-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EsuLpsbg3HM13H7ZqkCnUlDZ7AyhmgzagO8BL6H8SXH9HtsMl17nbDRDxiysRQiQ 5qE4FEIjDkpjXf4/1ShT2Q== 0001009675-97-000002.txt : 19970129 0001009675-97-000002.hdr.sgml : 19970129 ACCESSION NUMBER: 0001009675-97-000002 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961229 FILED AS OF DATE: 19970128 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAWTEK INC \FL\ CENTRAL INDEX KEY: 0001009675 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 591864440 STATE OF INCORPORATION: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-28276 FILM NUMBER: 97512010 BUSINESS ADDRESS: STREET 1: 1818 SOUTH HIGHWAY 441 CITY: APOPKA STATE: FL ZIP: 32703 BUSINESS PHONE: 4078868860 MAIL ADDRESS: STREET 1: 1818 SOUTH HIGHWAY 441 CITY: APOPKA STATE: FL ZIP: 32703 10-Q/A 1 AMENDMENT 1 TO FORM 10-Q FOR SAWTEK INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 10-Q/A -------------------- (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities ---- Exchange Act of 1934 For the quarterly period ended December 29, 1996 OR ____ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: SAWTEK INC. (Exact name of registrant as specified in its charter) Florida 59-1864440 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1818 South Highway 441 Apopka, Florida 32703 (Address of principal executive offices) Telephone Number (407) 886-8860 (Registrant's telephone number, including area code) 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 ______ ----- As of January 15, 1997, there were 20,241,856 shares of the Registrant's Common Stock outstanding, par value $.0005. Sawtek Inc. TABLE OF CONTENTS Part I. Financial Information Page Number - ------- --------------------- ----------- Item 1. Financial Statements (unaudited) Consolidated Balance Sheets as of December 31, 1996 and September 30, 1996 ....................................... 3 Consolidated Statements of Income (Loss) for the three months ended December 31, 1996 and 1995....................... 4 Consolidated Statements of Cash Flows for the three months ended December 31, 1996 and 1995 ............................. 5 Notes to Consolidated Financial Statements.................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................. 7 Part II. Other Information - -------- ------------------ Item 1. Legal Proceedings ................................... 12 Item 2. Changes in Securities ............................... 12 Item 3. Defaults Upon Senior Securities ..................... 12 Item 4. Submission of Matters to a Vote of Security Holders . 12 Item 5. Other Information ................................... 12 Item 6. Exhibits and Reports on Form 8-K .................... 12 Signatures ............................................................ 13 Exhibit Index ......................................................... 13 PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements (unaudited) SAWTEK INC. CONSOLIDATED BALANCE SHEETS
December 31, September 30, 1996 1996 ---- ---- (unaudited) (dollars in thousands, except per share data) Assets Current assets: Cash and cash equivalents $31,436 $ 27,743 Accounts receivable net of allowance for doubtful accounts and returns of $883 at December 31, 1996 and $654 at September 30, 1996 7,738 7,938 Inventories 5,947 6,509 Deferred income taxes 1,255 1,266 Other current assets 533 528 ------ ------- Total current assets 46,909 43,984 Other assets 165 186 Property, plant and equipment, net 34,381 30,424 ------ ------ Total assets $81,455 $74,594 ====== ====== Liabilities and shareholders' equity Current liabilities: Accounts payable $ 3,151 $ 1,801 Accrued wages and benefits 1,506 3,109 Other accrued liabilities 1,693 1,068 Current maturities of long-term debt 1,376 1,363 Income taxes payable 1,867 844 ------ ------ Total current liabilities 9,593 8,185 Long-term debt, less current maturities 3,668 3,786 Deferred income taxes 2,108 998 Shareholders' equity: Common stock; $.0005 par value; 40,000,000 authorized shares; issued and outstanding shares 20,197,872 at December 31, 1996 and 19,854,102 at September 30, 1996 10 10 Capital surplus 53,198 53,000 Unearned ESOP compensation (1,367) (1,367) Retained earnings 14,245 9,982 ------ ------ Total shareholders' equity 66,086 61,625 ------ ------ Total liabilities and shareholders' equity $81,455 $74,594 ====== ======
See accompanying notes to consolidated financial statements. 3 SAWTEK INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) - unaudited
Three Months Ended December 31, 1996 1995 ---- ---- (in thousands, except per share data) Net sales $18,502 $10,809 Cost of sales 8,678 5,092 ------ ------ Gross profit 9,824 5,717 Operating expenses: Selling expenses 1,246 774 General & administrative expenses 1,134 1,068 ESOP compensation expense 196 5,540 Research & development expenses 681 418 ------ ------ Total operating expenses 3,257 7,800 ------ ------ Operating income (loss) 6,567 (2,083) Interest expense 41 138 Other (income) expense (355) 6 ------ ------ Income (loss) before taxes 6,881 (2,227) Income taxes 2,618 954 ------ ------ Net income (loss) $ 4,263 $(3,181) ====== ====== Net income (loss) per share $ 0.20 $ (.18) ====== ====== Shares used in computing net income (loss) per share 21,358 17,272 ====== ======
