<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 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 1-804
------------------------------------------
SEQUA CORPORATION
- ----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1885030
- --------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Park Avenue, New York, New York 10166
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)986-5500
-------------
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
--- ---
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 April 30, 1999
----- --------------------------------
Class A Common Stock, no par value 7,026,402
Class B Common Stock, no par value 3,329,780
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share)
(Unaudited)
<CAPTION>
For the Three Months
Ended March 31,
---------------------
1999 1998
---- ----
<S> <C> <C>
SALES $ 407,266 $ 439,853
---------- ----------
COSTS AND EXPENSES
Cost of sales 327,679 352,839
Selling, general and
administrative 59,296 62,247
---------- ----------
386,975 415,086
---------- ----------
OPERATING INCOME 20,291 24,767
OTHER INCOME (EXPENSE)
Interest expense (11,915) (12,688)
Interest income 1,376 1,218
Equity in income (loss) of
unconsolidated joint ventures (622) (323)
Other, net 1,656 144
---------- ----------
INCOME BEFORE INCOME TAXES 10,786 13,118
Income tax provision (4,800) (8,300)
---------- ----------
NET INCOME 5,986 4,818
Preferred dividends (516) (625)
---------- ----------
NET INCOME AVAILABLE
TO COMMON STOCK $ 5,470 $ 4,193
========== ==========
EARNINGS PER SHARE
Basic $ .53 $ .42
Diluted $ .53 $ .41
DIVIDENDS DECLARED PER SHARE
Preferred $ 1.25 $ 1.25
<FN>
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Of Financial Condition and Results of Operations
------------------------------------------------
SUMMARY BUSINESS SEGMENT DATA (in millions)
- ------------------------------------------
<CAPTION>
Operating
Sales Income
-------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aerospace $187.7 $194.9 $14.7 $16.4
Propulsion 60.7 65.4 (0.1) 5.3
Metal Coating 44.3 43.7 3.0 1.2
Specialty Chemicals 38.5 35.6 4.9 4.1
Other Products 76.1 100.3 4.9 5.4
Corporate - - (7.1) (7.6)
----- ----- ----- -----
TOTAL $407.3 $439.9 $20.3 $24.8
====== ====== ===== =====
</TABLE>
SALES
- -----
Sales of the Aerospace segment declined 4% in the first
quarter of 1999. After excluding sales of $4.9 million from the
U.K. unit sold in mid-1998, sales were down 1%. OEM sales
declined primarily due to delivery schedule stretch outs and the
effects of continuing industry consolidation. Management
anticipates that the OEM sector will continue to report lower
year-to-year sales comparisons for at least the next several
quarters. Repair sales were on a par with the first quarter of
1998, as improvements in the commercial aviation market were
largely offset by lower sales to the domestic defense market.
Sales of the Propulsion segment declined 7% in the first
quarter of 1999 as a small advance in the automotive airbag
inflator product line was more than offset by declines in both
the solid and liquid propellant rocket motor product lines.
Sales of airbag inflators increased, reflecting one extra month's
sales in the 1999 quarter from a former joint venture that was
consolidated at the end of January 1998. The increase was
partially offset by the absence of component sales to the now
consolidated operation, lower pricing, a shift to lower priced
advanced products, and reduced energetics sales to an Italian
equity affiliate, BAG SpA. The decline of both solid and liquid
rocket motor sales was primarily related to revenue timing
issues.
<PAGE>
SALES (cont'd)
- -----
Sales of the Metal Coating segment increased 1% in the first
quarter of 1999. Sales to the building products and container
markets were on a par with prior year levels, while sales to
other manufactured products markets increased. Sales to the
building products market reflect the fact that the unit replaced
virtually all the sales lost in mid-1998 when a major customer
acquired coating capacity and brought the major portion of its
work in house. On a pro forma basis, excluding 1998 sales to
this major customer, building products sales increased 10% in the
first quarter of 1999.
Sales of the Specialty Chemicals segment advanced 8% in the
first quarter of 1999, due primarily to the inclusion of an extra
month's sales from the Italian specialty chemicals distribution
unit acquired in late January 1998. Each of the other
distribution units also recorded sales advances, while sales of
TAED-based products were on a par with the 1998 level.
Sales of the Other Products segment declined 24%, due
primarily to the absence of $21.7 million of sales of the Sequa
Chemicals unit, which was divested in the fourth quarter of 1998.
On a pro forma basis, excluding the Sequa Chemicals sales from
the 1998 quarter, segment sales declined only 3%. A sharp
decline in sales at the Sequa Can Machinery unit was largely
offset by advances at the MEGTEC and men's apparel units. Can
machinery sales declined 39%, as the economic problems in the
unit's key export markets, Asia and South America, continued to
have an unfavorable effect. Management currently anticipates
sustained market weakness and unfavorable sales comparisons at
this unit for the remainder of 1999. Sales of the MEGTEC unit
advanced 14%, driven by higher shipments of equipment to the
graphic arts and emission control markets. Sales of the
automotive products unit were on a par with the 1998 quarter, and
sales of the men's apparel unit advanced due to strength in the
After Six line of formalwear.
OPERATING INCOME
- ----------------
Operating income in the Aerospace segment declined 11% in the
first quarter of 1999. After excluding the contribution from the
U.K. unit sold in mid-1998, operating income was only 8% lower.
The decrease reflects a volume-related decline at units primarily
serving the OEM market, higher administrative costs, and start up
costs related to a new consolidated joint venture. These factors
were partially offset by lower legal expenses related to the
ongoing litigation with the Pratt & Whitney division of United
Technologies Corporation (expense of $0.3 million in the first
quarter of 1999 versus $1.1 million in the comparable quarter of
1998). Units primarily engaged in aftermarket repair work
reported profits comparable to the first quarter of 1998.
