UNITED STATES
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
For the Quarterly Period Ended January 2, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-25l02
BRIDGEPORT MACHINES, INC.
(exact name of registrant as specified in its charter)
Delaware 06-ll69678
(State of Incorporation) (IRS Employer Identification No.)
500 Lindley Street, Bridgeport, CT 06606
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code:
(203) 367-365l
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
The number of shares of Issuer's Common Stock, $.0l par value, outstanding on
January 2, 1999 was 5,704,404 shares.
<PAGE>
BRIDGEPORT MACHINES, INC.
AND SUBSIDIARIES
INDEX
Part I - FINANCIAL INFORMATION
- ------------------------------
Item l. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
January 2, 1999 and March 28, 1998
Consolidated Statements of Operations for
the three month and nine month periods
ended January 2, 1999 and
December 27, 1997
Consolidated Statements of Stockholders'
Equity for the nine month periods ended
January 2, 1999 and December 27, 1997
Consolidated Statements of Cash Flows
for the nine month periods ended
January 2, 1999 and December 27, 1997
Notes to Consolidated Financial Statements
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Part II - OTHER INFORMATION
- ---------------------------
Item l-5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Signatures
<PAGE>
BRIDGEPORT MACHINES, INC.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Quarterly Report on Form 10-Q and the Company's previously filed Annual Reports
on Form 10-K is forward-looking, such as information relating to the expansion
of the use of the Company's products into the factory floor market, expansion of
the Company's marketing efforts into foreign markets, the Company's ability to
develop additional sources of supply, the Company's shipment of its current
backlog, the Company's expected expenditures on environmental matters, the
Company's use of cash in operating activities, the Company's ability to
satisfactorily resolve any outstanding litigation, the ability of the Company to
meet working capital needs, and the effect on the Company of the adoption of
certain accounting standards. Such forward-looking information involves
important risks and uncertainties that could significantly affect expected
results in the future from those expressed in any forward-looking statements
made by, or on behalf of, the Company. These risks and uncertainties include,
but are not limited to, uncertainties relating to general economic conditions,
product introductions, contingent liabilities, changes in currency exchange
rates, the mix of products sold and the profit margins thereon, order
cancellations or reduced bookings by customers or distributors, discounting
necessitated by price competition, and general market conditions.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
January 2, March 28,
l999 l998
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ................................... $ 4,390 $ 4,892
Trade accounts receivable,
less allowance of $1,808
and $1,551, respectively ............. 30,626 39,236
Inventories ............................ 59,315 66,707
Deferred income taxes .................. 3,100 3,100
Prepaid expenses and other current
assets ............................... 685 1,190
--------- ---------
Total current assets ............... 98,116 115,125
PROPERTY, PLANT AND EQUIPMENT
Land ................................... 348 351
Buildings, improvements and
leasehold improvements ............... 4,239 4,081
Machinery and equipment ................ 20,691 19,880
Furniture and fixtures ................. 6,284 5,979
--------- ---------
31,562 30,291
Less: Accumulated depreciation ................ (12,770) (10,586)
--------- ---------
Property, plant and equipment,
net ............................. 18,792 19,705
--------- ---------
INVESTMENTS IN AND ADVANCES TO AFFILIATES ...... 935 859
OTHER ASSETS, net of accumulated
amortization of $331 and
$1,585 respectively .......................... 318 421
--------- ---------
Total assets ...................... $ 118,161 $ 136,110
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
January 2, March 28,
1999 l998
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdrafts ....................... $ 1,401 $ 2,386
Working capital revolver .............. 18,166 23,106
Accounts payable ...................... 11,013 20,153
Accrued expenses ...................... 13,434 14,396
Income taxes payable .................. 219 1,001
Current portion of long-term debt
obligations ......................... 2,418 2,483
------------ ------------
Total current liabilities ........ 46,651 63,525
LONG-TERM DEBT OBLIGATIONS .................... 1,400 3,142
OTHER LONG-TERM LIABILITIES ................... 120 120
------------ ------------
Total liabilities ................ 48,171 66,787
STOCKHOLDERS' EQUITY
Preferred stock, $.0l par value,
2,000,000 shares authorized,
no shares issued .................... -- --
Common stock, $.0l par value,
13,000,000 shares authorized;
5,704,404 shares issued
at January 2, 1999 and
5,702,404 shares issued
at March 28, 1998 ................... 57 57
Capital in excess of par value ........ 38,533 38,513
Retained earnings--subsequent to
reclassification of $6,750
deficit as part of the quasi-
reorganization as of January 3,
l993 ................................ 31,475 30,991
Accumulated other comprehensive income:
Cumulative translation adjustment ... 909 271
Treasury stock at cost, 110,500 shares (984) (509)
------------ ------------
Total stockholders' equity ....... 69,990 69,323
------------ ------------
Total liabilities and stock-
holders' equity .................. $ 118,161 $ 136,110
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND NINE MONTH PERIODS
ENDED JANUARY 2, 1999 AND DECEMBER 27, 1997
(In Thousands, Except Per Share Amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
January 2, December 27, January 2, December 27,
1999 1997 1999 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ........... $ 41,885 $ 58,728 $ 141,418 $ 158,170
Cost of sales ....... 33,027 45,632 111,718 122,959
--------- --------- --------- ---------
Gross profit ...... 8,858 13,096 29,700 35,211
Selling, general and
administrative
expenses .......... 8,301 9,774 27,067 28,706
--------- --------- --------- ---------
Operating income . 557 3,322 2,633 6,505
Interest expense .... (590) (654) (1,869) (1,955)
Other income
(expense), net .... (186) 222 (181) 268
--------- --------- --------- ---------
Income (loss)
before provision
(benefit) for
income taxes ..... (219) 2,890 583 4,818
Provision (benefit)
for income taxes . (97) 1,166 99 2,350
--------- --------- --------- ---------
Net income (loss) $ (122) $ 1,724 $ 484 $ 2,468
========= ========= ========= =========
Basic Earnings (loss)
Per Share ......... $ (0.02) $ 0.30 $ 0.09 $ 0.44
========= ========= ========= =========
Diluted Earnings
(loss) Per Share .. $ (0.02) $ 0.30 $ 0.09 $ 0.43
========= ========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTH PERIODS ENDED JANUARY 2, 1999 AND DECEMBER 27, 1997