See accompanying notes to consolidated financial statements. 4 SAWTEK INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended December 31, 1996 1995 ---- ---- (in thousands) Operating activities: Net income (loss) $ 4,263 $ (3,181) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 819 312 Deferred income taxes 1,120 108 ESOP allocation -0- 5,540 Changes in operating assets and liabilities: (Increase) decrease in assets: Accounts receivable 200 354 Inventories 562 (873) Other current assets (5) (74) Increase (decrease) in liabilities: Accounts payable 1,350 1,849 Accrued liabilities (978) (525) Income taxes payable 1,023 96 ------ ------ Net cash provided by operating activities 8,354 3,606 Investing activities: Purchase of property, plant and equipment, net (4,754) (6,424) Increase in Industrial Revenue Bond assets -0- 1,257 ------ ------ Net cash used in investing activities (4,754) (5,167) Financing activities: Proceeds from long-term debt -0- 3,000 Principal payments on long-term debt (105) (1,760) Net proceeds from sale of common stock 198 55 Purchase of common stock -0- (158) ------ ------ Net cash provided by financing activities 93 1,137 ------ ------ Increase (decrease) in cash and cash equivalents 3,693 (424) Cash and cash equivalents at beginning of period 27,743 2,819 ------ ------ Cash and cash equivalents at end of period $31,436 $ 2,395 ====== ====== Interest paid $ 56 $ 67 Income taxes paid $ 475 $ 750
See accompanying notes to consolidated financial statements. 5 SAWTEK INC. Notes to Consolidated Financial Statements - December 31, 1996 (unaudited) 1. Basis of Presentation --------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in response to the requirements of Article 10 of Regulation S-X. Accordingly, they do not contain all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial condition as of December 31, 1996, and the results of its operations, and its cash flows for the three months ended December 31, 1996 and 1995. These financial statements should be read in conjunction with the Company's audited financial statements as of September 30, 1996, including the notes thereto, and the other information set forth therein included in the Company's most recent annual report on Form 10-K for the year ended September 30, 1996 (File No. 000-28276), which was filed with the Securities and Exchange Commission (the "SEC") on November 8, 1996. The following discussion may contain forward looking statements which are subject to the risk factors set forth in "Risks and Uncertainties" in Item 2 of this Form 10-Q. The Company maintains its records on a fiscal year ending on September 30 of each year and all references to a year refer to the fiscal year ending on that date. The Company's first, second and third quarters end on the Sunday closest to the last day of the last month of such quarter, which was December 29, 1996, for the first quarter of 1997. However, for convenience, the financial statements are dated as of December 31, 1996. Operating results for the three months ended December 31, 1996 are not necessarily indicative of the operating results that may be expected for the year ending September 30, 1997. 2. Earnings (loss) Per Share ------------------------- Earnings (loss) per share ("EPS") is computed based on the weighted average number of common shares, common stock options (using the treasury stock method) and all ESOP shares outstanding. In accordance with Securities and Exchange Commission staff accounting bulletins, common and common equivalent shares issued by the Company at prices below the public offering price during the period beginning one year prior to the filing date of the initial public offering on April 29, 1996, have been included in the calculation as if they were outstanding for all periods prior to the offering (using the treasury stock method and the initial public offering price). 3. Inventories - Inventories are composed of the following: ----------- December 31, 1996 September 30, 1996 ----------------- ------------------ (in thousands) Raw Material..................... $ 2,034 $ 1,976 Work in Process.................. 1,951 2,341 Finished Goods................... 1,962 2,192 ------ ------ Total......................... $ 5,947 $ 6,509 ====== ======
6 4. Property, Plant and Equipment - Property, plant and equipment are composed ----------------------------- of the following: December 31, 1996 September 30, 1996 ----------------- ------------------ (in thousands) Land and Improvements............... $ 671 $ 671 Buildings........................... 9,829 9,829 Production and Test Equipment....... 21,943 21,459 Computer Equipment.................. 2,793 2,734 Furniture and Fixtures.............. 1,556 1,533 Construction in Progress............ 8,542 4,774 ------ ------ 45,334 41,000 Less Accumulated Depreciation.. 10,953 10,576 ------ ------ Total................. $34,381 $30,424 ====== ======
5. Shareholders' Equity -------------------- The consolidated changes in shareholders' equity for the three months ended December 31, 1996 are as follows: (in thousands)
Common Stock Unearned ------------- Capital ESOP Retained Shares Amount Surplus Compensation Earnings ------ ------ ------- ------------ -------- Balance at September 30, 1996 19,854 $ 10 $53,000 $(1,367) $ 9,982 Net income 4,263 Sale of common stock 344 198 ------- --- ------ ------ ------ Balance at December 31, 1996 20,198 $ 10 $53,198 $(1,367) $14,245 ====== === ====== ====== ======
Item 2. Management's discussion and analysis of financial condition and results of operations The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-Q. Except for the historical information contained herein, the discussion in this Form 10-Q contains certain forward-looking statements that involve risks and uncertainties, such as statements of the Company's plans, objectives, expectations and intentions. The cautionary statements made herein should be read as being applicable to all related forward-looking statements wherever they appear. The Company's actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include those discussed in "Risks and Uncertainties," as well as those discussed elsewhere herein. 