<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-26634
LeCROY CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 13-2507777
(State or other jurisdiction (I.R.S. Employer
of Incorporation or organization Identification No.)
700 CHESTNUT RIDGE ROAD, CHESTNUT RIDGE ,NEW YORK 10977
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (914) 425-2000
Indicate by check mark ("X") whether the Registrant: (1) has filed all reports
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding twelve 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 _______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JANUARY 15, 1999
Common stock, par value $.01 share 7,624,422
<PAGE> 2
LeCROY CORPORATION
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART I OTHER INFORMATION 12
PART II OTHER INFORMATION 12
Signatures 12
<PAGE> 3
LeCROY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
In thousands
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,847 $ 1,895
Accounts receivable 26,959 31,297
Inventories:
Raw materials 11,555 11,377
Work in process 4,685 6,206
Finished goods 11,288 9,099
Total inventories 27,528 26,682
Other current assets 2,681 2,556
Total current assets 63,015 62,430
Property and equipment, at cost:
Land and building 8,112 6,825
Furniture, machinery and equipment 30,726 29,907
Total property and equipment 38,838 36,732
Less: Accumulated depreciation and
amortization (25,246) (24,937)
Property and equipment, net 13,592 11,795
Marketable securities 4,518 5,073
Other assets 10,263 9,812
TOTAL ASSETS 91,388 89,110
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current debt 3,426 2,294
Accounts payable 6,303 9,970
Accrued warranty 2,175 1,943
Accrued liabilities and deferred revenue 6,539 6,980
Accrued employee compensation and benefits5,163 7,506
Accrued restructuring costs 1,975 2,516
Income taxes 2,951 3,524
Total current liabilities 28,532 34,733
Long term debt 4,000
Deferred compensation 299 270
Stockholders' equity:
Common stock 76 76
Additional paid-in capital 38,452 37,867
Accumulated other comprehensive loss (3,427) (5,347)
Retained earnings 23,456 21,511
Total stockholders' equity 58,557 54,107
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 91,388 89,110
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
LeCROY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
1998 1997 1998 1997
In thousands,
except per share data
<S> <C> <C> <C> <C>
Revenues:
Digital oscilloscopes and
related products $ 25,509 $ 27,292 $ 49,635 $ 55,277
LAN/WAN test instruments 3,008 4,948 5,174 6,197
High energy physics products 2,038 1,761 3,536 2,785
Service and other 1,777 1,751 3,282 3,464
Total 32,332 35,752 61,627 67,723
Cost of sales 15,119 15,377 29,006 28,836
Gross profit 17,213 20,375 32,621 38,887
Operating expenses:
Selling, general and
administrative 10,070 11,289 21,053 21,980
Research and development 4,201 5,279 8,602 9,502
Nonrecurring charges - 3,533 - 3,533
Total 14,271 20,101 29,655 35,015
Operating income 2,942 274 2,966 3,872
Other (income) expenses, net (151) 13 186 120
Income before income taxes 3,093 261 2,780 3,752
Provision for income taxes 927 78 833 1,085
Net income 2,166 183 1,947 2,667
Income per common share:
Basic $ 0.28 $ 0.02 $ 0.26 $ 0.37
Diluted $ 0.28 $ 0.02 $ 0.25 $ 0.33
Weighted average number of
common shares:
Basic 7,605 7,348 7,588 7,297
Diluted 7,861 8,070 7,874 8,059
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
LeCROY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1998 1997
In thousands <C> <C>
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,947 $ 2,667
Adjustments for noncash items included in
operating activities:
Depreciation and amortization 2,246 1,819
Other 11 -
Deferred income taxes - (72)
Purchased incomplete technology - 1,600
Non-recurring merger costs - 1,933
Change in operating asset and liability
components:
Accounts receivable 4,965 (4,693)
Inventories 40 (2,300)
Prepaid expenses and other assets 234 (345)
Accounts payable, accrued liabilities
and deferred revenue (3,970) 2,980
Accrued employee compensation and benefits (2,589) 370
Income taxes (444) (794)
Net cash provided by operating activities 2,440 3,165
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,357) (2,526)
Investment in computer software (755) -
Business acquisition, net of acquired cash - (395)
Proceeds from the disposal of property
and equipment - 37
Net cash used in investing activities (4,112) (2,884)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term debt 601 843
Borrowings under line of credit 4,000 -
Proceeds from exercise of stock options
and stock purchases 586 2,293