<PAGE>
OPERATING INCOME (cont'd)
- ----------------
The Propulsion segment recorded a small loss in the first
quarter of 1999, whereas, in the same quarter of 1998, this
operation recorded a profit of $5.3 million. Each of the major
product lines recorded lower results, with the largest decline at
the airbag inflator operation, which incurred a loss in the 1999
quarter. The loss at the airbag inflator unit resulted from
lower pricing, higher production costs and a shift to lower
margined products. The unit is introducing programs to lower the
cost of its airbag inflators. Solid propulsion results declined
primarily due to lower profits on the current year's portion of a
strategic missile program, as compared to the profits on the
wind-down of an earlier phase of this program in last year's
first quarter. The liquid propulsion product line operated at a
breakeven level in 1999, due primarily to lower sales to
commercial satellite customers and to the costs of integrating
the Royal Ordnance liquid rocket motor business acquired in late-
1998.
Although still constrained by pricing pressures in steel-
related markets, operating income in the Metal Coating segment
increased in the first quarter of 1999 when compared with the
first quarter of 1998. This improvement was derived primarily
from ongoing cost reduction programs and quality improvement
initiatives.
Operating income in the Specialty Chemicals segment
increased 19% in the first quarter of 1999. The segment
benefitted from aggressive cost reduction efforts; a favorable
pension comparison of the unit's overfunded pension plan; an
extra month's profit from the Italian unit acquired in early
1998; and lower foreign exchange losses on forward contracts.
Operating income in the Other Products segment declined $0.5
million in the first quarter of 1999. The comparable 1998
quarter included a $2.0 million severance provision at the MEGTEC
unit's French operation, and $1.4 million of profit from the
Sequa Chemicals unit, which was divested in the fourth quarter of
1998. On a pro forma basis, excluding these factors, operating
income was $1.1 million lower than in the 1998 period, primarily
due to a drop at the can machinery unit on significantly lower
sales. Management expects results for this unit will remain soft
until economic improvement in international markets takes hold.
Reported results at the MEGTEC unit improved in the first quarter
of 1999, due to the absence of the $2.0 million severance
provision in the first quarter of 1998. After excluding the
effect of the severance provision on MEGTEC results for the 1998
quarter, this unit operated at a breakeven level in both the 1999
and 1998 quarters. Operating income at the automotive products
unit declined 14%, primarily due to an unfavorable sales mix
shift and continued pricing pressures. Profits at the men's
apparel unit increased primarily due to higher sales.
<PAGE>
EQUITY IN INCOME (LOSS) OF UNCONSOLIDATED JOINT VENTURES
- --------------------------------------------------------
During 1998, Sequa had investments in two unconsolidated
joint venture partnerships which were formed to develop, produce
and market hybrid inflators for automotive airbags: BAICO, a
50/50 joint venture with AlliedSignal; and BAG SpA, an Italian
joint venture with Breed Technologies Inc. (Breed) and a
subsidiary of Fiat Avio, with each participant owning a one-third
interest in the venture. Breed is the largest customer of BAICO
and BAG SpA. In late January 1998, Sequa increased its ownership
in BAICO to 100% with the purchase of AlliedSignal's share of the
joint venture.
The carrying value of Sequa's one-third equity interest in
BAG SpA at March 31, 1999 was $0.3 million. In April 1999, Sequa
increased its ownership in BAG SpA to 50% with the purchase of
half of Fiat Avio's interest for approximately $2.6 million, of
which approximately $1.1 million is payable on July 1, 1999 and
approximately $1.1 million is payable on October 1, 1999. In
addition, Sequa has issued letters of credit to guarantee
approximately one third of BAG SpA's outstanding bank debt. At
March 31, 1999, BAG SpA's bank debt was $18.0 million. In
conjunction with Sequa's increased interest in BAG SpA, Sequa
will increase its guarantee to approximately 50% of the
outstanding bank debt on May 17, 1999.
Sequa's share of the losses of the unconsolidated airbag
businesses was equity losses of $0.6 million during the first
quarters of both 1999 and 1998. Sequa has other ownership
interests in joint ventures, one of the largest of which is a
50/50 partnership with United Technologies Corporation in
Advanced Coatings Technologies (ACT), a joint venture which owns
and operates an electron beam ceramic coater for the application
of Pratt & Whitney coatings to jet engine parts. Sequa's equity
share of the earnings of ACT was income of $0.3 million during
the first quarter of 1999 and $0.5 million during the first
quarter of 1998.
OTHER, NET
- ----------
During the first quarter of 1999, Other, net included $1.6
million of income related to the collection of a note receivable
written off many years ago, a $0.7 million gain on the sale of an
office building, discount expense of $0.5 million related to the
sale of accounts receivable and charges of $0.3 million for the
amortization of capitalized debt issuance costs. During the
first quarter of 1998, Other, net included $0.7 million of income
on the cash surrender value of corporate-owned life insurance and
charges of $0.3 million for the amortization of capitalized debt
issuance costs.
<PAGE>
INCOME TAX PROVISION
- --------------------
At the end of each quarter, Sequa estimates the effective
tax rate expected to be applicable for the full fiscal year. The
effective tax rates for the first quarters of 1999 and 1998 were
based upon estimated annual pre-tax earnings excluding the gain
on the sale of Sequa Chemicals recorded in the fourth quarter of
1998. The effective tax rates reflect nondeductible goodwill
amortization, the effect of a provision for state income and
franchise taxes and the establishment of a valuation allowance in
1998 to eliminate the tax benefit for losses of one of Sequa's
French subsidiaries. The French subsidiary returned to
profitability in 1999, and the resulting benefit from utilization
of the net operating loss carryforward combined with the absence
of a valuation allowance was the primary reason for the
significant reduction in the 1999 effective tax rate. The
estimated annual effective tax rates were then applied to interim
pre-tax earnings.