7 Overview - -------- The Company was incorporated in 1979 to design, develop, manufacture and market a broad range of electronic components based on surface acoustic wave ("SAW") technology used in telecommunications, data communications, video transmission, military and space systems and other markets. The Company's focus has been on the high-end performance spectrum of the market, and its primary products are SAW bandpass filters, resonators, delay lines, oscillators and SAW-based sub-systems. Initially, the Company's products were concentrated in the military and space systems market. The Company has since shifted its attention to commercial markets which account for 86% of net sales in the first quarter of 1997. The Company has also experienced significant growth in its international markets over the last five years, with international sales having more than doubled to approximately 45% of net sales. The Company derives revenue from high-volume commercial production components, military/industrial production components and engineering services and products. Non-recurring engineering ("NRE") revenue is included in net sales and relates to the design and development of custom devices and delivery of prototype parts. In all cases, revenue is recognized when the parts or services have been completed and units, including prototypes, have been shipped. Net sales increased 71% from the first three months of 1996 to the first three months of 1997. The growth in net sales is mainly attributable to growth in the wireless communications market to which the Company supplies SAW bandpass filters for cellular telephone basestations and, to a lesser extent, for handheld subscriber telephones. The Company has a broad product line of SAW filters and other components with average selling prices generally in the range of $5 to $300 for many high performance wireless applications. For the three months ended December 31, 1996, net sales to the Company's top ten customers accounted for approximately 76% of net sales with the top three customers accounting for 44%. The Company expects that sales of its products to a limited number of customers will account for a high percentage of its net sales in the foreseeable future. In 1991, the Company established an Employee Stock Ownership Plan ("ESOP"). At that time, the Company borrowed $4.0 million from its commercial bank and loaned it to the ESOP to finance the purchase of 8,888,880 shares of the Company's common stock. The unpaid balance of this loan, $1.367 million as of December 31, 1996, matures in 1998 and is payable in quarterly installments of approximately $195,000. These ESOP shares are accounted for in accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position ("SOP") 76-3, which uses cost as the basis for valuing shares as they are released and allocated to participants' accounts. In 1994, the Company borrowed an additional $1.7 million and loaned it to the ESOP to finance the purchase of an additional 1,610,600 shares of common stock. In 1996, the Company repaid the 1994 loan and allocated all of the related shares to participants' accounts. These shares were accounted for in accordance with the AICPA's SOP 93-6, which uses fair market value as the basis of valuing shares. The impact of this was a charge to ESOP compensation expense of $12.9 million reflected in the financial results for 1996. Of the $12.9 million, $11.3 million was a one-time, non-cash charge amounting to $0.59 per share for the full year of 1996 and $4.8 million or $0.28 per share for three months ending December 31, 1995. Management does not believe that inflation has had a material impact on operating costs and earnings of the Company. 8 Results of Operations - --------------------- The following table sets forth, for the periods indicated, the percentage relationship of certain items from the Company's statement of operations to total net sales: Three Months Ended December 31, ------------------ 1996 1995 ---- ---- Net sales 100.0% 100.0% Cost of sales 46.9 47.1 ----- ----- Gross profit 53.1 52.9 Operating expenses: Selling expenses 6.7 7.2 General & administrative expenses 6.1 9.9 ESOP compensation expense 1.1 51.2 Research & development expenses 3.7 3.9 ----- ----- Total operating expenses 17.6 72.2 ----- ----- Operating income (loss) 35.5 (19.3) Interest expense .2 1.3 Other (income) expense (1.9) 0.0 ----- ----- Income (loss) before income taxes 37.2 (20.6) Income taxes 14.2 8.8 ----- ----- Net income (loss) 23.0% (29.4)% ===== =====
Comparison of Three Months Ended December 31, 1995 and 1996 - ----------------------------------------------------------- Net Sales. Net sales increased 71% from $10.8 million in the quarter ended December 31, 1995 to $18.5 million in the quarter ended December 31, 1996. The increase for the period was a result of increased product shipments to the wireless communication market, specifically sales of high volume filters for basestation applications and for PCS-CDMA subscriber handsets. International sales decreased from approximately 48% of net sales in the three-month period ended December 31, 1995 to 45% of net sales for the three months ended December 31, 1996. The percentage decrease in international sales was due to increasing domestic sales, specifically sales of bandpass filters for subscriber handsets. Sales for military and space systems were approximately 11% of net sales in the three months ended December 31, 1995 compared to approximately 14% of net sales for the three months ended December 31, 1996. Gross Margin. Gross margin increased slightly from 52.9% in the three months ended December 31, 1995 to 53.1% in the three months ended December 31, 1996. The Company continued to shift production to high-volume components which have somewhat lower gross margins. However, the new Costa Rica facility is operating at favorable gross margins, which offset the slightly lower margins from the high-volume components. The Company anticipates that its gross profit margins may decline in the future due to increased production of lower margin subscriber filters and competitive price pressure. 