 |
|
Long-term debt payable to banks and others, including current maturities, at March 31 consisted of the
following (in thousands):
| |
|
2002 |
|
2001 |
| Credit agreement - 7.25% |
$ 17,000 |
$ -- |
| Credit agreement - 8.0% |
9,562 |
-- |
| Credit agreement - 25.0% |
2,500 |
-- |
| Credit agreement - 10.5% |
-- |
2,900 |
| Credit agreement - 9.95% |
-- |
153,368 |
| Term loan - 9.06% |
-- |
38,750 |
| Senior Subordinated Notes - 16% |
78,648 |
76,332 |
| Other |
-- |
892 |
|
|
| |
107,710 |
272,242 |
Less current maturities and
amounts callable by lenders |
-- |
271,395 |
| Less unamortized discount |
146 |
189 |
|
|
| Total long-term debt |
$ 107,564 |
$ 658 |
|
|
Credit Facilities - Effective December 31, 2000, the Company was not able to meet certain financial ratio
requirements of the senior credit facility (the "Credit Facility") as amended. Pursuant to discussions with the senior
debt lenders (the "Lenders"), the Company and the Lenders agreed to an amendment to the Credit Facility to include a
forbearance agreement as well as certain other fees and conditions, including the suspension of dividend payments.
During the forbearance period the Lenders agreed not to exercise certain of their rights and remedies under the Credit
Facility. The Company, accordingly, classified its bank debt as "current" at March 31, 2001, to reflect the fact that
the forbearance period was less than one year. The term of the forbearance period, initially scheduled to expire on
January 31, 2001, was subsequently extended by an additional amendment to March 29, 2001. This additional amendment
also reduced the Revolver from $200 million to $175 million with an additional sub-limit on usage at $162 million.
Prior to the March 29, 2001 expiration date, the Lenders agreed to extend the termination date until June 27, 2001,
provided that certain performance and debt reduction requirements occurred in which case the forbearance termination
date could be further extended under similar terms and conditions until September 27, 2001. The debt reduction
requirements of the forbearance agreement stipulated that $50 million was to be repaid prior to June 27, 2001,
which was deemed satisfied by the Lenders, because of the impending sale of the Company's Breeze Industrial and
Pebra divisions in July 2001. Effective as of September 27, 2001, a further extension to the forbearance
termination date was granted until December 21, 2001, provided that certain performance conditions were met and
certain fees and increased interest charges were paid.
Effective December 5, 2001, the Company sold its Engineered Components division for $98.5 million including cash of
$93.1 million, which was used to retire senior debt. An additional $2.9 million in cash was received on January
17, 2002. In anticipation of this debt reduction, a further extension to the forbearance termination date was
granted effective December 4, 2001 until March 27, 2002 provided certain conditions were met. This forbearance
agreement extension retained a provision that $2.5 million of the outstanding revolver bears an interest rate
of 25% per annum. This amount relates to the subordinated debt interest payment made on its scheduled due date
of October 1, 2001. Under the forbearance agreement, the $2.5 million will be the last piece of the revolver
paid. This agreement was further amended on January 31, 2002, to modify certain provisions with respect to
borrowing limits and on March 27, 2002, was extended until April 4, 2002. On April 3, 2002, a further
extension to the forbearance termination date was granted until September 25, 2002, provided certain conditions
are met. The current forbearance agreement retains a provision that an additional $2.5 million of the outstanding
revolver bears an interest rate of 25% per annum. This amount relates to the subordinated debt interest payment
made on April 4, 2002. This current forbearance agreement also requires the achievement of minimum levels of
EBITDA (earnings before interest, taxes, depreciation and amortization), adherence to borrowing limits as
adjusted based on anticipated debt reduction, restrictions on the level of spending for capital expenditures as
well as an agreement with the subordinated debt holders to refinance the obligation to the senior debt holders.
Other terms of the forbearance agreement include certain fees, reporting and consulting requirements.