Repayment of debt and capitalized leases - (44)
Net cash provided by financing activities 5,187 3,092
Effect of exchange rates on cash 437 (655)
Increase in cash and cash equivalents 3,952 2,718
Cash and cash equivalents at beginning
of the period 1,895 19,884
Cash and cash equivalents at end of the period 5,847 22,602
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
LeCROY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basis of Presentation
In the opinion of management, the accompanying unaudited interim condensed
consolidated financial statements reflect all adjustments, of a normal and
recurring nature, necessary to present fairly the results for the interim
periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The year-end balance sheet data
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. It is
suggested that these condensed statements be read in conjunction with the
Company's most recent Form 10-K and Annual Report as of June 30, 1998.
This Form 10-Q contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
the Company's actual results or activities to differ materially from these
forward-looking statements include but are not limited to: the effect of
economic conditions, including the effect on purchases by the Company's
customers; competitive factors, including pricing pressures, technological
developments and products offered by competitors; changes in product sales and
mix; the Company's ability to deliver a timely flow of competitive new
products and market acceptance of these products; inventory risks due to
changes in market demand or the Company's business strategies; currency
fluctuations; the effect of the Company's accounting policies; and other risk
factors listed from time to time in the Company's reports filed with the
Securities and Exchange Commission and press releases.
Results for the interim period are not necessarily indicative of the results
that may be expected for the entire year.
New Accounting Pronouncements
Comprehensive Income (Loss)
Effective July 1, 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes new rules for the reporting and display of comprehensive income or
(loss) and its components in the financial statements. The adoption of SFAS
No. 130 had no effect on the Company's financial position or results of
operations. For the three and six months ended December 31, 1998 the
Company's comprehensive income totaled $3.3 million and $3.9 million,
respectively. For the three and six months ended December 31, 1997 the
Company's comprehensive income (loss) totaled ($21,000) and $2.1 million,
respectively. Comprehensive income for the three and six months months ended
December 31, 1998 included foreign currency translation gains of $0.3 million
and $3 million, respectively, and unrealized gains and (losses) on marketable
equity securites classified as available for sale of $0.8 million and
($1 million), respectively. Comprehensive income for the three and six months
ended December 31, 1997 included foreign currency translation losses of $0.2
million and $0.6 million, respectively. The cumulative foreign currency
translation losses were $0.9 million at December 31, 1998 and $3.9 million at
June 30, 1998. The cumulative unrealized losses on marketable equity
securities classified as available for sale were $2.5 million at December 31,
1998 and $1.4 million at June 30, 1998.
<PAGE> 7
LeCROY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Shareholder Rights Plan
On November 2, 1998 the Company's Board of Directors declared a dividend
distribution of one right in respect to each share of the Company's common
stock outstanding at the record date, November 18, 1998. Initially, the rights
will trade together with the common stock and will not be exercisable or
separately tradable. The rights will be exercisable if a person or group
acquires, in the future, 15 percent or more of the Company's stock or announces
a tender offer. Right holders, other than the acquiring person or group, are
then entitled to purchase an amount of the Company's stock at a 50 percent
discount to the share price at that time. The amount of stock that a right
holder is entitled to purchase is based on the exercise price. Under certain
circumstances, the right will entitle the stockholder to buy shares in an
acquiring entity at a discount.
LeCroy's Board of Directors may redeem the rights at a price of $0.001 per
right up until 10 days following a public announcement that any person or group
has acquired 15 percent or more of LeCroy's common stock. The rights will
expire on November 2, 2008, unless redeemed prior to that date.
