 |
|
Interest Rate Swap Agreements - Under the terms of its Credit Facility, the Company is required to maintain
certain levels of interest rate protection through interest rate swap agreements. As a result, the Company has entered
into interest rate swap agreements to effectively convert all or a portion of its floating-rate debt to fixed-rate debt
in order to reduce the Company's risk to movements in interest rates. Such agreements involve the exchange of fixed and
floating interest rate payments over the life of the agreement without the exchange of the underlying principal amounts.
Accordingly, the impact of fluctuations in interest rates on these interest rate swap agreements is fully offset by the
opposite impact on the related debt. Swap agreements are only entered into with strong creditworthy counterparties.
The swap agreements in effect were as follows:
| |
|
Notional
Amount
(In thousands) |
|
Maturities |
|
Receive
Rate(1) |
|
Pay
Rate |
| March 31, 2002 |
$ 25,000 |
5/02 |
1.88% |
5.48% |
| |
25,000 |
5/02 |
1.88 |
5.48 |
| |
37,500 |
3/03 |
1.90 |
6.58 |
| |
37.500 |
3/03 |
1.90 |
6.58 |
(1) Based on three-month LIBOR |
Fair Value of Financial Instruments - The following methods and assumptions were used by the Company in
estimating the fair value of each class of financial instruments:
Cash and Cash Equivalents - The carrying amount reported in the balance sheet for cash and cash equivalents
approximates its fair value.
Accounts Receivable, Debt, Accounts Payable and Other Liabilities - The carrying amounts of these items
approximates their fair value.
Concentration of Credit Risk - The Company is subject to a concentration of credit risk primarily with its
trade and notes receivable. The Company grants credit to certain customers who meet pre-established credit requirements,
and generally requires no collateral from its customers. Estimates of potential credit losses are provided for in the
Company's consolidated financial statements and are within management's expectations and industry averages. As of March
31, 2002, the Company had no other significant concentrations of credit risk.
Interest Rate Swaps - The fair value of the Company's interest rate swaps are the estimated amounts the
Company would pay or receive to terminate the agreements at March 31, 2002 and 2001 based upon quoted market prices as
provided by financial institutions which are counterparties to the agreements and were as follows (in thousands):
| |
|
2002
(Pay) |
|
2001
(Pay) |
| Interest rate swap agreements |
$ (3,353) |
$ (3,207) |
The impact of interest rate swaps as discussed above 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 $98 million.
In 2000, the Company refinanced its credit facilities. Due to the termination of the prior credit agreement, the
Company recognized an extraordinary charge of $0.5 million, net of tax, to write-off the unamortized portion of
loan origination fees associated with the prior agreement.
Rent expense under operating leases for the years ended March 31, 2002, 2001, and 2000 was $1.1 million, $0.6
million and $0.6 million, respectively.
The Company and its subsidiaries have minimum rental commitments under noncancelable operating leases, primarily
leased buildings, as follows (in thousands):
Environmental Matters. During the fourth quarter of fiscal 2000, the Company presented an environmental
cleanup plan for a portion of a site in Pennsylvania which continues to be owned although the related business has
been sold. This plan was submitted pursuant to the Consent Order and Agreement with the Pennsylvania Department of
Environmental Protection ("PaDEP") concluded in fiscal 1999. Pursuant to the Consent Order, upon its execution the
Company paid $0.2 million for past costs, future oversight expenses and in full settlement of claims made by PaDEP
related to the environmental remediation of the site with an additional $0.2 million paid in fiscal 2001. A second
Consent Order was concluded with PaDEP in the third quarter of fiscal 2001 for another portion of the site, and a
third Consent Order for the remainder of the site is contemplated by October 1, 2002. The Company is also
administering an agreed settlement with the Federal government under which the government pays 50% of the direct and
internal environmental response costs associated with a portion of the site. The Company has also reached an
agreement in principle with the Federal government and is in the process of finalizing the necessary documentation
under which the Federal government will pay 45% of the direct and internal environmental response costs associated
with another portion of the site. At March 31, 2002, the Company's cleanup reserve was $1.8 million based on the net
present value of future expected cleanup costs. The Company expects that remediation at the Pennsylvania site will
not be completed for several years.
The Company also continues to participate in environmental assessments and remediation work at nine other locations,
which include operating facilities, facilities for sale, and previously owned facilities. The Company estimates that
its potential cost for implementing corrective action at these sites will not exceed $0.4 million payable over the
next several years, and has provided for the estimated costs in its accrual for environmental liabilities.
In addition, the Company has been named as a potentially responsible party in eight environmental proceedings pending
in several other states in which it is alleged that the Company was a generator of waste that was sent to landfills and
other treatment facilities and, as to several sites, it is alleged that the Company was an owner or operator. Such
properties generally relate to businesses which have been sold or discontinued. The Company estimates that its expected
future costs, and its estimated proportional share of remedial work to be performed, associated with these proceedings
will not exceed $0.1 million and has provided for these estimated costs in its accrual for environmental liabilities.
Litigation. The Company is also engaged in various other legal proceedings incidental to its business.