RISK/CONCENTRATION OF BUSINESS
- ------------------------------
Sequa is engaged in the automotive airbag inflator business
through both the Atlantic Research Automotive Products unit
(ARAP) in the Propulsion segment and its equity investment in BAG
SpA, an Italian joint venture. Breed is the major customer of
ARAP, accounting for 26% of the Propulsion segment's 1998 annual
sales and 35% of the Propulsion segment's sales in the first
quarter of 1999. Breed is also the sole customer of, and one-
third equity partner in, BAG SpA, (Breed's equity increased to
50% in April 1999). BAG SpA, which purchases inflator components
from ARAP, accounted for 10% of the Propulsion segment's 1998
annual sales and 7% of the Propulsion segment's sales in the
first quarter of 1999. (See the Equity in Income (Loss) of
Unconsolidated Joint Ventures section of this MD&A for further
information on BAG SpA.)
In Breed's Form 10-Q for the quarter ended December 31,
1998, filed with the Securities and Exchange Commission, it
disclosed it has certain financial issues, including negotiation
of an amendment to a loan agreement to address an existing
financial covenant violation and an existing event of default
(both covered by waiver through March 30, 1999) and to prevent
other financial covenant violations anticipated to occur by June
30, 1999. On March 31, 1999, Breed announced that it had
obtained a waiver of certain financial covenants related to its
credit facility through June 29, 1999, and that the company
anticipates that it will have the necessary liquidity to operate
the business through the waiver period. For more detailed
information on Breed's financial issues, the reader is encouraged
to review Breed's recent filings with the Securities and Exchange
Commission. If Breed is unable to meet its financial
obligations, it could have a serious impact on future sales and
operating results of ARAP and BAG SpA.
<PAGE>
RISK/CONCENTRATION OF BUSINESS (cont'd)
- ------------------------------
At March 31, 1999, ARAP had trade accounts receivable of
$9.8 million due from Breed and $11.2 million due from BAG SpA.
BAG SpA had trade accounts receivable of $16.2 million due from
Breed and an additional $0.9 million of net non-trade receivables
due from Breed. As of early May 1999, Breed was substantially
current in its payment of receivables to both ARAP and BAG SpA.
At March 31, 1999, neither ARAP nor BAG SpA had any significant
reserves related to the Breed accounts receivable. Management
continues to monitor this situation closely.
YEAR 2000 COMPUTER ISSUE
- ------------------------
Certain of Sequa's computer systems process transactions
based on storing two digits for the year of a transaction rather
than the full four digits. Such systems may not be programmed to
consider the start of a new century and will encounter
significant processing difficulties in the year 2000, unless they
are fixed or replaced.
Many of Sequa's operating units utilize purchased software,
and related software maintenance agreements provide for upgrades
which have addressed, or will address, the Y2K issue. Sequa's
estimate to become Y2K compliant includes the entire cost of new
software, including software purchased primarily for reasons
other than to address the Y2K issue. The costs of data
processing personnel on staff are not included in the estimate,
but outside consultants are included. Management currently
estimates that the total cost of hardware, software, training,
testing and other costs related to Y2K issues will be
approximately $26.5 million. To date, $13.7 million of these
costs has been incurred, with $9.0 million capitalized and the
balance of approximately $4.7 million expensed. Sequa
anticipates that approximately two thirds of the $12.8 million of
estimated future costs will be capitalized. Future costs will be
funded from Sequa's sources of funds, as discussed in the
Liquidity and Capital Resources section of this MD&A.
Sequa is a decentralized organization. Consequently,
compliance with the Y2K issue is the responsibility of individual
operating units. Corporate systems are the responsibility of the
individual staff departments. Sequa's senior management is
monitoring the progress of the various units and corporate
departments.
In evaluating Sequa's progress related to Y2K issues, the
following five major areas have been reviewed in detail:
APPLICATION SYSTEMS Broadly used business applications
which are supported by internal management information
systems (MIS) employees.
<PAGE>
YEAR 2000 COMPUTER ISSUE (cont'd)
- ------------------------
TECHNICAL INFRASTRUCTURE MIS-supported hardware and
software, including standard commercial packages on local
PCs.
FACILITIES & EQUIPMENT Manufacturing equipment and
building equipment, such as HVAC and telephones, plus any
other logic-based equipment.
THIRD-PARTY RELATIONSHIPS Entire supply chain, including
suppliers, customers, financial institutions and
necessary regulatory agencies.
END-USER COMPUTING End-user developed coding (for
example, in tools such as Microsoft Access and Microsoft
Excel) plus items purchased by end users outside of the
MIS support structure. This area was found to have no
critical applications; therefore, no further reporting
will be done on it.
Each unit's progress in the four critical major areas is
categorized in one of four life cycles defined below:
INVENTORY & ASSESSMENT (I&A) Awareness of problem,
detailed inventory creation, evaluation of the Y2K status
of each item, and remediation plan.
RENOVATION/REPLACEMENT (R) Any repair efforts.
TESTING & IMPLEMENTATION PROGRAM (T&I) Technical and Y2K
acceptance testing plus reintroduction into the
production environment.
PRODUCTION SUPPORT (PS) Ongoing execution of the item
after repair.
Following is the assessment of each operating unit and the
corporate departments reviewed for each of the four critical
major areas at March 31, 1999. While the Y2K remediation efforts
are ongoing, the assessments provide a snapshot at a given point
in time; they will be updated in each of Sequa's future filings.
Note: In all tables in this Y2K section, the X in the status
column means that this was the life cycle stage primarily being
worked on at the time of the review. In the case of Gas Turbine,
the figures in the status columns represent the number of units
that are doing work in each of the life cycle stages. Blank
spaces to the left of each X signify that these life cycle stages
were complete at the time of the review. Blank spaces to the
right of the X signify that while work may have started on these
stages, the unit was still most heavily involved in the column
marked with the X at the time of the review.
<PAGE>
<TABLE>
YEAR 2000 COMPUTER ISSUE (cont'd)
- ------------------------
<CAPTION>
Status
------------------------
Application systems I&A R T&I PS
------------------- --- - --- --
<S> <C> <C> <C> <C>
Gas Turbine 1 18 2 2
Atlantic Research X
Precoat Metals X
Warwick X
MEGTEC Systems X
Can Machinery X
Casco Products X
Men's Apparel X
Corporate X
</TABLE>
Many of Sequa's operating units and corporate departments
utilize purchased software. Significant progress in the
application systems area is expected to continue over the next
quarter, as software upgrades that address the Y2K issue are
received from vendors under ongoing maintenance agreements.