9 Selling Expenses. Selling expenses increased in the first quarter of 1997 compared to the same period in 1996, but decreased as a percentage of net sales from the corresponding period. The decrease as a percentage of net sales was a result of the Company's expanding net sales with substantially the same number of sales and marketing personnel in 1997 as in 1996. As a result, selling expenses remained relatively constant with advertising and commission expenses paid to outside sales representatives as the only components that increased significantly with the higher sales level. The Company anticipates that selling expenses will increase as new employees are added to support its sales and marketing effort in 1997 and as commissions are incurred. General and Administrative Expenses. General and administrative expenses remained essentially flat at approximately $1.1 million for the quarter ended December 31, 1996 from the year-ago quarter. However, these costs decreased as a percentage of sales from 10% for the first quarter of 1996 to 6% in 1997 as the Company was able to increase its sales without incurring significant additional administrative expenses. ESOP Compensation Expense. For the first quarter of 1997, the Company recorded a charge of $196,000 for ESOP compensation compared to $5.4 million for the same period in fiscal 1996. The expense for the first quarter of 1996 included a $4.8 million non-recurring, non-cash charge related to the release and allocation of all shares accounted for on a market-value basis. The Company will incur ESOP compensation expense of approximately $782,000 for 1997 and approximately $585,000 in 1998. Research and Development Expenses. Research and development expenses increased $263,000 in the quarter ended December 31, 1996 compared to the quarter ended December 31, 1995. These expenses increased due to additional personnel and expanded research and development efforts, but increased at a slower rate than the sales increase. The Company anticipates that research and development expenses will continue to increase in total dollars as personnel and programs are added. A significant portion of the Company's development activities is conducted in connection with the design and development of custom devices, which is paid for by customers and classified as NRE items. The revenue generated from these items is included in net sales and the cost is reflected in cost of sales rather than in research and development expenses. Interest Expense. Interest expense decreased from $138,000 in the first three months of 1996 to $41,000 in the first three months of 1997, as the Company repaid its credit line with a portion of the proceeds from the IPO in May, 1996. Other Income and Expense. Other income and expense primarily represents interest income and non-operating expenses. Other income increased due to interest earned on the remaining proceeds of the Company's IPO and positive cash flow for the quarter. Income Tax Expense. The provision for income taxes as a percentage of income before income taxes was 38% for the first three months of 1997. For the quarter ended December 31, 1995, the Company incurred a non-deductible, non-cash charge for ESOP compensation expense. Had it not been for this charge, the tax provision would have been approximately 37% for the quarter. The Company expects that its effective tax rate will remain at approximately 36% to 39% during 1997. 10 Risks and Uncertainties - ----------------------- General Risks and Uncertainties. Except for historical information contained herein, this Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that are subject to risks and uncertainties, including fluctuations in quarterly results, backlog, capacity limitations, order rescheduling or cancellation, limited sources of supply, dependence on continuing demand for wireless communication services, dependence on a limited number of customers, technological change, competition, risks associated with international operations, variation in production yield, change in economic conditions of the various markets the Company serves, as well as the other risks detailed in the Company's Form 10-K filed with the Securities and Exchange Commission on November 8, 1996. Liquidity and Capital Resources - ------------------------------- The Company has financed its operations to date through cash generated from operations, bank borrowings, lease financing, the private sale of securities, and its May 1, 1996 initial public offering. The Company requires capital principally for equipment, expansion of its primary facility, financing of accounts receivable and inventory, investment in product development activities and new technologies and for its operations in Costa Rica. For the three months ended December 31, 1996, the Company generated net cash from operating activities of $8.4 million, consisting primarily of net income of $4.3 million, $.8 million of depreciation and amortization, $1.1 million in deferred taxes and $1.4 million of increases in other current liabilities. The Company has a revolving credit agreement totaling $15.0 million from SunTrust Bank, Central Florida, N.A. available through January 1998. There were no balances outstanding on this credit line at December 31, 1996. The Company made capital expenditures of approximately $4.8 million during the quarter ended December 31, 1996. The Company intends to spend approximately $23 million in 1997 on capital equipment and facilities. The Company believes that its present cash position, together with its credit facility and funds expected to be generated from operations, will be sufficient to meet its projected working capital and other cash requirements through the next 12 months. Thereafter, the Company may require additional equity or debt financing to address its working capital needs or to provide funding for capital expenditures. There can be no assurance that events in the future will not require the Company to seek additional capital sooner or, if so required, that it will be available on terms acceptable to the Company, if at all. 11 PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings. The Company is not subject to any legal proceedings that, if adversely determined, would cause a material adverse effect on the Company's financial condition, business or results of operations. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit 10.1 - First Amendment to Amended and Restated Loan and Security Agreement dated December 9th, 1996 between the Company and SunTrust Bank, Central Florida, N.A. ("Suntrust"). (b) Exhibit 11.1 - Statement regarding computations of earnings per share. (c) Exhibit 27 - Financial Data Schedule. (d) Reports on Form 8-K. The Company did not file any reports on Form 8-K during the three months ended December 31, 1996. 12 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. Dated: January 21, 1997 SAWTEK INC. (Registrant) /S/ Steven P. Miller Steven P. Miller Chairman, President & Chief Executive Officer /S/ Raymond A. Link Raymond A. Link Vice President Finance, Chief Financial Officer (Principal Financial Officer) EXHIBIT INDEX - ------------- 10.1 First amendment to Amended and Restated Loan and Security Agreement dated December 9, 1996 between the Company and SunTrust Bank, Central Florida, N.A. ("Suntrust"). 11.1 Statement regarding computations of earnings per share. 27 Financial Data Schedule. 13 EX-11 2 COMPUTATIONS OF EARNINGS OR (LOSS) PER SHARE SAWTEK INC. EXHIBIT 11.1 STATEMENT REGARDING COMPUTATIONS OF EARNINGS PER SHARE - as reported on Form 10Q
Three months ended December 31, --------------------- 1996 1995 ---- ---- PRIMARY EARNINGS PER SHARE Weighted average number of shares of Common Stock outstanding 20,038 14,341 Net effect of dilutive stock options based on the Treasury stock method using the average fair market value in effect for the period 1,286 2,879 ------ ------ Total shares outstanding for Primary EPS 21,324 17,220 ====== ====== FULLY DILUTED EARNINGS PER SHARE Weighted average number of shares of Common Stock outstanding 20,038 14,341 Net effect of dilutive stock options based on the Treasury stock method using the fair market value at the end of the period 1,320 2,931 ------ ------ Total shares outstanding for fully Diluted EPS 21,358 17,272 ====== ====== Net income (loss) applicable to common shareholders $ 4,263 $(3,181) Earnings (loss) per share: Primary $ .20 $( 0.18) Fully Diluted $ .20 $( 0.18)
EX-99 3 FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT EXHIBIT 10.1 FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the "First Amendment") dated as of the 9th day of December, 1996, is entered into by and between SAWTEK INC., a Florida corporation, Post Office Box 609501, Orlando, Florida 32860-9501 (the "Borrower") and SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, f/k/a/ SUN BANK, NATIONAL ASSOCIATION (the "Bank"), a national banking association, with its principal banking office located at 200 South Orange Avenue, Orlando, Orange County, Florida. W I T N E S S E T H: WHEREAS, the Borrower and the Bank heretofore entered into that certain Amended and Restated Loan and Security Agreement dated as of November 15, 1995 (the "Loan Agreement") pursuant to which the Bank agreed, among other things, to lend to the Borrower a line of credit loan in the maximum principal amount of $11,500,000.00 (the "Line of Credit Loan"), which is scheduled to convert to a term loan on March 31, 1997; and WHEREAS, the Borrower has requested the Bank (a) to renew and modify the Line of Credit Loan by restructuring it to be strictly a revolving line of credit loan, with interest payable periodically and principal due on maturity, increasing the maximum principal amount available for borrowing thereunder to $15,000,000, changing the interest rate applicable to the Line of Credit Loan and extending the Revolving Period through January 31, 1998, (b) to release all collateral securing the Line of Credit Loan so that it will be an unsecured loan, (c) to modify the financial covenants and reporting requirements contained in the Loan Agreement and (d) to otherwise modify the Loan Agreement; and WHEREAS, the Bank has agreed to do so subject to the additional conditions, limitations and requirements as hereinafter set forth; NOW, THEREFORE, for and in consideration of the mutual premises contained herein and for other good and valuable consideration, the receipt and sufficiency whereof is hereby acknowledged, the parties hereto do hereby agree as follows: 1. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows: (a) The definitions of "Account", "Account Debtor", "Adjusted Net Worth", "Cash Flow", "Cash Flow to Current Maturities of Long Term Debt Ratio", "Chattel Paper", "Collateral", "Current Maturities of Long Term Debt", "Current Ratio", "Document", "EBITDA", "Equipment", "Existing Security Agreement", "Funded Debt to EBITDA Ratio", "Income Tax Expense", "Instrument", "Intercompany Loan", "Intercompany Note", "Interest Expense", "Inventory", "Long Term Debt", "Maturity Date", "Prime Rate", "Stock", "Term Loan" and "Term Note" are hereby deleted from the Loan Agreement, together with all references to such terms in the Loan Agreement. (b) The definition of the term "Interest Rate" contained in Paragraph 1 of the Loan Agreement is hereby deleted in its entirety and in lieu thereof there is substituted the following: "'Interest Rate' shall mean the applicable rate of interest to be borne by the Note (except when the Default Rate is in effect), which rate shall be the lesser of (a) a rate per annum equal to LIBOR plus one hundred twenty-five basis points (1.25%) or (b) the maximum rate allowed by applicable law from time to time." (c) The definition of the term "Line of Credit Loan" contained in Paragraph 1 of the Loan Agreement is hereby deleted in its entirety and in lieu thereof there is substituted the following: "'Line of Credit Loan' shall mean the revolving line of credit loan in the maximum principal amount of $15,000,000.00 extended to the Borrower by the Bank pursuant to the terms of this Agreement." (d) The