It is the opinion of management that, after taking into consideration information furnished by its counsel, the above
matters will have no material effect on the Company's consolidated financial position or the results of the Company's
operations in future periods.
The Company operates in only one business segment, the design, manufacture and sale of equipment for use in the aerospace
industry. Approximately 43%, 40% and 37% of sales in 2002, 2001 and 2000 were derived from sales to the United States
Government and its prime contractors.
Net sales below show the geographic location of customers (in thousands):
| Location |
|
2002 |
|
2001 |
|
2000 |
| United States |
$ 45,426 |
$ 45,576 |
$ 36,874 |
| Europe |
16,619 |
17,888 |
12,680 |
| Other non-U.S. |
10,240 |
7,017 |
11,282 |
|
|
| Total |
$ 72,285 |
$ 70,481 |
$ 60,836 |
|
|
On April 16, 2002, the Company completed the sale of all of the shares of its Aerospace Rivet Manufacturers Corporation
Inc. subsidiary for $3.2 million of cash consideration plus the assumption of certain liabilities.
On May 30, 2002, the Company completed the sale of substantially all of the net assets of its U.S. retaining ring
business for $2.9 million of cash, a promissory note of $0.8 million and warrants for 5% of the equity of the purchaser.
(In thousands except per share amounts)
| |
|
First
Quarter |
|
Second
Quarter |
|
Third
Quarter |
|
Fourth
Quarter |
|
Total |
| 2002 |
|
|
|
|
|
| Net sales |
$ 18,602 |
$ 16,293 |
$ 18,895 |
$ 18,495 |
$ 72,285 |
| Gross profit |
7,446 |
6,535 |
8,325 |
10,086(1) |
32,392 |
| |
|
|
|
|
|
| Income (loss) from continuing operations |
28 |
(1,266) |
575 |
1,436 |
773 |
| Income (loss) from discontinued operations |
778 |
(53,340) |
(6,790) |
(13,202) |
(72,554) |
|
|
| Net income (loss) |
$ 806 |
$ (54,606) |
$ (6,125) |
$ (11,766) |
$ (71,781) |
|
|
| |
|
|
|
|
|
| Basic (loss) earnings per share: |
|
|
|
|
|
| (Loss) earnings from continuing operations |
-- |
$ (0.21) |
$ 0.09 |
$ 0.23 |
$ 0.13 |
| Earnings (loss) from discontinued operations |
$ 0.13 |
(8.63) |
(1.10) |
(2.13) |
(11.74) |
|
|
| Basic earnings (loss) per share |
$ 0.13 |
$ (8.84) |
$ (1.01) |
$ (1.90) |
$ (11.61) |
|
|
| |
|
|
|
|
|
| Diluted (loss) earnings per share: |
|
|
|
|
|
| (Loss) income from continuing operations |
-- |
$ (0.21) |
$ 0.09 |
$ 0.23 |
$ 0.12 |
| Income (loss) from discontinued operations |
$ 0.13 |
(8.63) |
(1.09) |
(2.12) |
(11.64) |
|
|
| Diluted income (loss) per share |
$ 0.13 |
$ (8.84) |
$ (1.00) |
$ (1.89) |
$ (11.52) |
|
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| |
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
Total |
| 2001 |
|
|
|
|
|
| Net sales |
$ 15,428 |
$ 15,544 |
$ 18,650 |
$ 20,859 |
$ 70,481 |
| Gross profit |
6,135 |
5,970 |
7,491 |
10,331 |
29,927 |
| |
|
|
|
|
|
| (Loss) income from continuing operations |
(732) |
423 |
455 |
(6,192) |
(6,046) |
| Loss from discontinued operations |
(20) |
(2,178) |
(1,705) |
(63,021) |
(66,924) |
|
|
| Net loss |
$ (752) |
$ (1,755) |
$ (1,250) |
$ (69,213) |
$ (72,970) |
|
|
| |
|
|
|
|
|
| Basic (loss) earnings per share: |
|
|
|
|
|
| (Loss) earnings from continuing operations |
$ (0.12) |
$ (0.07) |
$ 0.07 |
$ (1.00) |
$ (0.98) |
| Loss from discontinued operations |
-- |
(0.35) |
(0.27) |
(10.21) |
(10.85) |
|
|
| Basic loss per share |
$ (0.12) |
$ (0.28) |
$ (0.20) |
$ (11.21) |
$ (11.83) |
|
|
| |
|
|
|
|
|
| Diluted (loss) earnings per share: |
|
|
|
|
|
| (Loss) earnings from continuing operations |
$ (0.12) |
$ (0.07) |
$ 0.07 |
$ (1.00) |
$ (0.98) |
| Loss from discontinued operations |
-- |
(0.35) |
(0.27) |
(10.21) |
(10.85) |
|
|
| Diluted loss per share |
$ (0.12) |
$ (0.28) |
$ (0.20) |
$ (11.21) |
$ (11.83) |
|
|
(1) The fourth quarter gross margin of 54.5% includes 6.9% relating to adjustments to product costing allowances and the
year-end reconciliation of fixed cost absorption rates, as well as a favorable mix of higher margin products.
|
|
|
|