<TABLE>
<CAPTION>
Status
------------------------
Technical infrastructure I&A R T&I PS
------------------------ --- - --- --
<S> <C> <C> <C> <C>
Gas Turbine 2 14 5 2
Atlantic Research X
Precoat Metals X
Warwick X
MEGTEC Systems X
Can Machinery X
Casco Products X
Men's Apparel X
Corporate X
</TABLE>
Sequa has a variety of technical infrastructures at its
units and is working with the vendors of these systems to repair
or replace system hardware and software to ensure Y2K compliance.
Based upon the results of a review performed by an international
consulting firm in 1998, Sequa does not believe this to be an
area of high risk.
<TABLE>
<CAPTION>
Status
------------------------
Facilities & equipment I&A R T&I PS
---------------------- --- - --- --
<S> <C> <C> <C> <C>
Gas Turbine 2 14 4 3
Atlantic Research X
Precoat Metals X
Warwick X
MEGTEC Systems X
Can Machinery X
Casco Products X
Men's Apparel X
Corporate X
</TABLE>
<PAGE>
<TABLE>
YEAR 2000 COMPUTER ISSUE (cont'd)
- ------------------------
<CAPTION>
Status
---------
Third-party relationships I&A R
------------------------- --- -
<S> <C> <C>
Gas Turbine 7 16
Atlantic Research X
Precoat Metals X
Warwick X
MEGTEC Systems X
Can Machinery X
Casco Products X
Men's Apparel X
Corporate X
</TABLE>
Sequa's individual operating units have, for the most part,
not yet developed contingency plans to handle any disruption that
may result from the Y2K issue. The need for and extent of such
plans is being evaluated by each of the units, and plans will be
developed to the extent needed based on various factors,
including: the unit's ongoing progress; the extent of significant
identified problems or unknowns; overall evaluation of risk, etc.
There can be no guarantee that Sequa's effort to be Y2K compliant
will prevent a material adverse impact on its results of
operations, financial condition or cash flows. If Sequa and/or
third parties upon which Sequa relies are not fully Y2K
compliant, the possible consequences could include: temporary
plant closings; delays in the delivery of finished products;
delays in the receipt of key purchased materials and services;
invoice and collection errors; customer and vendor relations
problems, etc. These consequences could possibly have a material
adverse impact on Sequa's results of operations, financial
condition and cash flows if Sequa is unable to conduct its
business in the ordinary course. Sequa believes that its
readiness program will reduce the likelihood, severity and
duration of any possible disruptions.
Sequa expects that its Y2K compliance program will be largely
completed before December 31, 1999. Individual units and
corporate departments have started to complete portions of their
work.
EURO CONVERSION
- ---------------
On January 1, 1999, certain member countries of the European
Union established fixed conversion rates between their existing
currencies and the European Union's common currency (Euro). The
transition period for the introduction of the Euro will extend to
January 1, 2002. Sequa, in conjunction with its Y2K efforts, has
begun to identify Euro conversion compliance issues and work on
remediation of anticipated problems.
<PAGE>
EURO CONVERSION (cont'd)
- ---------------
Based on its evaluation to date, management believes that the
introduction of the Euro, including the total costs for the
conversion, will not have a material adverse impact on Sequa's
financial position, results of operations or cash flows.
However, uncertainty exists as to the effects the Euro will have
on the marketplace, and there is no guarantee that all problems
will be foreseen and corrected or that third parties will address
the conversion successfully.
ENVIRONMENTAL MATTERS
- ---------------------
Sequa's environmental department, under senior management
direction, manages all activities related to Sequa's involvement
in environmental clean-up. This department establishes the
projected range of expenditures for individual sites with respect
to which Sequa may be considered a potentially responsible party
under applicable federal or state law. These projected
expenditures, which are reviewed periodically, include: remedial
investigation and feasibility studies; outside legal, consulting
and remediation project management fees; the projected cost of
remediation activities; site closure and post-remediation
monitoring costs. The assessments take into account currently
available facts, existing technology, presently enacted laws,
past expenditures, and other potentially responsible parties and
their probable level of involvement. Outside technical,
scientific and legal consulting services are used to support
management's assessments of costs at significant individual
sites.
It is Sequa's policy to accrue environmental remediation
costs for identified sites when it is probable that a liability
has been incurred and the amount of loss can be reasonably
estimated. The potential exposure for such costs is estimated to
range from $16 million to $32 million. At March 31, 1999,
Sequa's balance sheet includes accruals for remediation costs of
$24.4 million. These accruals are at undiscounted amounts and
are included in accrued expenses and other noncurrent
liabilities. Actual costs to be incurred at identified sites in
future periods may vary from the estimates, given inherent
uncertainties in evaluating environmental exposures.
With respect to all known environmental liabilities, it is
currently estimated that Sequa will spend in the range of $6
million to $10 million during 1999 and between $4 million and $8
million during 2000. Actual expenditures for the first three
months of 1999 were approximately $1.1 million.
<PAGE>
BACKLOG
- -------
The businesses of Sequa for which backlogs are significant
are the Turbine Airfoils, Caval Tool, Turbocombuster Technology
and Casting units of the Aerospace segment; the Propulsion
segment; and the can machinery, MEGTEC and men's apparel units of
the Other Products segment. The aggregate dollar amount of
backlog in these units at March 31, 1999 was $285.4 million
($305.4 million at December 31, 1998). The decline from year-end
is primarily attributable to an 18% backlog reduction at the Gas
Turbine OEM units. Sales of the men's apparel unit are seasonal,
with stronger sales in the first six months of the year;
accordingly, this unit's backlog is normally higher at December
31 than at any other time of the year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash used for operating activities was $17.5 million in
the first quarter of 1999, compared with $3.0 million used for
operating activities in the first quarter of 1998. The primary
reasons for the increase in cash used for operating activities
were a decrease in pre-tax income and an increase in foreign and
state income taxes paid during the 1999 period. Net cash used
for investing activities increased to $31.6 million in the first
quarter of 1999 from $13.9 million in the first quarter of 1998.