(In Thousands)
ACCUMULATED
OTHER
COMPENHENSIVE
INCOME:
CAPITAL IN CUMULATIVE TOTAL
COMMON EXCESS OF RETAINED TRANSLATION TREASURY STOCKHOLDERS'
STOCK PAR VALUE EARNINGS ADJUSTMENT STOCK EQUITY
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, March 29, 1997 ..... $ 57 $ 38,285 $ 27,076 $ 168 $ -- $ 65,586
--------
Comprehensive Income:
Net income for the nine
months ended December
27, 1997 ................ -- -- 2,468 -- -- 2,468
Other Comprehensive Income:
Translation adjustment
for the nine months
ended December 27,
1997 -- -- -- 356 -- 356
--------
Total Comprehensive
Income ........... 2,824
--------
Exercise of stock options
for Common Stock .......... -- 8 -- -- -- 8
Purchase of Common Stock
for treasury ............ -- -- -- -- (509) (509)
-------- -------- -------- -------- -------- --------
BALANCE, December 27, 1997 .. $ 57 $ 38,293 $ 29,544 $ 524 $ (509) $ 67,909
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTH PERIODS ENDED JANUARY 2, 1999 AND DECEMBER 27, 1997
(In Thousands)
ACCUMULATED
OTHER
COMPENHENSIVE
INCOME:
CAPITAL IN CUMULATIVE TOTAL
COMMON EXCESS OF RETAINED TRANSLATION TREASURY STOCKHOLDERS'
STOCK PAR VALUE EARNINGS ADJUSTMENT STOCK EQUITY
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, March 28, 1998 ..... $ 57 $ 38,513 $ 30,991 $ 271 $ (509) $ 69,323
--------
Comprehensive Income:
Net income for the nine
months ended January 2,
l999 .................... -- -- 484 -- -- 484
Other Comprehensive Income:
Translation adjustment
for the nine months
ended January 2, 1999 . -- -- -- 638 -- 638
--------
Total Comprehensive
Income ............ 1,122
--------
Exercise of stock options
for common stock .......... -- 20 -- -- -- 20
Purchase of Common Stock
for treasury ................ -- -- -- -- (475) (475)
-------- -------- -------- -------- -------- --------
BALANCE, January 2, 1999 .... $ 57 $ 38,533 $ 31,475 $ 909 $ (984) $ 69,990
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED JANUARY 2, 1999 AND DECEMBER 27, 1997
(In Thousands)
January 2, December 27,
1999 1997
-------- --------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net income ..................................... $ 484 $ 2,468
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization ........... 2,714 2,525
Net (gain) on sale of property,
plant and equipment ..................... (16) --
Changes in operating assets and
liabilities:
Decrease (increase) in net trade
accounts receivable ...................... 8,771 1,311
Decrease (increase) in inventories ......... 7,524 4,150
Decrease (increase) in prepaid expenses
and other current assets ................. 516 502
Decrease (increase) in other assets ........ (52) 295
(Decrease) increase in bank overdrafts ..... (984) (558)
Increase (decrease) in accounts payable
and accrued expenses ..................... (11,115) (3,744)
-------- --------
Total adjustments ........................ 7,358 4,481
-------- --------
Cash flows provided by (used in)
operating activities ......................... 7,842 6,949
-------- --------
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
Capital expenditures ........................... (1,208) (2,210)
Proceeds from sale of property,
plant and equipment .......................... 21 9
Purchase of certain assets of a distributor .... -- (1,245)
-------- --------
Cash flows provided by (used in)
investing activities ....................... (1,187) (3,446)
-------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRIDGEPORT MACHINES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED JANUARY 2, 1999 AND DECEMBER 27, 1997
(In Thousands)
January 2, December 27,
1999 1997
------- -------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES:
Sale of common stock ........................... $ 20 $ 8
Borrowings (payments) under working
capital revolver, net ........................ (4,755) (301)
Borrowings (payments) of other debt and
capitalized lease obligations ................ (2,039) (1,927)
Purchase of Treasury Stock ..................... (475) (509)
------- -------
Cash flows provided by (used in)
financing activities ....................... (7,249) (2,729)
------- -------
Effect of exchange rate changes
on cash ...................................... 92 (45)
------- -------
Net change in cash ........................... (502) 729
CASH, beginning of period ...................... 4,892 2,992
------- -------
CASH, end of period ............................ $ 4,390 $ 3,721
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid .................................. $ 1,595 $ 1,994
Income taxes paid, net ......................... 848 4,048
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
BRIDGEPORT MACHINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND BASIS OF PRESENTATION
Bridgeport Machines, Inc. and subsidiaries (the "Company") is a
manufacturer and distributor of metal cutting machine tools and
accessories. The Company manufactures its products in the U.S. and
Europe. Sales are principally in North America and Europe. A
substantial portion of the end users of the Company's products are
small and medium sized independent job shops who produce machined parts
for customers in a wide variety of industries.
The consolidated balance sheet as of January 2, 1999 and the related
consolidated statements of operations, stockholders' equity and cash
flows for the nine months ended January 2, 1999 and December 27, 1997
have been prepared by the Company without audit. In the opinion of
management, all adjustments necessary to present fairly the financial
position, results of operations and cash flows as of or for the periods
ended January 2, 1999 and December 27, 1997 have been made. The
accounting principles followed during interim periods are generally
consistent with those applied for annual periods and are described in
the Company's financial statements included in its Form 10-K filed with
the Securities and Exchange Commission (the "SEC").
2. INTERIM STATEMENTS
The following accounting policies which are applied in the preparation
of the interim financial statements are different from those applied in
the year-end financial statements:
Inventories:
Inventories are valued at year-end based upon actual inventory
on hand verified by a physical count. Inventories are adjusted
during interim periods for purchases, production and shipments
based upon standard costs for material, labor and overhead.
Income Taxes:
The income tax provision is calculated based upon the
estimated tax rate for the period for each tax jurisdiction.
3. EARNINGS PER SHARE
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("FAS 128"), was issued. FAS 128 established new
standards for computing and presenting EPS. The Company adopted the new
standard in the third quarter of fiscal 1998. Earnings per share
information for prior periods has been restated using the new
guidelines.
<PAGE>
Basic earnings per common share for the three and nine months ended
January 2, 1999 and December 27, 1997 are calculated by dividing net
income by weighted average common shares outstanding during the period.