<PAGE> 8
LeCROY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated revenues were $32.3 million and $61.6 million, respectively, for
the current quarter and six months ended December 31, 1998, a decline of
approximately $3.4 million and $6 million, or 10% and 9%, respectively, from
the comparable prior year periods. The decrease for the quarter and the six
months is primarily attributable to a decline in digital oscilloscopes and
related product revenues offset partially by an increase in the sales of high
energy physics products. In addition, LAN/WAN test instruments revenues
declined in the current quarter.
Digital oscilloscopes and related product revenues decreased $1.8 million or
7% in the second quarter and $5.6 million or 10.2% in the six months ended
December 31, 1998 compared to the comparable prior year periods. The decrease
in revenue for both the three and six month periods was caused by lower unit
volumes attributable to the softness in the Japanese and Pacific Rim markets
coupled with softness in the disk drive industry. This decrease in revenue
was partially offset by $2.5 million in license fees for digital oscilloscope
solutions in the current quarter ended December 31, 1998.
Revenues from LAN/WAN test instruments decreased $1.9 million or 39% in the
second quarter and $1 million or 17% in the six months ended December 31, 1998
compared to the same periods in the prior year. This decrease was caused by
the Company shipping a large order to Sprint, worth $3.7 million, in the
second quarter of the prior year. Excluding the impact of this order, revenues
from LAN/WAN test instruments increased $1.8 million or 144% in the quarter
and $2.7 million or 107% in the six months ended December 31, 1998 compared
to the quarter and six months ending December 31, 1997. This increase was
attributable to the Company's introduction of its remote access systems
analyzer product in the current year, and NEWSLine, a LAN network analyzer, in
December 1998.
Revenues from sales of HEP products increased 16% or $0.3 million and 27% or
$0.8 million in the quarter and in the six months ended December 31, 1998
compared to the comparable periods in the prior year. Despite the increase,
the Company believes that revenues from sales of HEP products, which
represented approximately 6% of total revenues for the three and six months
ended December 31, 1998, will represent a declining portion of its total
revenues in the future.
Gross profit in the three months ended December 31, 1998 was 53.2% of revenues
compared to 57% of revenues for the three months ended December 31, 1997.
Gross profit in the six months ended December 31, 1998 was 52.9% of revenues
compared to 57.4% of revenues for the comparable period in the prior year.
This decrease in gross profit for both the three and six months ended December
31, 1998 was caused by the higher material costs of the LC584/564 product
lines, which represented 36% and 40% of digital oscilloscope and related
product revenue for the respective periods. The decline in gross profit was
offset by $2.5 million in license fees for digital oscilloscope solutions
recorded in the current quarter.
Selling, general and administrative expenses for the quarter and six months
ended 1998 declined $1.2 million and $0.9 million, or 11% and 4%, respectively,
from the comparable prior year periods. This decline, which was offset by the
Company expanding its sales personnel in Korea resulting from the acquisition
of Woojoo Hi-Tech in the third quarter of fiscal 1998, was the result of the
benefits derived from the Company's previous restructuring programs. As a
percentage of total revenues, selling, general and administrative expenses were
31.1% for the three months ended December 31, 1998 and 31.6% for the three
months ended December 31, 1997. Selling, general and administrative expenses
as a percentage of total revenues was 34.2% for the six months ended December
31, 1998 compared to 32.5% for the six months ended December 31, 1997.
<PAGE> 9
LeCROY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Cont.)
Research and development dollar expenses declined $1.1 million in the quarter
ended December 31, 1998 and $0.9 million in the six months ended December 31,
1998 and reflects greater development costs last year for NEWSLine and the new
LC584/564 platform which products came to market this year. As a percentage
of total revenues, research and development expenses were 13% and 14% for the
three and six months ended December 31, 1998 compared to 14.8% and 14% for the
three and six months ended December 31, 1997.