The Company has taken action to reduce its debt by selling its Breeze-Industrial, Pebra, Engineered Components,
Seeger-Orbis and Aerospace Rivet Manufacturers business as well as taking action to arrange for the sale of the
other businesses in its discontinued Specialty Fastener Segment so as to be in an improved financial position
to negotiate further amendments or borrowing alternatives. The Company has made all of its scheduled interest
and principal payments on a timely basis.
The Company has unused borrowing capacity for both domestic and international operations of $7.2 million as of
March 31, 2002, including letters of credit. The Credit Facility is secured by all of the Company's assets.
As of March 31, 2002, the Company had total borrowings of $107.6 million, which have a current weighted-average
interest rate of 14.1% excluding the impact of interest rate swaps. The impact of interest rate swaps as
further discussed below was provided for as a charge to discontinued operations in the three month period
ended September 30, 2001. The interest rate swap contracts provide for a fixed rate of interest on $125
million notional amount of debt, which currently exceeds the Company's outstanding variable rate based debt
by approximately $96 million.
Borrowings under the Credit Facility as of March 31, 2002, were $29.1 million. Interest on the Revolver is
tied to the primary bank's prime rate, or at the Company's option, the London Interbank Offered Rate ("LIBOR"),
plus a margin that varies depending upon the Company's achievement of certain operating results. As of March
31, 2002, $9.6 million of the Company's outstanding borrowings utilized LIBOR, all of which were payable in
Pounds sterling. The remainder of the Company's outstanding borrowings under the Credit Facility utilized
the prime rate.
Effective July 10, 2001, the Term Loan of $38.8 million was repaid in full from the proceeds of the sale of
Breeze Industrial and Pebra.
The Credit Facility requires the Company to maintain interest rate protection on a minimum of 50% of its
variable rate debt. The Company has, accordingly, provided for this protection by means of interest rate
swap agreements which have fixed the rate of interest on $50.0 million of debt at a base rate of 5.48%
through May 4, 2002, and $75.0 million of debt at a base rate of 6.58% through March 3, 2003. Due to a
decline in interest rates since the inception of these swap agreements, the fair value of the agreements
has become unfavorable to the Company. At September 30, 2001, the Company recorded a charge and a liability
in the amount of $5.1 million before tax to recognize the liability based on the expected retirement of
the associated Credit Facility with the proceeds from the sale of the discontinued business units this
fiscal year. The Company increased this charge by $0.6 million at December 30, 2001. This pre-tax charge
to terminate these interest rate swap agreements is accordingly included with the loss on disposal of the
discontinued businesses.
Under the Credit Facility agreement, the base interest rate is added to the applicable interest rate margin
to determine the total interest rate in effect. The Credit Facility contains other customary financial
covenants, including the requirement to maintain certain financial ratios relating to performance, interest
expense and debt levels.
On June 13, 2002, the Company received a commitment to refinance its senior debt for a period of three years
and a commitment from the note holders to amend the financial covenants to bring the company into compliance.
Management expects to complete the proposed refinancing by the end of June 2002 and has, accordingly,
classified its senior debt, as well as its senior subordinated notes, as long term. Under the commitment,
$8.4 million is due in 2004, $3.4 million is due in 2005 and the remainder, including all subordinated debt
is due in 2006.
Senior Subordinated Notes - On August 30, 2000, the Company completed a private placement of
$75 million in senior subordinated notes (the "Notes") and certain warrants to purchase shares of the
Company's common stock (the "Warrants") to a group of institutional investors (collectively, the "Purchasers").
The Notes are due on August 29, 2005 and bear interest at a rate of 16% per annum, consisting of 13% cash
interest on principal, payable quarterly, and 3% interest on principal, payable quarterly in "payment-in-kind"
promissory notes. Prepayment of the Notes is permitted after August 29, 2001 at a premium initially of 9%,
declining to 5%, 3%, and 1% annually, respectively, thereafter. The Notes contain customary financial
covenants and events of default, including a cross-default provision to the Company's Credit Facility.
