-----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, UoiNRW4/1cTLT8WE7d/IU85hPmUQr3fh6yvvYOHT5BH8XJA04RkERtcPUL4zLQ19 gahPYPnts1ljIzATkEiWBA== 0000898430-98-000872.txt : 19980313 0000898430-98-000872.hdr.sgml : 19980313 ACCESSION NUMBER: 0000898430-98-000872 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980312 SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHITTAKER CORP CENTRAL INDEX KEY: 0000106945 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 954033076 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05407 FILM NUMBER: 98564037 BUSINESS ADDRESS: STREET 1: 1955 NORTH SURVEYOR AVENUE CITY: SIMI VALLEY STATE: CA ZIP: 93063-3388 BUSINESS PHONE: 8055265700 MAIL ADDRESS: STREET 1: 1955 NORTH SURVEYOR AVENUE CITY: SIMI VALLEY STATE: CA ZIP: 93063-3388 10-Q 1 FORM 10-Q DATED JANUARY 31, 1998 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1998 COMMISSION FILE NUMBER 0-20609 WHITTAKER CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 95-4033076 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1955 N. SURVEYOR AVENUE 93063 SIMI VALLEY, CALIFORNIA (Zip Code) (Address of principal executive offices) (805) 526-5700 (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 Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 11,204,658 shares, par value $.01 per share, as of January 31, 1998. ================================================================================ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WHITTAKER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS ($ in 000, except for per share amounts) (Unaudited)
For the Three Months Ended January 31, 1998 1997 --------- --------- (restated) Sales..................................................................... $ 31,799 $ 19,690 Costs and expenses Cost of sales......................................................... 18,689 12,253 Engineering and development........................................... 337 224 Selling, general and administrative................................... 7,275 6,077 --------- --------- Operating Profit.......................................................... 5,498 1,136 Interest expense...................................................... 4,906 3,828 Interest income....................................................... (218) (149) Other expense......................................................... 482 6 --------- --------- Income (loss) from continuing operations before provision for taxes....... 328 (2,549) Provision for taxes....................................................... 6 -- --------- --------- Income (loss) from continuing operations.................................. 322 (2,549) Discontinued operations Loss from discontinued operations..................................... -- (15,534) Gain on disposal of discontinued operations........................... 10,085 -- --------- --------- Net income (loss)......................................................... $ 10,407 $ (18,083) ========= ========= Average common shares outstanding (000)................................... 11,205 11,116 ========= ========= Basic income (loss) per share Continuing operations................................................. $ .03 $ (.23) Discontinued operations Loss from discontinued operations.................................. -- (1.40) Gain on disposal of discontinued operations........................ .90 -- --------- --------- Net income (loss) per share............................................... $ .93 $ (1.63) ========= ========= Diluted income (loss) per share Continuing operations................................................. $ .03 $ (.23) Discontinued operations Loss from discontinued operations.................................. -- (1.40) Gain on disposal of discontinued operations........................ .88 -- --------- --------- Net income (loss) per share............................................... $ .91 $ (1.63) ========= =========
See Notes to Consolidated Condensed Financial Statements (2) WHITTAKER CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS ($ IN 000)
AT JANUARY 31, AT OCTOBER 31, 1998 1997 -------------- -------------- (UNAUDITED) ASSETS Current Assets - -------------- Cash......................................................................... $ 37,550 $ 6,366 Receivables.................................................................. 24,597 27,337 Inventories.................................................................. 38,194 37,032 Other current assets......................................................... 1,777 914 Income taxes recoverable..................................................... 3,238 3,238 Deferred income taxes........................................................ 11,291 11,244 Net current assets of discontinued operations................................ (428) 7,766 ----------- ----------- Total Current Assets......................................................... 116,219 93,897 ----------- ----------- Property and equipment, at cost.............................................. 31,850 31,381 Less accumulated depreciation and amortization............................... (22,060) (21,550) ----------- ----------- Net Property and Equipment................................................... 