The major factors in the 1999 increase were the absence of
proceeds from the sale of short-term investments, lower proceeds
from the sale of property, plant and equipment and higher capital
expenditures during the 1999 quarter. These increases in cash
used for investing activities were partially offset by a $17.1
million decrease in cash used to purchase businesses during the
1999 quarter. Cash provided by financing activities in the first
quarter of 1999 was $39.0 million compared to cash used for
financing activities of $22.0 million in the first quarter of
1998. The $61.0 million increase was attributable to $45.0
million of proceeds from the sale of accounts receivable and
reduced debt payments during the first quarter of 1999.
Capital expenditures amounted to $20.7 million during the
first quarter of 1999 and $17.9 million during the first quarter
of 1998, with spending in the 1999 period concentrated in the
Aerospace, Propulsion and Metal Coating segments. These funds
were primarily used to upgrade existing facilities and equipment
and to expand capacity. Sequa currently anticipates that capital
spending in 1999 will be approximately $125 million and will be
concentrated in the same segments.
In October 1998, Sequa filed a shelf registration statement
with the Securities and Exchange Commission for the issuance of
up to $500 million aggregate principal amount of senior unsecured
debt securities. Sequa anticipates that securities will be sold
under the shelf registration during the second or third quarter
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (cont'd)
- -------------------------------
of 1999, and the net proceeds will be used to repay the remaining
$138.5 million principal amount of Sequa's senior unsecured notes
due in October 1999, to refinance other existing debt and for
general corporate purposes.
Sequa has an issue with the IRS involving the 1989
restructuring of two subsidiaries. While management believes its
tax position in this matter is appropriate, it has taken the
conservative position of providing reserves to cover an adverse
outcome. At March 31, 1999, the net amount involved was
approximately $59 million, composed of the potential liability
associated with the restructuring and related tax issues;
interest expense, net of tax benefit, from the date of the
resulting tax refund; and deferred tax assets for portions of tax
loss and credit carryforwards which could be utilized in a
settlement. Management has had preliminary settlement
discussions with the IRS, and on October 1, 1998, Sequa made a
deposit of $24 million with the IRS against the expected
liability for additional tax and interest that may be assessed
against Sequa related to certain of these tax matters. The
deposit stops the running of interest with respect to the amounts
deposited. Discussions have continued, and management believes
there is a possibility for final resolution of this matter by the
end of 1999, and that, in the event of an unfavorable resolution,
Sequa will have sufficient resources available to make any
additional negotiated or adjudicated payment.
Management currently anticipates that cash flow from
operations, proceeds from the divestiture of assets, the $127.0
million of credit available at May 10, 1999 under the revolving
credit agreement, the $8.9 million of available financing under
the Receivables Purchase Agreement at May 10, 1999, proceeds from
debt securities which may be sold under Sequa's shelf
registration and the $71.4 million of cash and cash equivalents
on hand at March 31, 1999 will be sufficient to fund Sequa's
operations, niche acquisitions, and airline spare parts inventory
purchases for the next two years, and to repay the remaining
$138.5 million principal balance of Sequa's 9 5/8% senior
unsecured notes due in October 1999.
OTHER INFORMATION
- -----------------
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998. This statement requires
companies to record derivatives on the balance sheet as assets
and liabilities, measured at fair value. Depending on the use of
a derivative and whether it has been designated and qualifies as
a hedge, gains or losses resulting from changes in the values of
those derivatives would be recognized currently in earnings or
reported as a component of other comprehensive income. This
<PAGE>
OTHER INFORMATION (cont'd)
- -----------------
statement is not expected to have a material impact on Sequa's
consolidated financial statements. This statement is effective
for the fiscal years beginning after June 15, 1999, with earlier
adoption encouraged. Sequa will adopt this accounting standard
as required by January 1, 2000.
FORWARD-LOOKING STATEMENTS
- --------------------------
This document includes forward-looking statements made under the
safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements are based on management's
current expectations, estimates and projections that are subject
to risks and uncertainties, including, but not limited to:
political, currency, regulatory, competitive and technological
developments. Consequently, actual results could differ
materially from these forward-looking statements.