definition of the term "Revolving Period" contained in Paragraph 1 of the Loan Agreement is hereby deleted in its entirety and in lieu thereof there is substituted the following: "'Revolving Period' shall mean the period during the term of the Line of Credit Loan during which the Borrower shall be entitled to receive Advances on the Line of Credit Loan, which period shall commence on the date hereof and end on the earlier of (a) the occurrence of an Event of Default, (b) January 31, 1998, or (c) such later date as the Bank, in its absolute discretion, may agree to in writing." (e) The definitions of the terms "Interest Payment Date", "Interest Period", "Interest Rate Determination Date", "LIBOR" and "Permitted Loan Limit", are hereby added to Paragraph 1 of the Loan Agreement in the proper alphabetical order, as follows: "'Interest Payment Date' shall mean the earlier of (i) the end of each Interest Period, or (ii) quarterly. Interest Period' shall mean 30, 60, 90 or 120 Days, or any other period approved by the Bank in its sole and absolute discretion, as selected by the Borrower from time to time in accordance with the terms hereof. 'Interest Rate Determination Date' shall mean each date for calculating LIBOR for purposes of determining the Interest Rate in respect of an Interest Period, and which shall be the second Business Day prior to the first Day of the applicable Interest Period. 'LIBOR' shall mean the interest rate per annum (in accordance with the length of the designated Interest Period) in effect on the Interest Rate Determination Date designated as the LIBOR rate and published from time to time in the Wall Street Journal or such substitute publication or interest rate reporting service as may be designated in writing from time to time by the Bank to the Borrower; in any such case rounded, if necessary, to the next higher 1/16 of 1.0%, if the rate is not such a multiple. 'Permitted Loan Limit' shall mean $15,000,000.00." (f) Subparagraphs (a), (b), (c) and (d) of paragraph 2 of the Loan Agreement are hereby deleted in their entirety and, in lieu thereof, the following is substituted therefor: "(a) Amount and Terms of the Line of Credit Loan. The Bank agrees from time to time during the term of the Line of Credit Loan to lend to the Borrower, upon the Borrower's request, up to the aggregate principal amount of the Permitted Loan Limit on the terms and conditions set forth herein. Except as otherwise set forth in this Agreement, the Borrower shall, during the Revolving Period, be entitled to receive up to the amount of the Permitted Loan Limit in one or more Advances. Advances under the Line of Credit Loan shall be evidenced by the Line of Credit Note and shall be payable in accordance with the terms of Paragraph 2(c) hereof. The Borrower shall not be liable under the Line of Credit Note except with respect to funds actually advanced to the Borrower by the Bank pursuant to the terms hereof. The Line of Credit Loan shall be a revolving loan and, accordingly, during the Revolving Period, the Borrower may in one or more Advances borrow up to the Permitted Loan Limit, repay all or any portion thereof, and reborrow up to such amount, subject to the terms and conditions set forth herein. After the expiration of the Revolving Period, the Borrower shall not be entitled to receive any further Advance under the Line of Credit Loan. (b) Advances on the Line of Credit Loan. After the date hereof the Borrower shall be entitled to obtain Advances under the Line of Credit Loan. The Borrower shall give the Bank written or telephonic notice of any requested Advance under the Line of Credit Loan. The Bank shall be under no duty or obligation to verify or confirm the authority of the representative of the Borrower requesting any such Advance as long as said person identifies himself/herself as an employee or repre- sentative of the Borrower. Such notice (the "Notice of Borrowing") shall specify (i) the proposed date of the Advance (which shall be a Banking Day), (ii) the amount thereof, (iii) the requested Interest Period and (iv) that on the date of the Notice of Borrowing there has been no material adverse change in the financial condition of the Borrower from that set forth on the most recent financial statements furnished to the Bank as provided herein. Each Advance under the Line of Credit Loan shall be in the minimum principal amount of $10,000.00 or, if less, the remaining amount available under the Line of Credit Loan. The Bank shall make each Advance under the Line of Credit Loan on the date proposed by the Borrower (which may be the same Banking Day if such request is made by the Borrower and is received by the Bank prior to 12:00 NOON (Orlando, Florida time), otherwise no earlier than the following Banking Day) by crediting the amount of each such Advance requested by the Borrower to the general deposit account of the Borrower maintained with the Bank. Each request for an Advance shall be deemed to restate and verify all representations of the Borrower made herein as of the date of such request. Loans or Advances which are unpaid upon the expiration of the Interest Period applicable thereto and with respect to which the Borrower has not advised the Bank in writing (a "Notice of Selection of Interest Period") as provided in paragraph 2(d) hereof and received by the Bank within the times provided in paragraph 2(d) prior to the expiration of such Interest Period of the Interest Period to be applicable to such Loans or Advances after the current Interest Period expires shall, effective as of the first Day after the expiration of such Interest Period, be continued for an Interest Period of identical length to that just expired. Thereafter, subject to the limitations set forth in paragraph 2(d) hereof, the Borrower may, by giving the Bank an appropriate Notice of Selection of Interest Period, together with the requested Interest Period, elect to change the Interest