9,790 9,831 ----------- ----------- Other Assets - ------------ Goodwill, net of amortization................................................ 13,942 14,032 Other intangible assets, net of amortization................................. 1,070 1,119 Notes and other noncurrent receivables....................................... 3,380 3,443 Other noncurrent assets...................................................... 9,081 7,672 Net assets held for sale or development...................................... 15,214 15,214 Net noncurrent assets of discontinued operations............................. -- 22,234 ----------- ----------- Total Other Assets........................................................... 42,687 63,714 ----------- ----------- Total Assets................................................................. $ 168,696 $ 167,442 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities - ------------------- Current maturities of long-term debt......................................... $ 127,313 $ 129,353 Accounts payable............................................................. 10,126 9,579 Accrued liabilities.......................................................... 25,876 31,331 ----------- ----------- Total Current Liabilities.................................................... 163,315 170,263 ----------- ----------- Other Liabilities - ----------------- Long-term debt............................................................... 91 222 Other noncurrent liabilities................................................. 12,174 12,603 Deferred income taxes........................................................ 13,432 15,077 ----------- ----------- Total Other Liabilities...................................................... 25,697 27,902 ----------- ----------- Stockholders' Equity (Deficit) - ------------------------------ Capital stock Preferred stock............................................................ 1 1 Common Stock............................................................... 112 112 Additional paid-in capital................................................... 72,041 72,041 Retained earnings (deficit).................................................. (92,470) (102,877) ----------- ----------- Total Stockholders' Equity (Deficit)......................................... (20,316) (30,723) ----------- ----------- Total Liabilities and Stockholders' Equity................................... $ 168,696 $ 167,442 =========== ===========
See Notes to Consolidated Condensed Financial Statements (3) WHITTAKER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ($ IN 000)
For The Three Months Ended January 31, ------------------------------------ 1998 1997 -------------- -------------- (Dollars in thousands) OPERATING ACTIVITIES Continuing Operations Net income (loss)............................................................. $ 322 $ (2,549) Adjustments to reconcile net income (loss) to net cash provided (used) by operations: Depreciation and amortization............................................... 691 753 Income taxes recoverable.................................................... -- 1,404 Deferred taxes.............................................................. (1,692) 1,230 Changes in operating assets and liabilities: Receivables............................................................... 2,568 5,690 Inventories and prepaid expenses.......................................... (2,025) (3,995) Accounts payable and other liabilities.................................... (4,435) (726) ---------- ---------- Total from continuing operations............................................ (4,571) 1,807 ---------- ---------- Discontinued Operations Net loss.................................................................... -- (15,534) Adjustments to reconcile net loss to net cash provided (used) by operations: Depreciation and amortization............................................. 2,557 5,009 Deferred taxes............................................................ 1,023 (1,019) Changes in operating assets and liabilities............................... 2,373 18,366 ---------- ---------- Total from discontinued operations.......................................... 5,953 6,822 ---------- ---------- Net cash provided by operating activities..................................... 1,382 8,629 ---------- ---------- INVESTING ACTIVITIES Continuing Operations Proceeds on sale of business................................................ 35,000 -- Purchase of property, plant and equipment................................... (507) (879) Collections of notes receivable............................................. 235 313 Increase in assets held for sale or development............................. -- (697) Other items, net............................................................ (3,051) (889) ---------- ---------- Total from continuing operations............................................ 31,677 (2,152) ---------- ---------- Discontinued Operations Net proceeds relating to discontinued operations............................ (440) 580 ---------- ---------- Net cash provided (used) by investing activities.............................. 31,237 (1,572) ---------- ---------- FINANCING ACTIVITIES Net decrease in debt.......................................................... (2,171) (7,612) Reduction in deferred debt costs.............................................. 736 139 Proceeds from shares issued under stock option plans.......................... -- 716 ---------- ---------- Net cash used by financing activities......................................... (1,435) (6,757) ---------- ---------- Net increase in cash.......................................................... 31,184 300 Cash at beginning of year..................................................... 6,366 1,566 ---------- ---------- Cash at end of period......................................................... $ 37,550 $ 1,866 ========== ========== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest.................................................................... $ 3,869 $ 3,435 ========== ========== Income taxes................................................................ $ 72 $ 59 ========== ==========
Unaudited See Notes to Consolidated Condensed Financial Statements (4) WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated condensed financial statements of Whittaker Corporation and its subsidiaries ("Whittaker" or the "Company") have been prepared in conformity with generally accepted accounting principles, consistent in all material respects with those applied in the Annual Report on Form 10-K for the year ended October 31, 1997. The interim financial information is unaudited, but reflects all adjustments which are of a normal recurring nature and, in the opinion of management, necessary to provide a fair statement of the results for the interim periods presented. The preparation of financial statements in conformity with generally accepted accounting principles may require management to make certain estimates and assumptions that could affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions include, among other things, future costs to complete long-term contracts, valuation of slow moving or obsolete inventories and amounts of estimated liabilities for contingent losses and future costs of litigation. Actual costs could differ from these estimates. The interim financial statements should be read in conjunction with the financial statements and related notes in the Company's Annual Report on Form 10-K for the year ended October 31, 1997. The results of operations for interim periods are not necessarily indicative of the results of operations for the full year. During 1997 the Financial Accounting Standards Board issued Financial Accounting Standards No. 128 "Earnings Per Share" which is effective for the Company beginning with the first quarter of fiscal 1998. Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes the potential dilutive effect of common stock equivalents such as stock options, warrants and convertible securities. Diluted earnings per share is similar to the previously reported primary and fully diluted earnings per share. Earnings per share amounts for all periods have been presented, and where necessary, restated to conform to Statement 128 requirements. See Note 3 for the computation of basic and diluted earnings per share. NOTE 2. DISCONTINUED OPERATIONS During the fourth quarter of 1997, the Company, in connection with its strategy to reduce debt and explore strategic options, sold its defense electronics unit and discontinued its Communications segment. During the first quarter of 1998 the Company completed the sale of Whittaker Xyplex, Inc. ("Xyplex") to MRV Communications, Inc. ("MRV"), for $35,000,000 in cash plus warrants to purchase 421,402 shares of common stock of MRV. Under the terms of its agreement with MRV, Whittaker shall be entitled to receive warrants to purchase an additional 78,598 shares of common stock of MRV upon Whittaker's timely performance of certain covenants. The net proceeds from the sale were used in February to reduce Whittaker's bank debt. The Company's financial statements report the operating results and balance sheet items of these discontinued operations separately from its continuing operations. Previously reported financial statements have been restated to reflect the discontinuance of these businesses. The gain on disposal of discontinued operations of $10,085,000 includes the gain on sale of Xyplex of $12,089,000, (net of estimated selling costs of $532,000), $1,432,000 of 1998 operating losses of Xyplex through the date of sale which where in excess of the estimate of these losses previously recorded, and certain other items. In calculating the gain on the sale of Xyplex, the 421,402 warrants were valued at $2,200,000 based on their estimated market value at January 31, 1998. No value was placed on the 78,598 warrants. The warrants have an initial exercise price of $35 and expire on January 29, 2001. The exercise price of the warrants may be adjusted in the future upon the occurrence of certain events. (5) WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings (loss) per share in thousands except per share amounts:
FOR THE THREE MONTHS ENDED JANUARY 31, --------------------------------------- 1998 1997 Basic Earnings (Loss) Per Share - ------------------------------- Net income (loss) from continuing operations available to common stockholders $ 322 $ (2,549) =========== ========== Weighted average common shares outstanding 11,205 11,116 =========== ========== Basic income (loss) per share from continuing operations $ 0.03 $ (0.23) =========== ========== Diluted Earnings (Loss) Per Share - --------------------------------- Net income (loss) from basic earnings per share calculation, above $ 322 $ (2,549) Adjustments -- -- ----------- --------- Net income (loss) from continuing operations for diluted earnings per share calculation $ 322 $ (2,549) =========== ========== Weighted average common shares outstanding for basic earnings per share calculation, above 11,205 11,116 Effect of dilutive securities: Series D Convertible Preferred Stock 188 -- Employee Stock Options 63 -- ----------- --------- Denominator for diluted earnings per share calculation 11,456 11,116 =========== ========== Diluted earnings (loss) per share from continuing operations $ 0.03 $ (0.23) =========== ==========
Options to purchase 589,437 shares of common stock at prices ranging from $10.32 to $26.25 per share were outstanding at January 31, 1998 but were not included in the computation of diluted earnings per share because their inclusion would be antidilutive. In addition, 618,556 shares of common stock issuable upon conversion of convertible subordinated debt are not included in the computation of diluted earnings per share because their inclusion would be antidilutive. NOTE 4. INVENTORIES Inventories consisted of the following ($ in thousands):
JANUARY 31, OCTOBER 31, 1998 1997 ------------- -------------- Parts and materials $ 19,143 $ 19,620 Work in process 17,185 15,595 Finished goods 1,866 1,817 ------------- -------------- $ 38,194 $ 37,032 ============= ==============
(6) WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 5. COMMITMENTS AND CONTINGENCIES In certain years, after evaluating the availability and cost of insurance, the Company did not purchase insurance for certain risks, including workers' compensation and product liability. Consequently, the Company is without insurance for various risks, including product liability for certain products it previously manufactured. The Company currently has workers' compensation insurance and product liability insurance for products it currently manufactures. The Company's insurance carriers have taken the position that in certain cases the Company is uninsured for environmental matters, a position that the Company disputes in certain instances. As a result primarily of the activities of its discontinued operations, the Company is a potentially responsible party in a number of actions filed under the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted to address public health and environmental concerns arising with respect to the past treatment and disposal of hazardous substances. The Company is also a potentially responsible party in a number of other actions brought under state laws patterned after CERCLA. In nearly all of these matters, the Company contributed a small amount (generally less than 1%) of the total treated or disposed of waste. In addition to the CERCLA and similar actions described above, the Company also, from time to time, conducts or participates in remedial investigations and cleanup activities at facilities currently or formerly occupied by its operating units. There are also various other claims and suits pending against the Company. At January 31, 1998, the Company had provided for its aggregate liability related to various claims, including uninsured risks and potential claims in connection with the environmental matters noted above but excluding the environmental remediation activities related to its property located in the City of Santa Clarita, California. The amounts provided on the Company's books for contingencies, including environmental matters, are recorded at gross amounts. Because of the uncertainty with respect to the amount of probable insurance recoveries, these potential insurance recoveries are not taken into account as a reduction of those amounts provided unless an insurance carrier has agreed to such coverage. The Company has made cash expenditures of approximately $0.1 million for these environmental matters during the three months ended January 31, 1998. The Company does not anticipate that these matters will have a material adverse effect on the Company's financial position, or on its ability to meet its working capital and capital expenditure needs. Although the Company has recorded estimated liabilities for contingent losses, including uninsured risks and claims in connection with environmental matters, in accordance with generally accepted accounting principles, the absence of or denial of various insurance coverages and the filing of future environmental claims which are unknown to the Company at this time represent a potential exposure for the Company, and the net income of the Company in future periods