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
ASSETS
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
---------- ----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 71,426 $ 84,889
Short-term investments 8,606 11,475
Trade receivables (less allowances of
$15,861 and $15,635) 257,466 292,152
Unbilled receivables (less allowances
of $981 and $879) 33,320 38,795
Inventories 267,842 262,765
Other current assets 27,154 25,792
---------- ----------
Total current assets 665,814 715,868
---------- ----------
INVESTMENTS
Net assets of discontinued operations 103,752 105,152
Other investments 28,898 28,130
---------- ----------
132,650 133,282
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, NET 448,598 451,443
---------- ----------
OTHER ASSETS
Excess of cost over net assets of
companies acquired 317,198 307,051
Deferred charges and other 15,840 16,503
---------- ----------
333,038 323,554
---------- ----------
TOTAL ASSETS $1,580,100 $1,624,147
========== ==========
<FN>
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Amounts in thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term
debt $ 2,668 $ 8,659
Accounts payable 113,643 137,981
Taxes on income 8,907 16,499
Accrued expenses 178,486 174,800
---------- ----------
Total current liabilities 303,704 337,939
---------- ----------
NONCURRENT LIABILITIES
Long-term debt 500,618 500,685
Deferred taxes on income 40,680 40,422
Other noncurrent liabilities 79,061 79,649
---------- ----------
620,359 620,756
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock--$1 par value,
1,825,000 shares authorized,
797,000 shares of $5 cumulative
convertible stock issued at
March 31, 1999 and
December 31, 1998 (involuntary
liquidation value--$17,181 at
March 31, 1999) 797 797
Class A common stock--no par value,
25,000,000 shares authorized,
7,275,000 shares issued at
March 31, 1999 and 7,273,000 shares
issued at December 31, 1998 7,275 7,273
Class B common stock--no par value,
5,000,000 shares authorized,
3,727,000 shares issued at
March 31, 1999 and
December 31, 1998 3,727 3,727
Capital in excess of par value 288,423 288,379
Accumulated other comprehensive
loss (14,360) (1,016)
Retained earnings 450,139 444,669
---------- ----------
736,001 743,829
Less: Cost of treasury stock 79,964 78,377
---------- ----------
Total shareholders' equity 656,037 665,452
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,580,100 $1,624,147
========== ==========
<FN>
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<CAPTION>
For the Three Months
Ended March 31,
-------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before income taxes $ 10,786 $ 13,118
Adjustments to reconcile income to net
cash used for operating activities:
Depreciation and amortization 21,499 21,725
Provision for losses on receivables 1,337 2,564
Equity in losses of unconsolidated joint ventures 622 323
Gain on sale of assets (1,064) (75)
Other items not providing cash (533) (903)
Changes in operating assets and liabilities,
net of businesses purchased:
Receivables (8,111) (21,149)
Inventories (7,638) (265)
Other current asset (1,600) (3,741)
Accounts payable and accrued expenses (20,901) (12,499)
Other noncurrent liabilities (1,307) (1,522)
-------- --------
Net cash used for continuing operations
before income taxes (6,910) (2,424)
Net cash provided by discontinued
operations before income taxes 319 1,088
Income taxes paid, net (10,913) (1,636)
-------- --------
Net cash used for operating activities (17,504) (2,972)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Businesses purchased, net of cash acquired (12,962) (30,103)
Short-term investments - 25,000
Purchase of property, plant and equipment (20,679) (17,948)
Sale of property, plant and equipment 2,882 9,554
Other investing activities (882) (437)
-------- --------
Net cash used for investing activities (31,641) (13,934)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of accounts receivable 45,000 -
Proceeds from issuance of debt - 4,500
Payments of debt (5,851) (26,300)
Contribution from minority interest 1,960 -
Dividends paid (516) (625)
Proceeds from exercise of stock options 102 437
Purchase of treasury stock (1,670) -
-------- --------
Net cash provided by (used for) financing activities 39,025 (21,988)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (3,343) 807
-------- --------
Net decrease in cash and cash equivalents (13,463) (38,087)
Cash and cash equivalents at beginning of period 84,889 93,743
-------- --------
Cash and cash equivalents at end of period $ 71,426 $ 55,656
======== ========
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
SEQUA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of Sequa Corporation
("Sequa") include the accounts of all majority-owned
subsidiaries, including those of Sequa Receivables Corp. (SRC), a
special purpose corporation formed for the sale of eligible
receivables. Under the terms of the Receivables Purchase
Agreement, SRC's assets will be available to satisfy its
obligations to its creditors, which have security interests in
certain of SRC's assets, prior to any distribution to Sequa.
Investments in 20% to 50% owned joint ventures are accounted for
on the equity method. All material accounts and transactions
between the consolidated subsidiaries have been eliminated in
consolidation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The consolidated financial statements included herein have
been prepared by Sequa, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the
opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to fairly
present Sequa's results for the interim periods presented.
Except for $1.6 million of income recorded in the first quarter
of 1999 related to the collection of a note receivable written
off many years ago and the $2.0 million redundancy provision
recorded by the French operation of MEGTEC during the first
quarter of 1998, such adjustments consisted of normal recurring
items. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although Sequa
believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto
included in Sequa's latest Annual Report on Form 10-K. The
results of operations for the three months ended March 31, 1999
are not necessarily indicative of the results to be expected for
the full year.
<PAGE>
NOTE 2 - COMPREHENSIVE INCOME
Comprehensive income includes net income and other
comprehensive income items which are recorded within a separate
component of equity in the balance sheet and are excluded from
net income. Sequa's other comprehensive income items include
foreign currency translation adjustments and unrealized gains and
losses on certain securities. Since undistributed earnings of
Sequa's foreign subsidiaries are intended to be permanently
reinvested, taxes have not been provided for foreign currency
translation adjustments.
Comprehensive income for the three months ended March 31, 1999
and 1998 is as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars)
(Unaudited)
For the Three Months
Ended March 31,
---------------------
1999 1998
---- ----
<S> <C> <C>
Net income $ 5,986 $4,818
Other comprehensive income
(loss):
Foreign currency
translation adjustments (11,478) 817
Unrealized loss on
marketable securities,
net of tax (1,866) -
------- ------
Comprehensive income (loss) $(7,358) $5,635
======= ======
</TABLE>
NOTE 3 - EARNINGS PER SHARE
Basic earnings per share (EPS) for each of the three month
periods have been computed by dividing the net earnings, after
deducting dividends on cumulative convertible preferred stock, by
the weighted average number of common shares outstanding during
the period.
Diluted EPS in the 1998 period reflects the potential
dilution that would have occurred if the outstanding options to
purchase shares of Class A common stock were exercised. In 1999,
options to purchase shares of common stock were not included in
he computation of diluted EPS because the options' weighted
average exercise price was greater than the average market price
of the common shares. The conversion of preferred stock into
1.322 shares of Class A common stock was not included in the
<PAGE>
computation of diluted earnings per common share in either period
since it has an anti-dilutive effect when the preferred stock
dividends are added back to the income available to common stock.
