, but only to the
extent that the maximum aggregate scheduled amount of principal or other sums
required to be paid by the Borrowers during such period with respect to such
Excludable Stature Indebtedness and Excludable Other Borrower Indebtedness does
not exceed the Available Facility Coverage as of the immediately preceding
fiscal quarter-end of the Borrowers.
1.3 The definition of the term "Base Credit Amount" in Section 1.1 is
amended to read in full as follows:
"Base Credit Amount" shall mean, as of any date, the greater of (a)
$35,000,000 or (b) such greater integral multiple of $5,000,000, not exceeding
$55,000,000, to which the Borrowers shall have elected to increase the Base
Credit Amount in accordance with Section 2.10.
1.4 The definition of the term "Fixed Charges" in Section 1.1 is amended to
read in full as follows:
"Fixed Charges" of any person shall mean, for any period, the sum, without
duplication, of (a) interest paid or payable during such period by such person
on Indebtedness of such person, plus (b) the maximum scheduled amount of
principal or other sums required to be paid by such person during the period of
four fiscal quarters of such person immediately following such period with
respect to Indebtedness (including the current portion of any Capital Lease) of
such person having a final maturity more than one year from the date of creation
of such Indebtedness, but excluding, for purposes of this clause (b) only, the
Excluded Indebtedness, plus (c) all debt discount and expense amortized or
required to be amortized during such period by such person, plus (d) the maximum
amount of all rents and other payments (exclusive of property taxes, property
and liability insurance premiums and maintenance costs) paid or required to be
paid by such person during such period under any lease of real or personal
property in respect of which such person is obligated as a lessee or user other
than any Capital Lease.
1.5 The following sentence is added to the end of the definition of the term
"Tangible Net Worth" in Section 1.1:
For purposes of determining Tangible Net Worth of the Borrowers, the value
of intangible assets shall be reduced by the deferred tax liability that results
pursuant to FASB No. 109 directly from assigning a portion of the purchase price
for Stature Electric, Inc. to the value of its customer list.
1.6 The definition of the term "Termination Date" in Section 1.1 is amended
to read in full as follows:
"Termination Date" shall mean the earlier to occur of (a) March 31, 2000,
and (b) the date on which the Commitment shall be terminated pursuant to Section
2.2 or 6.2.
<PAGE>
1.7 Sections 5.2(c) and (d) are amended to read in full as follows:
(c) Fixed Charges Coverage. Permit or suffer the ratio of Consolidated
Fixed Charges Coverage Availability of the Borrowers and their Subsidiaries to
Consolidated Fixed Charges of the Borrowers and their Subsidiaries to be less
than (i) 2.75 to 1.00 at any time prior to July 28, 1996, or (ii) 3.00 to 1.00
on July 28, 1996 or at any time thereafter; such ratio to be determined as of
the last day of each fiscal quarter of the Borrowers for the period of four
fiscal quarters of the Borrowers then ended. For purposes of determining from
time to time the Borrowers' compliance with this subsection, each Person that is
a Borrower or a Subsidiary of a Borrower at the time of such determination shall
be deemed to have been a Borrower or a Subsidiary of a Borrower, as the case may
be, for the entire period relevant to such determination (i.e., in each case,
the period of four fiscal quarters of the Borrowers then ended) and each Person
that was a Borrower or Subsidiary of a Borrower at any time during such relevant
period, but is not longer a Borrower or Subsidiary of a Borrower, as the case
may be, at the time of such determination, shall be deemed not to have been a
Borrower or a Subsidiary of a Borrower, as the case may be, at any time during
such period.