The Warrants entitle the Purchasers to acquire in the aggregate 427,602 shares, or 6.5%, of the common stock
of the Company at an exercise price of $9.93 a share, which represents the average daily closing price of
the Company's common stock on the New York Stock Exchange for the thirty (30) days preceding the completion
of the private placement. The Warrants must be exercised by August 29, 2010. These Warrants have been
valued at an appraised amount of $0.2 million and have been recorded in paid in capital. In connection
with the transaction, the Company and certain of its subsidiaries signed a Consent and Amendment Agreement
with the Lenders under the Company's $250 million Credit Facility existing at that time, in which the
Lenders consented to the private placement and amended certain financial covenants associated with the
Credit Facility.
The Company maintains the amended and restated 1992 long-term incentive plan (the "1992 Plan"), the 1998
non-employee directors stock option plan (the "1998 Plan") and the 1999 long-term incentive plan (the
"1999 Plan").
Under the terms of the 1992 Plan, 800,000 of the Company's common shares may be granted as stock options
or awarded as restricted stock to officers, directors and certain employees of the Company through
September 2002. Under the terms of the 1999 plan, 300,000 of the Company's common shares may be granted
as stock options or awarded as restricted stock to officers, directors and certain employees of the
Company through July 2009. Under both plans, option exercise prices equal the fair market value of the
common shares at their grant dates. For grants made prior to May 1999, options expire not later than
five years after the date of the grant. Options granted beginning in May 1999 to officers and employees
expire not later than 10 years after the date of the grant. Options granted to directors and to officers
and employees with the annual cash bonus vest ratably over three years beginning one year after the date
of the grant. Restricted stock is payable in equivalent number of common shares. The shares are
distributable in a single installment and, with respect to officers and employees, restrictions lapse
ratably over a three-year period from the date of the award, and with respect to directors, the
restrictions lapse after one year.
Under the terms of the 1998 Plan, non-employee directors are entitled to receive matching options for a)
each share of the Company's common stock which they hold at the end of a 60-day period following initial
election as a director, but not to exceed 25,000 shares, with the strike price of the option being the
fair market value of the shares at their grant dates, and b) thereafter, for each share of the Company's
common stock that they purchase on the open market, with the strike price of the option being the
purchase price of the share, up to a maximum of 5,000 options in any twelve month period or 15,000 options
over a three-year period. Options granted under the 1998 Plan vest on the first anniversary of the grant.
Options expire not later than five years after the date of the grant.
The Company continues to apply the accounting standards set forth in APB No. 25. However, disclosures are
required of pro forma net income and earnings per share as if the Company had adopted the accounting
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Based on Black-Scholes values,
pro forma net income for 2002, 2001 and 2000 would be $(72.4) million, $(73.3) million and $6.2 million,
respectively; pro forma earnings per common share for 2002, 2001 and 2000 would be $(11.62), $(11.89) and
$1.00, respectively.
The following table summarizes stock option activity over the past three years under the plan:
| |
|
Number
of Shares |
|
Weighted
Average
Exercise
Price |
| Outstanding at March 31, 1999 |
438,046 |
17.66 |
| Granted |
155,715 |
18.90 |
| Exercised |
(29,200) |
14.53 |
| Canceled or expired |
(75,521) |
15.47 |
|
|
|
| Outstanding at March 31, 2000 |
489,040 |
19.56 |
| Granted |
151,737 |
9.74 |
| Exercised |
(15,000) |
11.38 |
| Canceled or expired |
(83,606) |
20.19 |
|
|
|
| Outstanding at March 31, 2001 |
542,171 |
18.25 |
| Granted |
159,000 |
7.63 |
| Exercised |
(10,356) |
8.84 |
| Canceled or expired |
(150,268) |
18.86 |
|
|
|
| Outstanding at March 31, 2002 |
540,547 |
16.30 |
|
|
|
|
|
|
| Options exercisable at March 31, 2000 |
183,829 |
19.13 |
| Options exercisable at March 31, 2001 |
247,119 |
20.92 |
| Options exercisable at March 31, 2002 |
318,189 |
19.00 |
In 2002, 2001 and 2000 the Company awarded restricted stock totaling 10,294 shares, 12,382 shares and 8,177 shares,
respectively. The weighted-average fair value of this restricted stock was $10.12, $9.63 and $18.60 in 2002, 2001
and 2000, respectively. The expense recorded in 2002, 2001 and 2000 for restricted stock was $25,000, $133,000 and
$124,000, respectively.