In the second quarter of 1998 the Company incurred $3.5 million in
nonrecurring charges relating to the acquisition of Digitech Industries and
Preamble, Inc. These charges included $1.9 million relating to the Digitech
acquisition and $1.6 million relating to the Preamble acquisition. The
nonrecurring charges relating to the Digitech acquisition included provisions
for environmental cleanup, expenses for professional fees and write down of
assets associated with duplicate product lines. The nonrecurring charges
relating to the Preamble acquisition resulted from the purchase of incomplete
technology.
Operating income, excluding the impact of nonrecurring charges, decreased
$865,000 or 23% for the current quarter and $4.4 million or 60% for the six
months ended December 31, 1998 compared to the same periods in the prior year.
This decline in operating income was due to decreased revenues and lower
margins in the current year as well as the other factors discussed above.
Excluding the impact of nonrecurring charges, operating income as a percentage
of total revenues was 9.1% and 4.8% for the quarter and six months ended
December 31, 1998 compared to 10.6%, and 10.9%, respectively, for the quarter
and six months ended December 31, 1997.
Net interest expense and financing charges, included in other expenses, was
$106,000 and $163,000 in the three and six month periods ended December 31,
1998 compared to net interest income of $187,000 and $345,000 in the same
prior year periods. The decrease in the current year is due primarily to
reduced levels of cash on hand as the Company has made significant capital
investments in the prior year including an equity investment and purchased
manufacturing and distribution rights in the last half of fiscal 1998.
Operating results for the three months ended December 31, 1998 included
currency exchange gains of $257,000 compared to currency exchange losses of
$200,000 in the comparable prior year period. Operating results for the six
months ended December 31, 1998 and 1997 include currency exchange losses of
$23,000 and $465,000, respectively.
The Company's income tax rate for the three months ended December 31, 1998 and
1997 was 30%. The Company's income tax rate on earnings for the six months
ended December 31, 1998 was 30% compared to 28.9% for the six months ended
December 31, 1997. Currently, the Company's Swiss subsidiary operates under a
tax agreement with the Canton of Geneva pursuant to which the effective tax
rate on income with respect to such subsidiary is approximately 15%. This
agreement is in effect through the fiscal year ended June 30, 2000.
RESTRUCTURING COSTS
While the Company has experienced substantial revenue growth during the past
several years, the Company faces upcoming challenges, specifically in the
Japanese and Pacific Rim markets. Additionally, the cyclical slowdown in the
disk drive industry has placed increased pressure on the Company's domestic
sales. Although the Company's visibility regarding the duration of these
factors is limited, it is possible that the aforementioned factors could
affect the Company's performance for the next several quarters. As a result,
the Company finalized a restructuring plan in the fourth quarter of fiscal
1998 to bring costs in line with revenues. At June 30, 1998, the Company
had remaining
<PAGE> 10
LeCROY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Cont.)
liabilities of approximately $6.4 million relating to the restructuring plan.
During the quarter and six months ended December 31, 1998 the Company charged
approximately $0.7 million and $1.4 million, respectively, against these
restructuring reserves. These charges primarily related to severance and
other employee benefits. The overall expected cost of the restructuring plan
has not changed since the plan was approved and it is expected to be completed
by the end of fiscal 1999.
YEAR 2000
The Company has undertaken a major Company-wide study and testing program to
locate and cure any Year 2000 issues in the products or systems on which it
relies. The Company believes its financial operating systems in New York are
currently Year 2000 compliant, however the Geneva, Switzerland location is
not year 2000 compliant. It is the Company's intention to implement its new
ERP (Enterprise Resource Planning) system by July 1999, which is compliant.