Diluted earnings per common share for the three and nine months ended
January 2, 1999 and December 27, 1997 are calculated by dividing net
income by weighted average common shares outstanding during the period
plus dilutive potential common shares which are determined as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
Jan. 2, Dec. 27, Jan. 2, Dec. 27,
1999 1997 1999 1997
----- ----- ----- -----
(amounts in thousands)
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding ........... 5,606 5,680 5,636 5,669
Effect of dilutive
options to purchase
common stock ................. 0 11 14 9
Adjusted weighted
average common shares ........ 5,606 5,691 5,650 5,678
</TABLE>
Stock options to purchase 347,510 and 198,600 shares of common stock at
January 2, 1999 and December 27, 1997, respectively, at prices ranging
from $9.50 to $16.25 and from $10.75 to $16.25 per share were
outstanding at January 2, 1999 and December 27, 1997, respectively,
and did not meet the requirements to be included in the computation of
diluted earnings per share for the three month periods. These options
expire in fiscal years 2000 to 2003.
Dilutive potential common shares are calculated in accordance with the
treasury stock method which assumes that proceeds from the exercise of
all options are used to repurchase common stock at market value. The
number of shares remaining after the proceeds are exhausted represents
the potentially dilutive effect of the securities.
4. COMPREHENSIVE INCOME
In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("FAS 130") was issued. FAS 130
requires the disclosure of comprehensive income to reflect changes in
equity that result from transactions and economic events from non-owner
sources. Comprehensive income for the three and nine months ended
January 2, 1999 and December 27, 1997 presented below include foreign
currency translation items. There was no tax expense or tax benefit
associated with the foreign currency translation items.
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
Jan. 2, Dec. 27, Jan. 2, Dec. 27,
1999 1997 1999 1997
------ ------ ------ ------
(amounts in thousands)
<S> <C> <C> <C> <C>
Net income (loss) ................. $ (122) $1,724 $ 484 $2,468
Foreign currency
translation adjustments ......... (680) 896 638 356
------ ------ ------ ------
Comprehensive income (loss) ....... $ (802) $2,620 $1,122 $2,824
====== ====== ====== ======
</TABLE>
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"), which changes the way public companies
report information about segments. SFAS No. 131, which is based on the
management approach to segment reporting, includes requirements to
report selected segment information quarterly, and entity-wide
disclosures about products and services, major customers, and the
material countries in which the entity holds assets and reports
revenues. The first disclosure required by this statement will be in
the Company's annual financial statements for the year ending April 3,
1999. The Company does not expect adoption of the statement to have a
significant impact on the presentation of its financial statements.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which provides new guidelines for accounting for derivative
instruments. The Company is currently analyzing what, if any, impact
the new guideline will have on the Company. This new statement is
effective for financial periods beginning after June 15, 1999.
6. ACQUISITION
On August 1, 1997, the Company acquired certain assets and assumed
certain liabilities of its German distributor. The acquisition was
accounted for as a purchase. The Company paid in installments
approximately $1.8 million in cash for the assets acquired and assumed
approximately $2.5 million of liabilities. The purchase price
approximated book value. The purchase did not meet the significant
subsidiary rules of SEC reporting requirements.
7. COMMITMENTS AND CONTINGENCIES
The Company is subject to various legal proceedings, claims and
liabilities which have arisen in the ordinary course of its business.
In the opinion of management, the amount of ultimate liability, if any,
with respect to these actions will not materially affect the financial
results of operations or financial position of the Company.
<PAGE>
BRIDGEPORT MACHINES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items reflected in the Company's
consolidated financial statements:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
January 2, December 27, January 2, December 27,
1999 1997 1999 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 21.1 22.3 21.0 22.3
Selling, general and
administrative
expenses 19.8 16.6 19.1 18.1
Operating income 1.3 5.7 1.9 4.1
Interest 1.4 1.1 1.3 1.2
expense
Other income (expense) (0.4) 0.4 (0.1) 0.2
Income tax expense
(benefit) (0.2) 2.0 0.1 1.5
Net income (loss) (0.3) 2.9 0.3 1.6
</TABLE>
FISCAL CALENDAR
The Company's fiscal year is the 52 or 53 week period ending Saturday
nearest to March 31. Fiscal 1998 was a 52 week year while fiscal 1999 is a 53
week year. The additional week in fiscal 1999 is included in the second quarter
of fiscal 1999. As a result, the nine months ended January 2, 1999 include 40
weeks, while the nine months ended December 27, 1997 include 39 weeks.
COMPARISON OF THE THREE MONTHS ENDED JANUARY 2, 1999 ("THIRD QUARTER OF FISCAL
1999") TO THE THREE MONTHS ENDED DECEMBER 27, 1997 ("THIRD QUARTER OF FISCAL
1998")
Net sales were $41.9 million in the third quarter of fiscal l999, a
decrease of $16.8 million, or 28.7%, as compared to the third quarter of fiscal
l998. The decrease in sales consists primarily of a decrease in sales of
approximately $13.6 million, $2.1 million and $1.1 million in North America,
Europe and the Pacific Rim/South America, respectively. These decreases in sales
are primarily a result of weaker market conditions in the United States and the
Pacific Rim/South America. The decrease in sales in Europe was comprised of
decreased sales in the United Kingdom of $4.2 million partially offset by
increased sales in continental Europe. The decrease in sales in the United
Kingdom is primarily a result of weaker market conditions.
<PAGE>
During the third quarter of fiscal 1999, the Company's net incoming
orders in North America and Europe were approximately 44% and 63% less,
respectively, than the incoming orders in the third quarter of fiscal 1998.
These declines appear to represent a cyclical trend in the United States and the
United Kingdom, the Company's two principal markets, of declining purchases by
customers for machine tools in the segment of the machine tool industry in which
the Company participates. The Company cannot predict for what period of time the
decreased level of customer purchases could continue, whether the level of
customer purchases will decline further or the level at which incoming orders
will be.
Backlog at January 2, 1999 was approximately $19.5 million compared
with approximately $28.3 million at October 3, 1998. Of the backlog at January
2, 1999, approximately $7.7 million relates to sales primarily in North America
and approximately $11.8 million relates to sales primarily in Europe. The
Company's backlog balances fluctuate as a result of many factors including
length of time to deliver products, new product introductions and market
conditions. At the current levels of backlog, the Company is more dependent on
future incoming orders than it has been in the recent past. During the third
quarter of fiscal 1999, the Company's incoming orders in North America and
Europe were approximately 44% and 63% less, respectively, than the incoming
orders in the third quarter of fiscal 1998.
Gross profit was $8.9 million in the third quarter of fiscal l999, a
decrease of $4.2 million, or 32.4%, as compared to the third quarter of fiscal
l998. Gross profit declined approximately $4.0 million in the Company's U.S.
operations due to decreased North American sales. Gross profit as a percent of
net sales was 21.1% compared with 22.3% in the third quarter of fiscal 1998. The
decline in gross profit as a percent of sales was predominately due to the
decline in sales in North America which resulted in a lower profit margin in the
Company's U.S. operations. As a result of lower North American sales, the
Company's production volume decreased in its U.S. operations resulting in less
absorption of its fixed costs.