The weighted-average Black-Scholes value per option granted in 2002, 2001 and 2000 was $4.22, $3.00 and $4.74,
respectively. The following weighted-average assumptions were used in the Black-Scholes option pricing model for
options granted in 2002, 2001 and 2000:
| |
|
2002 |
|
2001 |
|
2000 |
| Dividend yield |
0.0% |
0.9% |
1.3% |
| Volatility |
75.6% |
38.4% |
25.0% |
| Risk-free interest rate |
3.3% |
6.3% |
5.5% |
Expected term of options
(in years) |
4.0 |
4.0 |
4.0 |
For options outstanding and exercisable at March 31, 2002, the exercise price ranges and average remaining lives were:
| |
Options Outstanding |
Options Exercisable |
|
|
Range of
Exercise Prices |
|
Number Outstanding
at March 31, 2002 |
|
Weighted Average
Remaining Life |
|
Weighted Average
Exercise Price |
|
Number Exercisable
at March 31, 2002 |
|
Weighted Average
Exercise Price |
| $ 3-10 |
242,995 |
4 |
$ 7.61 |
62,185 |
$ 6.53 |
| 10-15 |
8,285 |
3 |
$ 11.43 |
2,857 |
$ 11.52 |
| 15-21 |
186,499 |
2 |
$ 18.97 |
144,740 |
$ 19.07 |
| 21-28 |
102,768 |
1 |
$ 27.11 |
102,768 |
$ 27.11 |
|
|
|
|
|
|
| |
540,547 |
2 |
$ 15.30 |
312,550 |
$ 19.15 |
|
|
|
|
|
|
Notes Receivable from Officers - Notes receivable from an officer result from the exercise of stock options in exchange
for notes. The notes are full recourse promissory notes bearing interest at 5% and are collateralized by the stock issued upon exercise
of the stock options. Principal and interest are due in May 2003.
The Company has a defined contribution plan covering all eligible employees. Contributions are based on certain percentages of
an employee's eligible compensation. Expenses related to this plan were $1.0 million, $0.9 million and $0.9 million in 2002,
2001 and 2000, respectively.
The Company provides postretirement benefits to union employees at one of the Company's divisions. The Company funds these
benefits on a pay-as-you-go basis.
(In thousands)
For measurement purposes, a 9.5% and 10.0% annual rate of increase in the per capita cost of covered health care benefits was
assumed for 2002 and 2001, respectively. The rate was assumed to decrease gradually to 5.0% by 2011 and remain at that level
thereafter. Under the Plan, the actuarially determined effect of a one-percentage point change in the assumed health case
cost trend would have the following effects.
| |
|
One
Percentage
Point
Increase |
|
One
Percentage
Point
Decrease |
Effect on total of service
and interest cost components |
$ 6 |
$ (6) |
Effect on accumulated
postretirement benefit obligation |
87 |
(76) |
The balance sheet of the Company contains a non-current asset and a non-current liability in the amount of $3.1 million
relating to the pension plan of a divested company. These amounts represent the legal liability of the company under
German law and the indemnification received from the buyer of the business for that liability.
|
|
|
|