could be adversely affected if uninsured losses in excess of amounts recorded were to be incurred. As prescribed by SOP 96-1, the Company has accrued for its estimated costs, including certain employee compensation costs, for the environmental remediation where the Company is a potentially responsible party under CERCLA and similar state laws. These accruals are adjusted as further information develops or circumstances change. The total remediation costs for the sites associated with these federal and state actions is estimated to be $4.6 million. As of January 31, 1998, all of these estimated costs have been accrued and are reflected in accrued liabilities and, in the case of those costs to be incurred beyond one year, other noncurrent liabilities in the Consolidated Balance Sheet of the Company. The Company, at this time, does not anticipate any additional significant costs, beyond those already recognized, will be incurred in the remediation efforts for these sites. Costs of future expenditures for environmental remediation efforts are not discounted to their present value. (7) WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6. LONG-TERM DEBT On April 10, 1996, the Company increased the amount of its bank credit facility to $170.0 million. At January 31, 1998, the credit facility consisted of an $85.0 million revolving credit facility that expires in April 2001, of which the Company was permitted to utilize $83.0 million and a $31.9 million term loan payable in quarterly installments until 2001. At January 31, 1998, the interest rate on loans outstanding under the credit agreement was equal to the agent bank's prime rate plus 4.25% with interest payable monthly. At that time, the Company was obligated to pay letter of credit fees which ranged between 4.875% per annum and 5.375% per annum on the aggregate amount of outstanding letters of credit, and commitment fees on the unused amount of the revolving credit facility. Additional borrowings under the credit facility will be used to fund future working capital and other corporate requirements. At January 31, 1998, the Company had $2.1 million of letters of credit outstanding and unused and available credit of $0.8 million under its revolving credit facility. The Company's obligations under the credit agreement are secured by a pledge of shares of stock of subsidiaries of the Company, accounts receivable, inventory, equipment, intellectual property and other assets of the Company and its subsidiaries. The agreement includes four financial ratio covenants with respect to financial leverage, cash flow, and net worth. Since July 31, 1996, the Company has not been in compliance with one or more of the four financial ratio covenants and at January 31, 1998 the Company was not in compliance with any of such covenants. The Company has obtained successive waivers of these defaults. The latest waiver dated January 31, 1998 waives the defaults up to but not including March 31, 1998. There can be no assurance that in future periods the Company will be in compliance with any of the financial ratio covenants contained in its credit agreement, or that, after expiration of the latest waiver on March 31, 1998, additional waivers of the financial covenants will be obtained. There can be no assurance that any future waivers would contain terms which would be as favorable to the Company as, or would materially differ from, waivers granted in the past. Consequently, bank debt in the amount of $103.1 million, which otherwise would have been classified as noncurrent, has been classified as current. Acceleration of the debt under the credit agreement by the bank lending group upon the Company's failure, after March 30, 1998, to comply with any of the financial ratio covenants noted above would be an event of default under the Company's $15 million 7% convertible subordinated note. Because of this possible cross default, the entire $15 million principal balance of the 7% convertible subordinated note has also been classified as current debt. Under the Company's 7% convertible subordinated note, the Company may not pay or declare cash dividends or redeem shares of the Company if the Company's tangible net worth is less than $15 million. As of April 30, 1996, the Company's tangible net worth was less than $15 million and the Company has not paid or declared dividends (including the quarterly dividend for the Series D Preferred Stock) or redeemed shares since that date. However, dividends on the Series D Preferred Stock have been accrued since that date. In order to reduce the risk of higher interest expense under the Company's credit agreement that could result from an increase in the level of market interest rates, the Company in June 1996 purchased an interest rate cap with an initial notional amount of $42.5 million. Under the terms of the interest rate cap, the Company will receive a payment at the end of each quarterly period, as defined in the interest rate cap agreement, if three-month LIBOR at the beginning of the period exceeds 7.5%. The amount of such payment will be the interest for such period on the notional amount of the interest rate cap at the beginning of such