Period applicable to such Loan or Advance at a date designated by the Borrower, which date shall be (i) no earlier than a date two (2) Banking Days after the receipt by the Bank of such Notice of Selection of Interest Period and (ii) immediately following the expiration of an existing Interest Period. (c) Interest on the Line of Credit Note. The Line of Credit Note shall bear interest from the date thereof through maturity (whether by acceleration or otherwise) on the unpaid principal balance thereof from time to time outstanding at the Interest Rate. From and after the Due Date, interest shall accrue on the unpaid principal balance of the Line of Credit Note and on all accrued but unpaid interest thereon, or on such defaulted payment, from the Due Date at the Default Rate. such interest shall continue to accrue until the date of payment in full of all principal and accrued but unpaid interest on such defaulted payment, if applicable. (d) Payment of the Line of Credit Note. Accrued interest only on the Line of Credit Note, at the Interest Rate, shall be payable on each Interest Payment Date, upon any permitted prepayment of the Loan (to the extent accrued on the amount being prepaid) and at maturity. The Bank will endeavor to notify Borrower of interest due prior to any Interest Payment Date. The entire outstanding principal balance, together with all accrued but unpaid interest, shall be due and payable upon the expiration of the Revolving Period. For each Loan or Advance under the Loan, the Borrower shall deliver to the Bank a written notice (or facsimile transmission, immediately confirmed by telephone and further confirmed by sending the original notice to the Bank so that the same is received by the Bank no later than three (3) Banking Days after the date of the facsimile transmission) (a "Notice of Selection of Interest Period"), no later than 11:00 a.m. Orlando, Florida time, on the Interest Rate Determination Date, which Notice of Selection of Interest Period shall be in such form as may be acceptable to the Bank in its sole and absolute discretion and shall specify (i) the amount of the Advance for which an Interest Period is being selected, (ii) the requested Interest Period and (iii) that on the date of the Notice of Selection of Interest Period, there has been no material adverse change in the financial condition of the Borrower from that set forth on the most recent annual financial statements furnished to the Bank. The Bank shall incur no liability to the Borrower in acting upon any telephonic notice referred to above or for otherwise acting under this paragraph (d) and upon selection of an Interest period in accordance with this Agreement pursuant to any telephonic notice, the Borrower shall have effected Loans hereunder. Each Notice of Selection of Interest Period shall be irrevocable by the Borrower on or after the related Interest Rate Determination Date and the Borrower shall be bound to continue such Advance in accordance therewith." (g) Paragraph 4 of the Loan Agreement is hereby deleted in its entirety and, in lieu thereof, the following is substituted therefor: "4. Special provisions Governing LIBOR. Notwithstanding other provisions of this Agreement, the following provisions shall govern with respect to LIBOR as to the matters covered: (a) Determination of Interest Period. By giving notice as set forth in paragraphs 2(b) and (d) the Borrower shall have the option, subject to the other provisions of this paragraph 4, to specify the Interest Period commencing on any such date, provided, that: (i) in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the Day on which the next preceding Interest Period expires; (ii) if any Interest Period would otherwise expire on a Day which is not a Banking Day, that Interest Period shall be extended to expire on the next succeeding Banking Day; provided, that if any such Interest Period would otherwise expire on a Day which is not a Banking Day but is a Day of the month after which no further Banking Day occurs in that month, that Interest Period shall expire on the next preceding Banking Day; and (iii) any Interest Period which begins on the last Banking Day of a calendar month (or on a Day for which there is no numerically corresponding Day in the calendar month at the end of such Interest Period) shall end on the last Banking Day of a calendar month. (b) Determination of Interest Rate. As soon as practicable after 11:00 A.M. Orlando, Florida time, on the Interest Rate Determination Date, Bank shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the Interest Rate which shall apply to the Advance for which an Interest Rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to the Borrower." (h) Subparagraphs 6(b) (iii) and (iv) of the Loan Agreement are hereby deleted in their entirety and, in lieu thereof, the following is substituted therefor: "(iii) quarterly, as soon as possible and in any event within thirty (30) Days after the end of each quarter of Borrower's fiscal year, (1) a Covenant Compliance Certificate confirming the Borrower's compliance with all financial covenants and ratios, in form and substance satisfactory to the Bank and certified to the Bank by the Chief Financial Officer of the Borrower; (iv) as soon as available, copies of all such financial statements, proxy statements, notices, and reports as it shall send to all stockholders and of all Form 10Q and Form 10K reports (with exhibits) and all registration statements (with exhibits) and all other reports which it is or may be required to file with the Securities and Exchange Commission or any governmental body or agency succeeding to the functions of such Commission; (v) promptly upon receipt thereof, a copy of each other report submitted to the Borrower by independent accountants in connection with any annual, interim or special audit made by them of the books of the borrower; and (vi) with reasonable promptness, such other