If the ERP system is not ready, the Company has a contingency plan to upgrade
its legacy system in Geneva, to be year 2000 compliant. At December 31, 1998
the ERP implementation is proceeding as planned with regards to the three
major areas; engineering, manufacturing and finance. At the end of its third
fiscal quarter the Company will make a final decision, based on the progress
of the ERP implementation, as to whether to invoke the contingency plan to
validate the Geneva legacy system. The Company continues to work with other
third party suppliers to identify exposures and obtain compliance. The Company
anticipates no material adverse effect resulting from Year 2000 problems. This
represents a forward-looking statement under the Private Securities Litigation
Reform Act of 1997. Undiscovered issues related to the Year 2000 issue could
have an adverse impact.
LIQUIDITY AND CAPITAL RESOURCES
Working capital, including $5.8 million in cash and cash equivalents, was
$34.5 million at December 31, 1998 compared to $27.7 million, at June 30,
1998. The working capital ratio is currently 2.2 to 1.
LeCroy has borrowed $ 4 million under its $15 million unsecured multicurrency
credit agreement. At December 31, 1998, the Company was in violation of a
financial covenant relating to the multicurrency credit agreement. The banks
have waived this violation as of December 31, 1998.
Cash flows generated from operating activities for the first six months of
fiscal 1999 decreased $725,000 in comparison with the prior year due
primarily to lower operating earnings.
The Company's cash together with amounts available under its multicurrency
revolving credit agreement and internally generated cash flow will be
sufficient to fund working capital and capital expenditure requirements for
at least the next twelve months.
RISK MANAGEMENT
The Company's equity investment in Iwatsu Electric Co., Ltd is subject to the
impact of foreign exchange rates and the Japanese stock market fluctuation
which, at December 31, 1998, has resulted in a $2.5 million reduction from the
$7 million original cost. The change in the value of this investment, which
is deemed to be temporary, is included as part of accumulated comprehensive
(loss) in stockholders' equity and is not included in income or loss.
NEW PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
which is effective for the Company beginning July 1, 1998. This statement
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements. This
statement supercedes SFAS No. 14 and amends SFAS No.94. The adoption of SFAS
131 will have no impact on the Company's financial position, results of
operations or cash flows.
<PAGE> 11
LeCROY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Cont.)
In February 1998, the FASB issued SFAS 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which revises and standardizes
pensions and other postretirement benefit plan disclosures. The Statement is
effective for fiscal years beginning after December 15, 1997. The adoption of
SFAS 132 will have no impact on the Company's financial position, results of
operations or cash flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting
and reporting standards for derivative instruments and requires recognition of
all derivatives as assets or liabilities in the statement of financial
position and measurement of those instruments at fair value. The statement is
effective for fiscal years beginning after June 15, 1999. Management believes
that adopting this statement will not have a material impact on the financial
position, results of operations or cash flows of the Company.
<PAGE> 12
LeCROY CORPORATION
PART I. OTHER INFORMATION
ITEM 6.(A) EXHIBITS
Exhibit 1.1
Amendment to Multicurrency Credit Agreement dated as of
December 12, 1995 between the Company and Chase Manhattan
Bank, N.A. as agent for the lenders named therein.