(d) Ratio of Senior Debt to Tangible Capital Funds with Minimum
Tangible Capital Funds and Tangible Net Worth. Permit or suffer both of either
(i) and (ii) below or (i) and (iii) below to occur at any time:
(i) the ratio of (A) Consolidated Senior Debt of the Borrowers and
their Subsidiaries to (B) Consolidated Tangible Capital Funds of the Borrowers
and their Subsidiaries to exceed (1) at the end of each of the Borrowers' fiscal
quarters ending on or about October 31, 1995 and January 31, 1996, 5.50 to 1.00,
(2) at the end of the Borrowers' fiscal quarter ending on or about April 30,
1996, 5.00 to 1.00, (3) at the end of the Borrowers' fiscal quarter ending on or
about July 31, 1996, 4.50 to 1.00, (4) at the end of the Borrowers' fiscal
quarter ending on or about October 31, 1996, 4.00 to 1.00, (5) at the end of the
Borrowers' fiscal quarter ending on or about January 31, 1997, 3.50 to 1.00, (6)
at the end of the Borrowers' fiscal quarter ending on or about April 30, 1997,
3.00 to 1.00, and (7) at the end of the Borrowers' fiscal quarter ending on or
about July 31, 1997 or at any time thereafter, 2.50 to 1.00.
(ii) the Consolidated Tangible Capital Funds of the Borrowers and
their Subsidiaries to be less than the sum of (A) $15,000,000 plus (B) 50% of
the Consolidated Cumulative Net Income of the Borrowers and their Subsidiaries
for the period from the completion of the IPO through the end of the latest
fiscal quarter of the Borrowers prior to the date of determination.
(iii) the Consolidated Tangible Net Worth of the Borrowers and
their Subsidiaries to be less than (i) as of the end of any fiscal year of the
Borrowers commencing with the Borrowers' fiscal year ending in 1994, the sum of
(A) $7,500,000 plus (B) an amount equal to 50% of the Consolidated Cumulative
Net Income of the Borrowers and their Subsidiaries for each fiscal year of the
Borrowers ending in 1996 and thereafter.
<PAGE>
ARTICLE 2. CONDITIONS PRECEDENT TO AMENDMENTS
As conditions precedent to the effectiveness of the amendments to the Credit
Agreement set forth in Article 1 of this Amendment, the Banks shall receive the
following documents and the following matters shall be completed, all in form
and substance satisfactory to the Agent:
2.1 Certified copies of such documents evidencing necessary corporate action
of each Borrower with respect to this Amendment and the transactions
contemplated hereby as the Agent may reasonably request.
2.2 The Borrowers shall have paid to the Banks a fee for this Amendment in
the amount of $20,000. Such fee shall be shared between the Banks as follows:
$12,727 for NBD and $7,273 for PNC.
2.3 Such other documents and agreements reasonably requested by the Agent.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Amendment, each Borrower
represents and warrants that:
3.1 The execution, delivery and performance by the Borrowers of this
Amendment have been duly authorized by all necessary corporate action and do not
and will not (a) require any consent or approval of the stockholders of any
Borrower, (b) violate any provisions of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award presently in effect having
applicability to any Borrower or of the Articles of Incorporation or By-Laws of
any Borrower, or (c) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which any Borrower is a party or by which any Borrower or its
properties may be bound or affected.
3.2 No authorization, consent, approval, license, exemption of or filing,
declaration or registration with any governmental authority or any
non-governmental person or entity, including without limitation any creditor or
stockholder of any Borrower, is required on the part of any Borrower in
connection with the execution, delivery and performance of this Amendment or the
transactions contemplated hereby or as a condition to the legality, validity or
enforceability of this Amendment.
3.3 This Amendment is a legal, valid and binding obligation of the Borrowers
enforceable against the Borrowers in accordance with its terms.
3.4 After giving effect to the amendments contained in Article 1 of this
Amendment and to Section 4.2 of this Amendment, the representations and
warranties contained in Article IV of the Credit Agreement are true on and as of
the date hereof with the same force and effect as if made on and as of the date
hereof, provided that neither (a) Stature nor (b) either of Motor Products-Ohio
or Great Bend shall be deemed a "Borrower" with respect to, but only with
respect to, such representations and warranties regarding historical matters
involving only, respectively, (a) the Borrowers other than Stature or (b) the
Borrowers other than Stature, Motor Products-Ohio and Great Bend.