Selling, general and administrative expenses were $8.3 million in the
third quarter of fiscal l999, a decrease of $1.5 million, or 15.1%, as compared
to the third quarter of fiscal l998. The decrease consisted of $0.3 million in
advertising expenses, $0.5 million in compensation and related expenses and $0.4
million research and development expenditures. As a percentage of net sales,
selling, general and administrative expenses were 19.8% in the third quarter of
fiscal l999, as compared to 16.6% for the third quarter of fiscal l998.
Operating income was $0.6 million for the third quarter of fiscal l999,
as compared to $3.3 million for the third quarter of fiscal l998.
Interest expense was $0.6 million for the third quarter of fiscal l999
as compared to $0.7 million for the third quarter of fiscal l998.
Benefit for income taxes was $0.1 million in the third quarter of
fiscal l999, compared to a provision for income taxes of $1.2 million in the
third quarter of fiscal 1998. During the third quarter of fiscal 1999 the
Company utilized net operating loss carryforwards in its German and Malaysian
operations. The tax provision in the third quarter of fiscal 1998 primarily
represents a tax provision for the U.S. operating results. In addition, tax
benefits for losses incurred in the Company's German operations were not
established in the third quarter of fiscal 1998 because they were not currently
recognizable for tax return purposes.
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED JANUARY 2, 1999 TO THE NINE MONTHS ENDED
DECEMBER 27, 1997
Net sales were $141.4 million for the nine months ended January 2,
1999, a decrease of $16.8 million, or 10.6%, as compared to the nine months
ended December 27, 1997. Net sales in North America and the Pacific Rim/South
America decreased approximately $24.8 million and $3.3 million, respectively, in
the nine months ended January 2, 1999 as compared to the nine months ended
December 27, 1997. Net sales in Europe increased by approximately $11.4 million
in the nine months ended January 2, 1999 as compared to the nine months ended
December 27, 1997. The increase in sales in Europe was a result of better market
conditions in continental Europe, while the decrease in sales in North America
and the Pacific Rim/South America is due to weaker market conditions.
Since the beginning of fiscal 1999, the Company has experienced
declining net incoming orders in certain markets as compared to fiscal 1998.
Fiscal year-to-date, net incoming orders in North America and the United Kingdom
were approximately 31% and 35% less, respectively, than the incoming orders in
the same fiscal year-to-date period. These declines appear to represent a
cyclical trend in the United States and the United Kingdom, the Company's two
principal markets, of declining purchases by customers for machine tools in the
segment of the machine tool industry in which the Company participates. The
Company cannot predict for what period of time the decreased level of customer
purchases could continue, whether the level of customer purchases will decline
further or the level at which incoming orders will be.
Gross profit was $29.7 million for the nine months ended January 2,
1999, a decrease of $5.5 million, or 15.7%, as compared to the nine months ended
December 27, 1997. Gross profit declined approximately $7.9 million in the
Company's U.S. operations due to decreased North American sales. This decline
was offset somewhat by an increase in gross profit in the Company's European
operations due primarily to increased continental European sales. The gross
profit as a percentage of net sales was 21.0% for the nine months ended January
2, 1999 versus 22.3% for the nine months ended December 27, 1997. Gross profit
as a percent of sales declined primarily due to a decline in sales in North
America. As a result of lower North American sales, the Company's production
volume decreased in its U.S. operations resulting in less absorption of its
fixed costs.
Selling, general and administrative expenses were $27.1 million for the
nine months ended January 2, 1999, a decrease of $1.6 million, or 5.7%, as
compared to the nine months ended December 27, 1997. The decrease consisted of
$0.5 million in advertising expenses, $0.4 million in compensation and related
expenses, and $0.5 million research and development expenditures. As a
percentage of net sales, selling, general and administrative expenses were 19.1%
for the nine months ended January 2, 1999, as compared to 18.1% for the nine
months ended December 27, 1997.
Operating income was $2.6 million for the nine months ended January 2,
1999, as compared to $6.5 million for the nine months ended December 27, 1997.
Interest expense was $1.9 million for the nine months ended January 2,
1999 and $2.0 million for the nine months ended December 27, 1997.
Provision for income taxes was $0.1 million for the nine months ended
January 2, 1999, compared to a tax provision of $2.4 million for the nine months
ended December 27, 1997. The tax provision for the nine months ended January 2,
1999 reflects a benefit in the Company's German operations for the utilization
<PAGE>
of net operating loss carryforwards. The tax provision in the nine months ended
December 27, 1997 primarily represents a tax provision for the U.S. operating
results. In addition, tax benefits for losses incurred in the Company's German
operations in the nine months ended December 27, 1997 were not established
because they were not currently recognizable for tax return purposes.
FOREIGN OPERATIONS:
During the nine months ended January 2, 1999, net sales outside North
America represented approximately 51.9% of total net sales, as compared to 41.3%
for the nine months ended December 27, 1997. A substantial portion of these net
sales were made by the Company's European operations.
Generally, from time to time, the Company enters into forward exchange
contracts to provide economic hedges against foreign currency fluctuations
primarily on its intercompany sales transactions between its U.S. and U.K.
operations. At January 2, 1999, the Company did not have any outstanding
commitments under forward purchase contracts.
LIQUIDITY AND CAPITAL RESOURCES:
As of January 2, 1999, the Company had working capital of $51.5 million
compared with $51.6 million at March 28, 1998. The Company meets its short-term
financing needs through cash from operations and its revolving credit facility,
as amended, which could provide for maximum borrowing, subject to certain
limitations, of up to $24.5 million in the United States and $19.5 million in
the United Kingdom. The amount the Company can actually borrow is based upon a
calculation using, among other items, the Company trade accounts receivable and
inventories. As a result, the actual available amount the Company can borrow may
be less than the combined maximum borrowing limits of $44 million. As of January
2, 1999, the Company could borrow approximately an additional $19.1 million
under the terms of the revolving credit facility, as amended, beyond the balance
already borrowed.
In February 1999, the Company executed a waiver and amendment to its
revolving credit facility to change, among other items, the senior interest
coverage covenant, as defined in the credit facility, from a requirement that
the Company maintain a coverage ratio of at least 4.0 to 1.0, measured at the
end of each fiscal quarter, to 1.0 to 1.0, measured at the end of each fiscal
quarter, until April 3, 2000 and to waive any event of default that occurred as
a result of the Company not achieving the required ratio of 4.0 to 1.0 as of
January 2, 1999.