Exhibit 27 Financial Data Schedule.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on
October 28, 1998. The following actions were taken at the
meeting:
Election of Directors
Votes For Votes Against
Walter O. LeCroy Jr. 6,551,366 17,567
Robert E. Anderson 6,508,060 60,873
Approval of the 1998 Non Employee Directors Stock Option Plan
Votes For Votes Against Abstain
2,602,042 2,547,242 12,582
ITEM 6.(B) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K on November 12, 1998
relating to its adoption of a shareholder rights plan,
respectively.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LECROY CORPORATION
Date: January 25, 1999 By: /S/ JOHN C. MAAG
John C. Maag
Vice President-Finance, Chief Financial Officer,
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-Q for the fiscal quarter ended December 31, 1998
</LEGEND>
<MULTIPLIER>1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-30-1998
<CASH> 5847
<SECURITIES> 0
<RECEIVABLES> 27559
<ALLOWANCES> 600
<INVENTORY> 27528
<CURRENT-ASSETS> 63015
<PP&E> 38838
<DEPRECIATION> 25246
<TOTAL-ASSETS> 91388
<CURRENT-LIABILITIES> 28532
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 58481
<TOTAL-LIABILITY-AND-EQUITY> 91388
<SALES> 58345
<TOTAL-REVENUES> 61627
<CGS> 29006
<TOTAL-COSTS> 29006
<OTHER-EXPENSES> 29841
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> 2780
<INCOME-TAX> 833
<INCOME-CONTINUING> 1947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1947
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.25
</TABLE>
<PAGE> 1
THIRD AMENDMENT TO MULTICURRENCY CREDIT AGREEMENT
THIS THIRD AMENDMENT (the Third Amendment) is made as of the 23rd
day of December, 1998 by and among LECROY CORPORATION (the Borrower), a
corporation organized and existing under the laws of the State of Delaware, THE
CHASE MANHATTAN BANK (Chase), a New York banking corporation, successor
by merger to The Chase Manhattan Bank, N.A., as agent for the Lenders (defined
below) under the Credit Agreement (defined below) and as a Lender thereunder
and BANKBOSTON, N.A., a national association, successor by merger to
Bank of Boston Connecticut (BBNA), as a Lender under the Credit
Agreement.
W I T N E S S E T H :
WHEREAS, The Chase Manhattan Bank, N.A., predecessor in interest to The
Chase Manhattan Bank, Chemical Bank now known as The Chase Manhattan Bank, Bank
of Boston Connecticut, predecessor in interest to BankBoston, N.A. and Borrower
are signatories to a certain Multicurrency Credit Agreement dated as of
December 12, 1995 (the Multicurrency Credit Agreement), as amended by that
certain Amendment dated as of January 30, 1998 (the First Amendment) and by
that certain Second Amendment dated as of March 31, 1998 (the Second
Amendment) (the Multicurrency Credit Agreement, the First Amendment, the
Second Amendment, and as thereafter amended from time to time, the Credit
Agreement);
WHEREAS, The Chase Manhattan Bank, N.A. merged into Chemical Bank with
Chemical Bank as the surviving entity and Chemical Bank changed its name to The
Chase Manhattan Bank;
WHEREAS, Bank of Boston Connecticut merged into BBNA with BBNA as the
surviving entity;
WHEREAS, Chase is now agent (the Agent) for Chase and BBNA (collectively,
the Lenders and individually, a Lender) and the Lenders are now Chase and
BBNA;
WHEREAS, pursuant to the Credit Agreement, (i) Chase (x) acts as Agent under
a revolving credit facility in the maximum principal sum of $15,000,000 and
(y) is a Lender with a combined Commitment (as defined in the Credit
Agreement) in the sum of $11,250,000 and (ii)BBNA is a Lender with a Commitment
in the sum of $3,750,000;
WHEREAS, Chase, BBNA and the Borrower desire to amend certain terms and
provisions of the Credit Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, receipt of which is hereby
acknowledged and upon the execution and delivery of this Third Amendment by
each party hereto and the satisfaction of the conditions set forth in Paragraph
3 below, the Borrower, Chase, as Agent and Lender, and BBNA agree as follows:
<PAGE> 2
1. Amendment. Section 7.01 of the Credit Agreement is deleted in its entirety
and the following new Section 7.01 is inserted in lieu thereof:
SECTION 7.01. Current Ratio. The Borrower and its Consolidated
Subsidiaries shall maintain at all times, on a consolidated basis, a Current
Ratio of not less than 2.0:1.0, to be measured at the end of each fiscal
quarter.
2. Representations and Warranties. (a) The Borrower hereby represents and
warrants as follows:
(a) The execution, delivery and performance by the Borrower of this Third
Amendment has been duly authorized by all necessary corporate action; and
(b) This Third Amendment constitutes the legal, valid and binding obligations
of the Borrower, enforceable against the Borrower in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, equitable remedies and other similar laws affecting
creditors' rights generally, and except that the availability of equitable
remedies is subject to the discretion of the court before which such remedies
are sought.