<PAGE>
ARTICLE 4. MISCELLANEOUS
4.1 If any Borrower shall fail to perform or observe any term, covenant or
agreement in this Amendment, or any representation or warranty made by any
Borrower in this Amendment shall prove to have been incorrect in any material
respect when made, such occurrence shall be deemed to constitute an Event of
Default.
4.2 All references to the Credit Agreement in any agreement, certificate or
instrument referred to in the Credit Agreement, or delivered pursuant thereto or
in connection therewith or in any other document, hereafter shall be deemed
references to the Credit Agreement, as amended hereby.
4.3 All agreements, certificates and instruments executed pursuant to the
Credit Agreement or in connection therewith and, subject to the amendments
herein provided, the Credit Agreement, shall in all respects continue in full
force and effect and are hereby ratified and confirmed.
4.4 Capitalized terms used but not defined in this Amendment shall have the
respective meanings ascribed thereto in the Credit Agreement.
4.5 This Amendment shall be governed by and construed in accordance with the
laws of the State of Michigan.
4.6 This Amendment may be signed upon any number of counterparts with the
same effect as if the signatures thereto were upon the same instrument.
4.7 The Borrowers jointly and severally agree to pay the reasonable fees and
expenses of Dickinson, Wright, Moon, Van Dusen & Freeman, counsel for the Agent,
in connection with the negotiation and preparation of this Amendment and the
documents referred to herein and the consummation of the transactions
contemplated hereby, and in connection with advising the Agent as to its rights
and responsibilities with respect thereto.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered as of the date first above written.
BORROWERS: OWOSSO CORPORATION
By: /s/JOHN H. WERT, JR.
-----------------------------
Its: SENIOR V.P. - FINANCE
-------------------------
AHAB INVESTMENT COMPANY
By: /s/ NORMAN J. SHUMAN
-----------------------------
Its: Vice President
-------------------------
CRAMER COMPANY
By: /s/ THOMAS L. FRENCH
-----------------------------
Its: Vice President
-------------------------
DEWEZE MANUFACTURING, INC.
By: /s/ THOMAS L. FRENCH
-----------------------------
Its: Vice President
-------------------------
THE LANDOVER COMPANY
By: THOMAS L. FRENCH
-----------------------------
Its: Vice President
-------------------------
<PAGE>
MOTOR PRODUCTS-OWOSSO CORPORATION
By: THOMAS L. FRENCH
-----------------------------
Its: Vice President
-------------------------
GREAT BEND MANUFACTURING
COMPANY, INC.
By: THOMAS L. FRENCH
-----------------------------
Its: Vice President
-------------------------
SNOWMAX, INCORPORATED
By: THOMAS L. FRENCH
-----------------------------
Its: Vice President
-------------------------
SOONER TRAILER MANUFACTURING CO.
By: THOMAS L. FRENCH
-----------------------------
Its: Vice President
-------------------------
<PAGE>
MOTOR PRODUCTS-OHIO CORPORATION
By: THOMAS L. FRENCH
-----------------------------
Its: Vice President
-------------------------
STATURE ELECTRIC, INC.
By: THOMAS L. FRENCH
-----------------------------
Its: Vice President
-------------------------
Agent and Banks: NBD BANK, as Agent and as a Bank
By: /s/ WILLIAM C. GOODHUE
-----------------------------
Its: Vice President
-------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ MARK E. BEVILACQUA
-----------------------------
Its:
-------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-27-1996
<PERIOD-END> APR-28-1996
<CASH> 502,959
<SECURITIES> 0
<RECEIVABLES> 19,961,294
<ALLOWANCES> 222,416
<INVENTORY> 20,693,264
<CURRENT-ASSETS> 43,183,790
<PP&E> 46,673,979
<DEPRECIATION> 21,465,736
<TOTAL-ASSETS> 108,390,136
<CURRENT-LIABILITIES> 18,309,304
<BONDS> 52,906,813
0
13,527,746
<COMMON> 58,650
<OTHER-SE> 25,459,227
<TOTAL-LIABILITY-AND-EQUITY> 108,390,136
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<INCOME-CONTINUING> 906,479
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