The table below presents the summary of cash flow for the periods
indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
January 2, 1999 December 27, 1997
--------------- -----------------
(amounts in thousands)
<S> <C> <C>
Net cash provided by (used in)
operating activities ................. $ 7,842 $ 6,949
Net cash provided by (used in)
investing activities ................. (1,187) (3,446)
Net cash provided by (used in)
financing activities .................. (7,249) (2,729)
</TABLE>
<PAGE>
Net cash provided by (used in) operating activities fluctuates between
periods primarily as a result of differences in net income, the timing of the
collection of accounts receivable, purchase of inventory, level of sales and
payment of accounts payable. Included in net cash provided by (used in)
investing activities in the nine months ended December 27, 1997 is a $1.2
million payment for the purchase of certain assets as discussed in Note 6 to the
financial statements. The net cash provided by (used in) financing activities in
the nine months ended January 2, 1999 and December 27, 1997, represents
primarily net borrowings or repayments of debt.
The Company believes that cash generated from operations and borrowings
available under the revolving credit facility will be sufficient to meet its
working capital and capital expenditure requirements for at least 12 months from
January 2, 1999. Such facility, together with cash from operations, is expected
to be sufficient to enable the Company to meet its working capital and capital
expenditure needs for the longer term. However, there can be no assurance that
liquidity would not be adversely impacted by a decline in general economic
conditions or other factors, or that future credit facilities will be available.
CHANGES IN FINANCIAL POSITION:
At January 2, 1999, accounts receivable and inventories decreased $8.6
million and $7.4 million, respectively, as compared to March 28, 1998 primarily
due to lower sales.
ECONOMIC CYCLES:
The overall market for machine tools is cyclical, reflecting economic
conditions, production capacity utilization, changes in tax and fiscal policies,
corporate profitability and financial condition as well as the general level of
business confidence. During the third quarter of fiscal 1999, the Company's
incoming orders in North America and Europe were approximately 44% and 63% less,
respectively, than the incoming orders in the third quarter of fiscal 1998.
These declines appear to represent a cyclical trend in the United States and the
United Kingdom, the Company's two principal markets, of declining purchases by
customers for machine tools in the segment of the machine tool industry in which
the Company participates. The Company cannot predict for what period of time the
decreased level of customer purchases could continue, whether the level of
customer purchases will decline further or the level at which incoming orders
will be.
YEAR 2000 READINESS DISCLOSURE:
Many companies may face potential serious business problems because
software applications and business equipment developed in the past may not
properly recognize future calendar dates due to Year 2000 limitations. These
problems could cause systems to become unstable, stop working or provide
incorrect data based upon dates.
<PAGE>
The Company is continuing its assessment of the impact on the Year 2000
issue on its operations. Based upon its assessment to date, the Company believes
that the majority of its significant internal computer operating and date
sensitive systems are Year 2000 compliant or will be able to operate after the
date change without having a material adverse impact on the Company's
operations. Part of this belief is based upon third party representations.
Discussions to date with third party suppliers have not indicated that any
significant problems will occur as a result of the Year 2000 that would
materially effect the Company's ability to operate. Many of the Company's
suppliers are still working on ensuring that they will be Year 2000 compliant.
Based on the current status of the Company's Year 2000 compliance assessment,
the estimated total costs to be incurred for all the Company's Year 2000 related
projects are not expected to exceed approximately $200,000. Such expenses will
be expensed as incurred and are exclusive of systems being replaced or upgraded
in the normal course of business.
In addition, the Company's customer base may also be facing problems
related to Year 2000. Such problems could affect their spending plans and thus
potentially impact the Company's future sales.
Due to the intricate nature of the Year 2000 problems that could arise
if the Company and other businesses with which it transacts business fail to
address this issue, such problems could result in a material financial risk to
the Company.
<PAGE>
PART II - OTHER INFORMATION
Item l Legal Proceedings
On August 12, 1998, the Company was named as a defendant in an action
filed by Alamo Iron Works, Inc. (the "Plaintiff") in the State of Texas
District Court. The Plaintiff alleges that the Company breached a
contract under which the Plaintiff distributed the Company's products
and that the Company performed tortious interference with the
Plaintiff's present and prospective business relationships and employee
relationships. The Plaintiff seeks among other things an award of
damages to compensate the Plaintiff for the above allegations.
Item 2 Changes in Securities None
Item 3 Defaults Upon Senior Securities None
Item 4 Submission of Matters to a
Vote of Security Holders None
Item 5 Other Information None
Item 6 Exhibits and Reports on Form 8-K Exhibit No.
-------------------------------- -----------
a) Exhibits
(2) Not Applicable
(4) Not Applicable
(l0) Material Contracts:
Consent and Amendment
No. 7 to Amended and
Restated Revolving
Credit, Term Loan and
Security Agreement 10.1
Waiver and Amendment No. 8
to Amended and Restated
Revolving Credit, Term Loan
and Security Agreement 10.2
(ll) Statement regarding computation of per share earnings
is not required because the relevant computation can
be determined from the material contained in the
Financial Statements included herein.
(l5) Not Applicable
(18) Not Applicable
(l9) Not Applicable
(22) Not Applicable
(23) Not Applicable
<PAGE>
(24) Not Applicable
(27) Financial Data Schedule 27
(99) Not Applicable
b) There were no reports or exhibits on Form 8-K filed
during the three months ended January 2, 1999.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
BRIDGEPORT MACHINES, INC.
(Registrant)
February 12, 1999 /s/ Dan L. Griffith
-------------------
By: Dan L. Griffith
President and
Chief Executive Officer
February 12, 1999 /s/ Walter C. Lazarcheck
------------------------
By: Walter C. Lazarcheck
Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
10.1 Consent and Amendment No. 7 to Amended and Restated
Revolving Credit, Term Loan and Security Agreement
10.2 Waiver and Amendment No. 8 to Amended and Restated
Revolving Credit, Term Loan and Security Agreement
27 Financial Data Schedule
EXHIBIT 10.1
CONSENT AND AMENDMENT NO. 7
TO
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 7 ("Amendment") is entered into as of November 24,
1998 by and among BRIDGEPORT MACHINES, INC. ("BMI"), BRIDGEPORT MACHINES LIMITED
("BML") and BRIDGEPORT MACHINES GmbH ("BMG") (BMI, BML and BMG each, a
"Borrower" and jointly and severally, the "Borrowers"); IBJ SCHRODER BANK &
TRUST COMPANY ("IBJS"), GENERAL ELECTRIC CAPITAL CORPORATION ("GECC") (IBJS and
GECC each, a "Lender" and jointly and severally, the "Lenders"); and IBJS, as
agent for the Lenders (in such capacity, the "Agent").