3. Conditions Precedent. (a) For purposes of Section 10.01 of the Credit
Agreement, each of the Lenders hereby consents and agrees, as of the Effective
Date referred to below, to the terms and provisions of this Third Amendment
subject to the Agent's receipt of(and the effectiveness of this Third Amendment
shall be conditioned upon such receipt by the Agent of) the Subparagraph 3(b)
Documents (as defined below) specified in subparagraph 3(b) below. If the
Agent does not receive the Subparagraph 3(b) Documents in the manner and on
the date set forth in Subparagraph 3(b) hereof, then this Third Amendment shall
not be effective among the parties. If the Subparagraph 3(b) Documents are
received by the Agent in the manner and on the date set forth in Subparagraph
3(b) hereof, then this Third Amendment shall be effective among the parties
as of the date first above written.
(b) For purposes hereof, the Agent shall receive on the date of the execution
and delivery of this Third Amendment by all parties hereto (the Effective
Date) the following documents in form and substance satisfactory to the Agent
(the Subparagraph 3(b) Documents) either as copies thereof via telecopy with
the originals delivered to the Agent promptly after the Effective Date or as
originals:
(i) Duly executed counterpart of this Third Amendment signed by the Agent,
the Lender, BBNA and the Borrower.
<PAGE> 3
Furthermore, as a condition to the effectiveness of this Third Amendment, the
Borrower certifies (1) that there have been no changes to (A) the Certificate
of Incorporation of the Borrower and all amendments thereto or (B) the By-laws
of Borrower as amended since the delivery of such items to the Agent on April
25, 1997, (2) that the Borrower has duly authorized the extension and
modifications contemplated by this Third Amendment, (3) that the officer of the
Borrower executing this Third Amendment is duly authorized to execute this
Third Amendment and (4) that no Articles of Dissolution of the Borrower have
been filed with the Secretary of State of the State of Delaware.
4. Costs, Expenses and Taxes. The Borrower agrees to pay on demand all
reasonable fees and expenses of the Agent and the Lenders in connection with
the preparation, negotiation, execution, delivery, administration, modification
and amendment of this Third Amendment, including without limitation, the
reasonable fees and expenses of counsel for the Agent and the Lenders with
respect thereto and with respect to advising the Agent and the Lenders as to
their respective rights and responsibilities hereunder and thereunder. The
Borrower further agrees to pay on demand all reasonable costs and expenses, if
any (including without limitation, reasonable counsel fees and expenses), in
connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Third Amendment, including, without
limitation, reasonable fees and expenses of counsel in connection with the
enforcement of rights under the Credit Agreement, as amended by this Third
Amendment.
5. Agreement. Except as specifically amended hereby, the Credit Agreement and
the other Loan Documents (as defined in the Credit Agreement) are and shall
continue to be in full force and effect and are hereby in all respects ratified
and confirmed.
6. Capitalized Terms. All capitalized terms used in this Third Amendment and
not otherwise defined herein shall have the meanings ascribed thereto in the
Credit Agreement.
7. Counterparts. This Third Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
8. Governing Law. This Third Amendment shall be governed by, and construed
and enforced in accordance with, the internal, substantive laws of the State
of New York without giving effect to the conflict of law rules thereof.
<PAGE> 4
IN WITNESS WHEREOF, the parties to this Second Amendment have caused their
signatures to be affixed hereto the date above first written.
LECROY CORPORATION
By: /S/ John C. Maag
Name: John C. Maag
Title: Chief Financial Officer
THE CHASE MANHATTAN BANK,
successor by merger to The Chase Manhattan
Bank, N.A. and formerly known as Chemical
Bank, as Agent and Lender
By: /S/ C. William Cosgrove
Name: C. William Cosgrove
Title: Vice President
BANKBOSTON, N.A., successor by merger
to Bank of Boston Connecticut
By: /S/ John Murphy
Name: John Murphy
Title: Senior Vice President