<TABLE>
<CAPTION>
(Thousands of dollars)
(Unaudited)
For the Three Months
Ended March 31,
---------------------
1999 1998
---- ----
<S> <C> <C>
Net income $ 5,986 $ 4,818
Less: Preferred stock dividends (516) (625)
------- -------
Net income available to common
stock - basic $ 5,470 $ 4,193
======= =======
Weighted average number of common
shares outstanding - basic 10,374 10,067
Exercise of stock options - 68
------- -------
Weighted average number of common
shares outstanding - diluted 10,374 10,135
======= =======
Basic earnings per common share $0.53 $0.42
Diluted earnings per common share $0.53 $0.41
</TABLE>
NOTE 4 - INVENTORIES
The inventory amounts at March 31, 1999 and December 31,
1998 were as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars)
(Unaudited)
March 31, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Finished goods $ 75,548 $ 78,000
Work in process 82,546 78,728
Raw materials 109,941 105,430
Long-term contract costs 11,693 9,249
Customer deposits (11,886) (8,642)
-------- --------
$267,842 $262,765
======== ========
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1 - LEGAL PROCEEDINGS
-----------------
Sequa is involved in a number of claims, lawsuits and
proceedings (environmental and otherwise) which arose in the
ordinary course of business. Other litigation is pending against
Sequa involving allegations that are not routine and include, in
certain cases, compensatory and punitive damage claims. Included
in this other class of litigation is an action commenced on July
11, 1995 by United Technologies Corporation (UTC), through its
Pratt & Whitney division, against Chromalloy Gas Turbine
Corporation (Chromalloy) in the United States District Court for
the District of Delaware. The complaint sought unspecified
monetary damages and injunctive relief based on alleged breaches
of certain license agreements, alleged infringement of patents
and misuse of Pratt & Whitney intellectual property. Chromalloy
answered the complaint denying UTC's claims, and Chromalloy filed
counterclaims against UTC seeking monetary, declaratory and
injunctive relief based on UTC's breaches of license agreements,
failure to return royalty overpayments, patent invalidity, and
patent misuse. For a detailed report on earlier developments in
this matter, please see Sequa's Report on Form 10-K for the year
ended December 31, 1997, Reports on Form 10-Q for the quarters
ended March 31, 1998, June 30, 1998 and September 30, 1998, and
Report on Form 8-K, filed on September 10, 1998.
The most recent significant events and the current status
follow. On August 14, 1998, the Court issued a Memorandum Opinion
and Order relating to Chromalloy's claim under the parties' 1985
Repair Agreement. The Court ordered UTC to provide Chromalloy
with updated technical data on an ongoing basis and to evaluate
and grant repair approvals to Chromalloy to repair components for
the most advanced models of several Pratt & Whitney engine
families, including the PW 4000 series, the PW 2000 series, and
the V2500 series. The Court identified eight separate contract
breaches by UTC and granted Chromalloy all the relief it had
requested. The Court also held that UTC had violated the 1985
Repair Agreement by failing to notify Chromalloy of the more
favorable licensing terms, including lower royalty rates, that
Pratt & Whitney negotiated with other component repair suppliers
and to give Chromalloy the opportunity to accept the same terms.
The trial on the monetary damages and other remedies being sought
by Chromalloy on that claim currently is scheduled for July 1999.
On February 19, 1999, Chromalloy moved for summary judgment with
regard to the damages and remedies being sought on this claim.
UTC has filed a Notice of Appeal to the United States Court
of Appeals for the Federal Circuit (the Federal Circuit) and UTC
also sought a stay of the August 14, 1998 Order from the federal
district court. On December 4, 1998, the district court denied
UTC's stay application. On December 7, 1998, UTC filed with the
<PAGE>
ITEM 1 - LEGAL PROCEEDINGS (cont'd)
-----------------
Federal Circuit a motion for stay of the August 14, 1998 order
pending the court's decision on UTC's appeal. On March 1, 1999,
the Federal Circuit denied UTC's stay application stating that
UTC "has not shown a strong likelihood of success" on the merits
of its appeal. UTC's appeal to the Federal Circuit is now fully
briefed and pending.
Additional claims by both UTC and Chromalloy had been
scheduled for trials in November 1998 and March 1999. On
December 18, 1998, the parties agreed to resolve all of these
remaining claims, except for one of Chromalloy's counterclaims
and the issues scheduled for trial in July 1999 discussed above.
The settlement does not affect the issues tried during the five-
day bench trial in July 1998 on Chromalloy's claim for equitable
relief under one of the parties' licensing agreements. It would
be premature at this stage for management to make an evaluation
of the likely outcome of Chromalloy's remaining claims or UTC's
appeal.
On August 29, 1995, Chromalloy filed suit against UTC in the
131st District Court of Bexar County, Texas. This suit sought
unspecified damages and injunctive relief for violations by UTC
of the Texas Free Enterprise and Antitrust Act. UTC filed
counterclaims against Chromalloy for alleged breach of contract
and unfair competition. For a detailed report on earlier
developments in this matter, please see Sequa's previous filings
listed in the first paragraph of this Note. The only remaining
issue in this case is Chromalloy's appeal of the trial court's
denial of injunctive relief. On October 14, 1998, the Fourth
Court of Appeals issued its decision refusing to overturn the
trial court's denial of Chromalloy's request for injunctive
relief. Although the Court of Appeals acknowledged the October
1996 jury finding that Pratt & Whitney "willfully" or
"flagrantly" attempted to monopolize the market, causing harm to
Chromalloy, the Court held that, under the record presented on
appeal, "the trial court was not required, as a matter of law, to
conclude that ongoing, illegal conduct threatened Chromalloy with
injury." Chromalloy disagrees with the decision and has filed a
motion for reconsideration, both to the three-judge panel that
decided the case and also to the entire Court of Appeals for en
--
banc consideration. Those motions are still pending.
- ----
On October 17, 1996, Chromalloy filed suit against UTC in
the United States District Court for the District of Delaware.
The suit sought unspecified damages for, and injunctive relief
against, alleged infringement of Chromalloy patents. UTC filed
its answer asserting certain affirmative defenses and four
counterclaims. For a detailed report on earlier developments in
this matter, please see the reports listed in the first paragraph
of this Note. The Court initially set the trial date for
<PAGE>
ITEM 1 - LEGAL PROCEEDINGS (cont'd)
-----------------
September 3, 1998 and (on UTC's motion) moved the trial date to
October 13, 1998. Prior to trial, the parties agreed to resolve
all of Chromalloy's claims and UTC's counterclaims, and, on
December 18, 1998, the parties finalized the settlement
documents.