BACKGROUND
BMI, BML, Lenders and Agent are parties to an Amended and Restated
Revolving Credit, Term Loan and Security Agreement, dated as of December 23,
1994, as amended by: Amendment No. 1 to Amended and Restated Revolving Credit,
Term Loan and Security Agreement, dated as of March 31, 1995; Consent and
Amendment No. 2 to Amended and Restated Revolving Credit, Term Loan and Security
Agreement dated as of May 31, 1995; an Amended and Restated Consent and
Amendment No. 2 to Amended and Restated Revolving Credit, Term Loan and Security
Agreement dated as of June 28, 1995; an Amendment No. 3 to Amended and Restated
Revolving Credit, Term Loan and Security Agreement dated as of November 30,
1995; an Amendment No. 4 to Amended and Restated Revolving Credit, Term Loan and
Security Agreement dated as of August 2, 1996, wherein, among other things, BMG
was added as a Borrower; an Amendment No. 5 to Amended and Restated Revolving
Credit, Term Loan and Security Agreement dated as of March 21, 1997; and a
Consent and Amendment No. 6 to Amended and Restated Revolving Credit, Term Loan
and Security Agreement dated as of May 16, 1997 (as same may be further amended,
supplemented or otherwise modified from time to time, the "Loan Agreement"),
pursuant to which Lenders provide BMI, BML and BMG with certain financial
accommodations.
Borrowers have requested that Lenders amend certain provisions of the
Loan Agreement and Lenders are willing to do so on the terms and conditions
hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers by
Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the
conditions precedent set forth in Section 5 below:
<PAGE>
(a) The following definitions in Section 1.2 of the Loan
Agreement are hereby amended in their entirety to read as follows:
(i) "Domestic Revolving Interest Margin" for
Revolving Advances which are Prime Rate Domestic Loans or
Prime Rate U.K. Loans shall be zero percent (0%).
(ii) "Domestic Term Loan Interest Margin" for Prime
Rate Domestic Term Loans and Prime Rate U.K. Term Loans shall
be one quarter of one percent (.25%).
(iii) "Eurodollar Revolving Interest Margin" for
Revolving Advances consisting of Sterling Loans and Domestic
Loans shall be one and three quarters percent (1.75%).
(iv) "Eurodollar Term Loan Interest Margin" for
Eurodollar Rate Domestic Term Loans and Eurodollar Rate U.K.
Term Loans shall be two percent (2%).
(v) "Term" shall mean the Effective Date through
December 23, 2002.
(b) The following definitions are hereby added to the Loan
Agreement in appropriate alphabetical order:
"Deutschmark Equivalent" shall mean at any time for the
determination thereof the amount of Deutschmarks obtained by converting
the Dollar amount or Dollar Equivalent involved in such computation
into Deutschmarks at the spot rate for the purchase of Deutschmarks
with U.S. Dollars as quoted by IBJS at approximately 11:00 a.m. (New
York time) on any date of such determination.
"Dutch Line of Credit" shall mean an unsecured line of credit
provided to BML by a financial institution in The Netherlands on terms
and conditions satisfactory to Lenders under which an amount not
greater than the Guilder Equivalent of $200,000 will be outstanding at
any point in time.
"German Line of Credit" shall mean an unsecured line of credit
provided to BMG and/or any of its Subsidiaries by a financial
institution in the Republic of Germany on terms and conditions
satisfactory to Lenders under which an amount not greater than the
Deutschmark Equivalent of $1,250,000 will be outstanding at any point
in time.
"Guilder" shall mean lawful money of The Netherlands.
"Guilder Equivalent" shall mean at any time for the
determination thereof the amount of Guilders obtained by converting the
Dollar amount or Dollar Equivalent involved in such computation into
Guilders at the spot rate for the purchase of Guilders with U.S.
Dollars as quoted by IBJS at approximately 11:00 a.m. (New York time)
on any date of such determination.
(c) The definition of "Dollar Equivalent" is hereby amended by
adding "or Guilder" after "Deutschmark" wherever Deutschmark appears.
(d) Section 2.15 of the Loan Agreement is hereby amended in
its entirety to read as follows:
<PAGE>
"2.15. BMG Term Loan. The BMG Term Loan shall be payable with
respect to principal, in equal consecutive monthly installments
aggregating Deutschmarks equal to one-sixtieth of the original amount
of the BMG Term Loan per month payable on the last day of each
successive month, except that the final installment shall be in the
amount of the balance thereof and shall be due on July 31, 2001,
subject to acceleration upon the occurrence of a Default or Event of
Default under this Agreement or termination of this Agreement.
Notwithstanding any provision to the contrary herein, interest on the
BMG Term Loan shall be payable in arrears on the last day of each month
at a rate per annum equal to (a) 7.345% through December 23, 1999 and
(b) 6% for each month thereafter."
(e) Subclauses (i)(A) and (i)(B) of Section 3.2 of the Loan
Agreement are hereby amended in its entirety to read as follows:
"(A) for issuing or causing the issuance of a Letter of
Credit, a fee computed at a rate per annum of one and one-quarter
percent (1 1/4%) on the outstanding amount thereof from time to time
and (B) for issuing or causing the issuance of a Letter of Credit that
is not a standby Letter of Credit, a fee computed at a rate per annum
of one and one quarter percent (1 1/4%) of the original and each
increase in the face amount thereof for each 120 days or part thereof
of its term (the fees set forth in (A) and (B) referred to as "Letter
of Credit Fees") and"
(f) Section 3.4(a) of the Loan Agreement is hereby amended by
deleting "$1500" and inserting "$1000" in its place and stead.
(g) Section 7.3 of the Loan Agreement is hereby amended by
adding the following at the end thereof:
"or (iii) BMI may guarantee (x) the Deutschmark Equivalent of
up to $1,250,000 of BMG's obligations under the German Line of Credit
and (y) the Guilder Equivalent of up to $200,000 of BML's obligations
under the Dutch Line of Credit, provided in each case such guarantees
shall be unsecured and in form and substance satisfactory to Lenders."
(h) Section 7.8 of the Loan Agreement is hereby amended by
adding the following at the end thereof:
"or (iii) Indebtedness under the German Line of Credit and the
Dutch Line of Credit."
3. Consent by Lenders. BML has advised the Lenders that it desires to
open a Eurocurrency collection account at National Westminster Bank in the
United Kingdom and Lenders hereby consent to the opening of such account. Such
account will not be a blocked or dominion account as provided in Section 4.15
hereof and Borrowers agree to close such account immediately upon Agent's
request.