data, financial information or reports as the Bank may request from time to time." (i) Subparagraphs 6(s) (i), (ii), (iii) and (iv) of the Loan Agreement are hereby deleted in their entirety and, in lieu thereof, the following is substituted therefor: "(i) Minimum Tangible Net Worth. The Borrower's Tangible Net Worth shall equal or exceed $50,000,000. (ii) Total Liabilities to Tangible Net Worth Ratio. The ratio of Borrower's Total Liabilities to its Tangible Net Worth shall not exceed 1.0:1." (j) Subparagraph 6(t) of the Loan Agreement is hereby deleted in its entirety and, in lieu thereof, the following is substituted therefor: "(t) Subordination of Affiliate Loans. All loans, commissions or fees owed to Affiliates of the Borrower shall, at all times, be subordinate to the Loan and all other Obligations of the Borrower to the Bank and the Borrower shall cause its Affiliates from time to time, to execute and deliver to the Bank subordination agreements in form and content satisfactory to the Bank; provided, however, so long as no Default exists or has occurred, the Bank may pay (but not prepay) current principal and interest on such loans to such Affiliates." (k) Subparagraph 7(b) of the Loan Agreement is hereby deleted in its entirety and, in lieu thereof, the following is substituted therefor: "(b) RESERVED." (l) Subparagraph 7(e) of the Loan Agreement is hereby deleted in its entirety and, in lieu thereof, the following is substituted therefor: "(e) Sale of Assets. Sell, lease, assign, transfer or otherwise dispose of any of its assets or properties, tangible or intangible, whether now owned or hereafter acquired, in excess of $500,000.00, either in a single case or in the aggregate, to any Person; provided, however, so long as no default has occurred, the Borrower may (i) replace its equipment due to obsolescence or repair, and (ii) sell its inventory in the normal course of its business." (m) Subparagraph 7(g) of the Loan Agreement is hereby deleted in its entirety and, in lieu thereof, the following is substituted therefor: "(g) Additional Indebtedness. Except for the Existing Loans, incur, create, assume or permit or suffer to exist any indebtedness or liability for borrowed money, any indebtedness evidenced by notes, bonds, debentures, or similar obligations or any conditional sales or title retention agreement or capitalized lease, in excess of an aggregate of $500,000.00 in any fiscal year without the prior written consent of the Bank." (n) Subparagraph 7(o) of the Loan Agreement is hereby deleted in its entirety and, in lieu thereof, the following is substituted therefor: "(o) Subsidiaries. Form any additional Subsidiaries other than those set forth on Exhibit D, attached hereto; or loan or advance to, or guarantee or endorse or otherwise be or become contingently liable, directly or indirectly, in connection with the obligations of, or make any capital contribution to or otherwise invest in, Subsidiaries in excess of $15,000,000.00 in the aggregate, without prior written notice to and written consent from the Bank." 2. Payment and Elimination of the Term Loan. As of the date of execution of this First Amendment, the Borrower shall repay in full the outstanding principal balance and all accrued but unpaid interest due to the Bank on the Term Loan from its own funds and the Term Loan shall be eliminated from the Loan Agreement. 3. Representations and Warranties. The Borrower hereby reaffirms all of the representations and warranties contained in the Loan Agreement as though made and given in connection with the execution and delivery of this First Amendment and further certifies that all such representations and warranties are true and correct on and as of the date hereof. 4. Ratification. Except for any modification of and/or amendment to the Loan Agreement as herein provided, no other term, condition or provision of the Loan Agreement shall be considered to be altered or amended, and this First Amendment shall not be considered a novation. The Borrower agrees that the amounts extended by the Bank to the Borrower hereunder are absolutely and unconditionally due and owing to the Bank, and are not subject to any claims, counterclaims, defenses or other rights of offset whatsoever. 5. Complete Agreement. This First Amendment constitutes the complete agreement between the parties hereto and incorporates all prior discussions, agreements and representations made in regard to the matters set forth herein. 6. Capitalized Terms. Capitalized terms used in this First Amendment shall have the meanings assigned to them in the Loan Agreement unless otherwise indicated or the context hereof clearly dictates otherwise. 7. Conflict with Agreement. In the event of conflict between the terms of the Loan Agreement and the terms of any of the other loan documents executed in connection therewith the terms of the Loan Agreement shall govern in all instances. IN WITNESS WHEREOF, the Bank and the Borrower have caused this First Amendment to be executed by their respective duly authorized officers as of the day and year first above written. Signed, sealed and delivered in SAWTEK INC. the presence of: /s/Kathleen Sinnott By:/s/Raymond A. Link Raymond A. Link, Print Name: Kathleen Sinnott Vice President-Finance/ Chief Financial Officer /s/KC Hoppe Print Name: KC Hoppe SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, f/k/a SUN BANK, NATIONAL ASSOCIATION _________________________________ By:______________________________ Print Name:_______________________ Name:____________________________ Title:___________________________ EX-27 4 FDS FOR 1ST QUARTER 10-Q
5 (Replace this text with the legend) 0001009675 Sawtek Inc. 1,000 3-MOS SEP-30-1997 OCT-01-1996 DEC-29-1996 31,436 0 8,621 883 5,947 46,909 45,334 10,953 81,455 9,593 3,668 0 0 10 66,076 81,455 18,502 18,502 8,678 8,678 0 15 41 6,881 2,618 4,263 0 0 0 4,263 .20 .20
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