Chromalloy's divisions compete for turbine engine repair
business with a number of other companies, including the original
equipment manufacturers (OEMs). The OEMs generally have
obligations (contractual and otherwise) to approve vendors to
manufacture components for their engines and/or perform repair
services on their engines and components. Chromalloy has a
number of such approvals, including licensing agreements, which
allow it to manufacture and repair certain components of flight
engines. The loss of a major OEM's approval to manufacture or
repair components for the OEM's engines could have an adverse
effect on Chromalloy, although management believes it has certain
actions available to it to mitigate the adverse effect.
The ultimate legal and financial liability of Sequa in
respect to all claims, lawsuits and proceedings referred to above
cannot be estimated with any certainty. However, in the opinion
of management, based on its examination of these matters, its
experience to date and discussions with counsel, the ultimate
outcome of these contingencies, net of liabilities already
accrued in Sequa's Consolidated Balance Sheet, is not expected to
have a material adverse effect on Sequa's consolidated financial
position, although the resolution in any reporting period of one
or more of these matters could have a significant impact on
Sequa's results of operations for that period.
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) Exhibits
COMPENSATORY PLANS OR ARRANGEMENTS
10.18 Amendment dated as of March 1, 1999 to
Employment Agreement dated April 1, 1993 by and
between John J. Quicke and Sequa - filed
herewith.
10.19 Amendment dated as of March 1, 1999 to
Employment Agreement dated as of October 1,
1991 by and between Martin Weinstein and
Chromalloy Gas Turbine Corporation - filed
herewith.
27.1 Financial Data Schedule, filed herewith.
(B) Reports on Form 8-K
No report on Form 8-K was filed during the three
month period ended March 31, 1999.
<PAGE>
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.
SEQUA CORPORATION
BY:/S/ WILLIAM P. KSIAZEK
-----------------------------
William P. Ksiazek
Vice President and Controller
May 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 71,426
<SECURITIES> 8,606
<RECEIVABLES> 307,628
<ALLOWANCES> 16,842
<INVENTORY> 267,842
<CURRENT-ASSETS> 665,814
<PP&E> 1,096,922
<DEPRECIATION> 648,324
<TOTAL-ASSETS> 1,580,100
<CURRENT-LIABILITIES> 303,704
<BONDS> 500,618
0
797
<COMMON> 11,002
<OTHER-SE> 644,238
<TOTAL-LIABILITY-AND-EQUITY> 1,580,100
<SALES> 407,266
<TOTAL-REVENUES> 407,266
<CGS> 327,679
<TOTAL-COSTS> 327,679
<OTHER-EXPENSES> (2,410)
<LOSS-PROVISION> 1,337
<INTEREST-EXPENSE> 11,915
<INCOME-PRETAX> 10,786
<INCOME-TAX> 4,800
<INCOME-CONTINUING> 5,986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,986
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
EXH 10.18
March 1, 1999
Mr. John J. Quicke
11 Stony Hollow Road
Chappaqua, NY 10514
Dear John:
Reference is made to your Employment Agreement dated April 1,
1993, as amended by letter agreement dated March 1, 1995 and as
further amended by letter agreement dated September 26, 1996 (the
"Agreement"). This shall confirm that the term of the Agreement as
specified in Paragraph 6(a) thereof is hereby extended for an
additional three (3) year period commencing as of January 1, 2000
and expiring December 31, 2002. The foregoing is expressly subject
to provisions of subparagraphs 6(b) and 6(c) of the Agreement.
This shall also confirm that the first sentence of Paragraph
2 of the Agreement is hereby amended to read in its entirety as
follows:
"In full consideration of all of the services to be rendered
by you under this Agreement, the Company will pay to you a
base salary at the rate of Five Hundred Sixty Thousand Dollars
($560,000) per year (that being the effective rate commencing
March 1, 1999) during the term of your employment hereunder,
payable in equal bi-weekly installments."
Except as set forth above, this letter shall not amend or
affect your Agreement; said Agreement, as hereby amended, shall
remain in full force and effect. If the above is in accordance
with your understanding, please sign the enclosed duplicate of this
letter and return it to the undersigned. Upon our receipt of such
fully executed copy, this shall constitute a binding agreement
between us.
SEQUA CORPORATION
By:_________________________________
Norman E. Alexander
Chairman and Chief Executive
Officer
AGREED TO AND ACCEPTED:
By:___________________________Date:___________
John J. Quicke
EXH 10.19
March 1, 1999
Dr. Martin Weinstein
111 Sheffield Drive
San Antonio, TX 78218
Dear Marty:
Reference is made to the Employment Agreement dated as of
October 1, 1991 between Chromalloy Gas Turbine Corporation and you,
as amended by Agreement dated as of June 1, 1993, as further
amended by letter agreement dated as of February 23, 1995 and as
further amended by Agreement dated as of June 1, 1996 (the
"Agreement"). This shall confirm that the term of the Agreement as
specified in Paragraph 1(a) thereof is hereby extended for an
additional three (3) year period commencing as of January 1, 2000
and expiring December 31, 2002. The foregoing is expressly subject
to the provisions of Paragraphs 3 and 4 of the Agreement.
This shall also confirm that the first sentence of Paragraph
2(a)(i) of the Agreement is hereby amended to read in its entirety
as follows:
Aa salary (ABase Salary@) at the rate of $530,700 a year (that
being the effective rate commencing March 1, 1999) payable in
approximately equal installments no less frequently than bi-
weekly, and subject to annual review in the same manner as
reviews are held for other executive officers of Sequa;@
Except as set forth above, this letter shall not amend or
affect your Agreement; said Agreement, as hereby amended, shall
remain in full force and effect. If the above is in accordance
with your understanding, please sign the enclosed duplicate of this
letter and return it to the undersigned. Upon our receipt of such
fully executed copy, this shall constitute a binding agreement
between us.
CHROMALLOY GAS TURBINE CORPORATION
By:_________________________________
Norman E. Alexander, Director
By:_________________________________
Stuart Z. Krinsly, Vice President
AGREED TO AND ACCEPTED:
By:___________________________Date:___________
Martin Weinstein