4. Reserves. Notwithstanding anything to the contrary contained in the
Loan Agreement, Agent shall not impose any Reserves with respect to any sums
outstanding under the Dutch Line of Credit or the German Line of Credit.
5. Conditions Precedent. This Consent and Amendment shall become
effective upon satisfaction of the following conditions precedent:
<PAGE>
(a) This Consent and Amendment shall have been executed by the
Lenders, the Borrowers and the Guarantor, in four counterparts, with executed
counterparts delivered to each of the parties.
(b) Agent shall have received opinions of counsel to BMI, BML
and BMG indicating that the transactions contemplated by this Amendment have
been properly authorized and that the documents executed and delivered in
connection therewith are the legal, valid and binding obligations of the
respective signatories.
(c) Agent shall have received an amendment fee of $60,562.50
to be shared equally by the Lenders.
6. Representations and Warranties.
(a) Borrowers hereby represent and warrant that as of the date
hereof:
(i) This Consent and Amendment and the Loan
Agreement, as amended hereby, constitute legal, valid and
binding obligations of Borrowers and are enforceable against
Borrowers in accordance with their respective terms.
(ii) Upon the effectiveness of this Consent and
Amendment, Borrowers hereby reaffirm their respective
covenants, representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and
agree that all such covenants, representations and warranties
shall be deemed to have been remade as of the effective date
of this Consent and Amendment.
(iii) No Event of Default or Default has occurred and
is continuing or would exist after giving effect to this
Consent and Amendment.
(iv) Borrowers have no knowledge of any facts which
would form the basis for any defense, counterclaim or offset
with respect to the Loan Agreement.
(b) Lenders hereby represent and warrant that this Consent and
Amendment and the Loan Agreement, as amended hereby, constitute legal, valid and
binding obligations of Lenders and are enforceable against Lenders in accordance
with their respective terms.
7. Effect on the Loan Agreement
(a) Upon the effectiveness of this Consent and Amendment, each
reference in the Loan Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import shall mean and be a reference to the Loan
Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan Agreement,
and all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
<PAGE>
(c) The execution, delivery and effectiveness of this Consent
and Amendment shall not operate as a waiver of any right, power or remedy of
Lenders, nor constitute a waiver of any provision of the Loan Agreement, or any
other documents, instruments or agreements executed and/or delivered under or in
connection therewith.
8. Governing Law. This Consent and Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns and shall be governed by and construed in accordance with the laws of
the State of New York.
9. Headings. Section headings in this Consent and Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Consent and Amendment for any other purpose.
10. Counterparts. This Consent and Amendment may be executed by the
parties hereto in one or more counterparts, each of which shall be deemed to be
an original and all of which taken together shall be deemed to constitute one
and the same agreement.
<PAGE>
IN WITNESS WHEREOF, this Consent and Amendment has been duly executed
as of the day and year first written above.
BRIDGEPORT MACHINES, INC.,
as Borrower and Guarantor
By: /s/ Yvonne L. Megenis
---------------------
Name: Yvonne L. Megenis
Title: Vice President-Treasurer
BRIDGEPORT MACHINES LIMITED,
as Borrower
By: /s/ Yvonne L. Megenis
---------------------
Name: Yvonne L. Megenis
Title: Attorney In Fact
BRIDGEPORT MACHINES GmbH,
as Borrower
By: /s/ Yvonne L. Megenis
---------------------
Name: Yvonne L. Megenis
Title: Attorney In Fact
IBJ SCHRODER BANK & TRUST COMPANY,
as Lender and as Agent
By: /s/ Robert R. Wallace
----------------------
Name: Robert R. Wallace
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
as Lender
By: /s/ Peggy Erlenkotter
---------------------
Name: Peggy Erlenkotter
Title: Duly Authorized Signatory
EXHIBIT 10.2
WAIVER AND AMENDMENT NO. 8
TO
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS WAIVER AND AMENDMENT NO. 8 ("Amendment") is entered into as of
February 12, 1999 by and among BRIDGEPORT MACHINES, INC.("BMI"), BRIDGEPORT
MACHINES LIMITED ("BML") and BRIDGEPORT MACHINES GmbH ("BMG") (BMI, BML and BMG
each, a "Borrower" and jointly and severally, the "Borrowers"); IBJ WHITEHALL
BUSINESS CREDIT CORPORATION (as successor in interest to IBJ Schroder Business
Credit Corporation as successor in interest to IBJ Schroder Bank & Trust
Company) ("IBJS"), GENERAL ELECTRIC CAPITAL CORPORATION ("GECC") (IBJS and GECC
each, a "Lender" and jointly and severally, the "Lenders"); and IBJS, as agent
for the Lenders (in such capacity, the "Agent").
BACKGROUND
BMI, BML, Lenders and Agents are parties to an Amended and Restated
Revolving Credit, Term Loan and Security Agreement, dated as of December 23,
1994, as amended by: Amendment No. 1 to Amended and Restated Revolving Credit,
Term Loan and Security Agreement, dated as of March 31, 1995; Waiver and
Amendment No. 2 to Amended and Restated Revolving Credit, Term Loan and Security
Agreement dated as of May 31, 1995; an Amended and Restated Waiver and Amendment
No. 2 to Amended and Restated Revolving Credit, Term Loan and Security Agreement
dated as of June 28, 1995; an Amendment No. 3 to Amended and Restated Revolving
Credit, Term Loan and Security Agreement dated as of November 30, 1995; an
Amendment No. 4 to Amended and Restated Revolving Credit, Term Loan and Security
Agreement dated as of August 2, 1996, wherein, among other things, BMG was added
as a Borrower; an Amendment No. 5 to Amended and Restated Revolving Credit, Term
Loan and Security Agreement dated as of March 21, 1997; a Consent and Amendment
No. 6 to Amended and Restated Revolving Credit, Term Loan and Security Agreement
dated as of May 16, 1997 and a Consent and Amendment No. 7 to Amended and
Restated Revolving Credit, Term Loan and Security Agreement dated as of November
24, 1998 (as same may be further amended, supplemented or otherwise modified
from time to time, the "Loan Agreement"), pursuant to which Lenders provide BMI,
BML and BMG with certain financial accommodations.
Borrowers have requested that Lenders amend certain covenant violations
and amend certain provisions of the Loan Agreement and Lenders are willing to do
so on the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers by
Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction of the
conditions precedent set forth in Section 5 below:
(a) The following definitions in Section 1.2 of the Loan
Agreement are hereby amended in their entirety to read as follows:
<PAGE>
(i) "Domestic Revolving Interest Margin" for
Revolving Advances which are Prime Rate Domestic Loans or
Prime Rate U.K. Loans shall be subject to change by Agent
within fifteen (15) days of each required delivery date of the
quarterly financial statements of Borrowers as set forth in
Section 9.8 of the Agreement and shall be fixed as set forth
below for each quarter based upon the Senior Interest Coverage
Ratio at the end of the immediately preceding fiscal quarter.
Senior Interest Coverage Margin
------------------------ ------
less than 2.0 to 1.0 .25%
greater than or equal to 2.0 to 1.0 .0%
(ii) "Domestic Term Loan Interest Margin" for Prime
Rate Domestic Term Loans and Prime Rate U.K. Term Loans shall
be subject to change by Agent within fifteen (15) days of each
required delivery date of the quarterly financial statements
of Borrowers as set forth in Section 9.8 of the Agreement and
shall be fixed as set forth below for each quarter based upon
the Senior Interest Coverage Ratio at the end of the
immediately preceding fiscal quarter.
Senior Interest Coverage Margin
------------------------ ------
less than 2.0 to 1.0 .50%
greater than or equal to 2.0 to 1.0 .25%
(iii) "Eurodollar Revolving Interest Margin" for
Revolving Advances consisting of Sterling Loans and Domestic
Loans shall be subject to change by Agent within fifteen (15)
days of each required delivery date of the quarterly financial
statements of Borrowers as set forth in Section 9.8 of the
Agreement and shall be fixed as set forth below for each
quarter based upon the Senior Interest Coverage Ratio at the
end of the immediately preceding fiscal quarter.
Senior Interest Coverage Margin
------------------------ ------
less than 2.0 to 1.0 2.00%
greater than or equal to 2.0 to 1.0 1.75%
(iv) "Eurodollar Term Loan Interest Margin" for
Eurodollar Rate Domestic Term Loans and Eurodollar Rate U.K.
Term Loans shall be subject to change by Agent within fifteen
(15) days of each required delivery date of the quarterly
financial statements of Borrowers as set forth in Section 9.8
of the Agreement and shall be fixed as set forth below for
each quarter based upon the
Senior Interest Coverage Ratio at the end of the immediately
preceding fiscal quarter.
Senior Interest Coverage Margin
------------------------ ------
less than 2.0 to 1.0 2.25%
greater than or equal to 2.0 to 1.0 2.00%
<PAGE>
(b) Section 6.7 of the Loan Agreement is hereby amended in its
entirety to read as follows:
"6.7 Senior Interest Coverage. Cause to be maintained
Senior Interest Coverage not less than (a) 1.0 to 1.0 at the end of
each fiscal quarter ended from 4/3/99 through and including the fiscal
quarter ended 4/1/00 with respect to the four fiscal quarters then
ended and (b) 4.0 to 1.0 at the end of each fiscal quarter ended
thereafter with respect to the four fiscal quarters then ended."
3. Waiver. Subject to the satisfaction of the conditions precedent set
forth in Section 4 below, Lenders hereby waive any Event of Default that has
occurred as a result of Borrowers' non-compliance with Section 6.7 of the Loan
Agreement to the extent that such Event of Default arose solely as a result of
Borrowers' failure to maintain the required Senior Interest Coverage as of
January 2, 1999.
4. Conditions Precedent. This Waiver and Amendment shall become
effective upon satisfaction of the following conditions precedent:
(a) This Waiver and Amendment shall have been executed by the
Lenders, the Borrowers and the Guarantor, in four counterparts, with executed
counterparts delivered to each of the parties.
(b) Agent shall have received an amendment fee of $20,000.00
to be shared equally by the Lenders.
5. Representations and Warranties.
(a) Borrowers hereby represent and warrant that as of the date
hereof:
(i) This Waiver and Amendment and the Loan Agreement,
as amended hereby, constitute legal, valid and binding
obligations of Borrowers and are enforceable against Borrowers
in accordance with their respective terms.
(ii) Upon the effectiveness of this Waiver and
Amendment, Borrowers hereby reaffirm their respective
covenants, representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and
agree that all such covenants, representations and warranties
shall be deemed to have been remade as of the effective date
of this Waiver and Amendment.
(iii) No Event of Default or Default has occurred and
is continuing or would exist after giving effect to this
Waiver and Amendment.
(iv) Borrowers have no knowledge of any facts which
would form the basis for any defense, counterclaim or offset
with respect to the Loan Agreement.
(b) Lenders hereby represent and warrant that this Waiver and
Amendment and the Loan Agreement, as amended hereby, constitute legal, valid and
binding obligations of Lenders and are enforceable against Lenders in accordance
with their respective terms.
<PAGE>
6. Effect on the Loan Agreement
(a) Upon the effectiveness of this Waiver and Amendment, each
reference in the Loan Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import shall mean and be a reference to the Loan
Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan Agreement,
and all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Waiver
and Amendment shall not operate as a waiver of any right, power or remedy of
Lenders, nor constitute a waiver of any provision of the Loan Agreement, or any
other documents, instruments or agreements executed and/or delivered under or in
connection therewith.
7. Governing Law. This Waiver and Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns and shall be governed by and construed in accordance with the laws of
the State of New York.
8. Headings. Section headings in this Waiver and Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Waiver and Amendment for any other purpose.
9. Counterparts. This Waiver and Amendment may be executed by the
parties hereto in one or more counterparts, each of which shall be deemed to be
an original and all of which taken together shall be deemed to constitute one
and the same agreement.
<PAGE>
IN WITNESS WHEREOF, this Waiver and Amendment has been duly executed as
of the day and year first written above.
BRIDGEPORT MACHINES, INC.,
as Borrower and Guarantor
By: /s/ Yvonne L. Megenis
---------------------
Name: Yvonne L. Megenis
Title: Vice President-Treasurer
BRIDGEPORT MACHINES LIMITED,
as Borrower
By: /s/ Yvonne L. Megenis
---------------------
Name: Yvonne L. Megenis
Title: Attorney In Fact
BRIDGEPORT MACHINES GmbH,
as Borrower
By: /s/ Yvonne L. Megenis
---------------------
Name: Yvonne L. Megenis
Title: Attorney In Fact
IBJ WHITEHALL BUSINESS CREDIT CORPORATION,
as Lender and as Agent
By: /s/ Robert R. Wallace
---------------------
Name: Robert R. Wallace
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
By: /s/Martin Greenberg
-------------------
Name: Martin Greenberg
Title: Duly Authorized Signature
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