period calculated using an interest rate equal to the positive difference, if any, between LIBOR at the beginning of such period and 7.5%. The interest rate cap expires in July 1999. The cost of this interest rate cap is being amortized over its 37-month term. At January 31, 1998, the unamortized cost was $129,000. On January 30, 1998, the Company sold Whittaker Xyplex, Inc. On February 2, 1998 the net cash proceeds of $34.5 million from the sale were used to prepay all of the $31.9 million of term debt under the Company's credit agreement and $2.6 million of loans outstanding under the Company's revolving credit facility. Also on February 2, 1998, commitments under the revolving credit facility were reduced to $82.4 million. (8) WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 7. BUSINESS SEGMENTS The Company develops and provides specialized aerospace and data network services to create products and customer solutions for aircraft, defense and industrial markets and hospitals and other enterprises. The Company operates in two business segments: Aerospace, which designs, manufactures, and distributes a wide variety of fluid control devices and fire detection systems, and Integration Services, which provides professional services for the integration of data networks for hospitals and other enterprises. Prior to the second quarter of 1997, the Company's Integration Services operation did not exist. Operating profit is total revenue less operating expenses. General corporate expenses have not been allocated to the business segments and are shown as a separate expense element of operating profit to reconcile to consolidated operating income. Information about the Company's operations by business segment for the periods ended January 31, 1998 and 1997 follows ($ in thousands):
FOR THE THREE MONTHS ENDED JANUARY 31, 1998 1997 --------- --------- SALES: Aerospace....................... $ 28,980 $ 19,690 Integration Services............ 2,819 -- --------- --------- $ 31,799 $ 19,690 ========= ========= OPERATING PROFIT (LOSS): Aerospace....................... $ 8,078 $ 3,485 Integration Services............ (538) -- Corporate and Other............. (2,042) (2,349) --------- --------- $ 5,498 $ 1,136 ========= =========
The financial statements for prior periods have been restated to reflect the segregation of continuing and discontinued operations. The information presented above for 1997 reflects the removal from the Aerospace segment of amounts relating to the discontinued defense electronics business and the removal of the discontinued Communications segment. (9) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RECENT DEVELOPMENTS - ------------------- During the first quarter of 1998 the Company completed the sale of Whittaker Xyplex, Inc. ("Xyplex") to MRV Communications, Inc. ("MRV"), for $35.0 million in cash plus warrants to purchase 421,402 shares of common stock of MRV. Under the terms of its agreement with MRV, Whittaker shall be entitled to receive warrants to purchase an additional 78,598 shares of common stock of MRV upon Whittaker's timely performance of certain covenants. The net proceeds from the sale were used in February to reduce Whittaker's bank debt. RESULTS OF OPERATIONS - --------------------- COMPARISON OF THREE MONTHS ENDED JANUARY 31, 1998 AND 1997 Sales. The Company's first quarter 1998 sales from continuing operations of $31.8 million increased by $12.1 million (61.5%) over first quarter sales in the prior year. The Company's Aerospace segment sales for the first quarter of 1998 were up $9.3 million (47.2%) from the same period in 1997 reflecting increased sales of fluid and pneumatic control devices, fire and overheat detectors and cable products. The increase in sales of fire and overheat detectors reflects the successful resolution, in 1998, of the production inefficiencies associated with the 1997 move of operations from Concord, California to Simi Valley, California. Also impacting the overall increase in 1998 sales was the Company's Integration Services Segment which did not exist prior to the second quarter of 1997. Gross Margin. The Company's gross margin from continuing operations for the first quarter of 1998 as a percentage of sales was 41.2%, compared with 37.8% for the first quarter of 1997. The first quarter 1998 gross margin consists of Aerospace segment gross margin of $12.1 million (41.6% of sales), and Integration Services gross margin of $1.0 million (36.9% of sales). Aerospace gross margin as a percentage of sales increased from 37.0% in the first quarter of 1997 due primarily to the efficiencies associated with higher sales volume and the successful resolution in 1998 of the production inefficiencies associated with the 1997 move from Concord, California to Simi Valley, California of the fire and overheat detector business. Engineering and Development. Engineering and development expenses for continuing operations for the first quarter of 1998 increased slightly from the first quarter of 1997, from $0.2 million to $0.3 million. Selling, General and Administrative. Selling, general and administrative expenses (SG&A) for continuing operations for the first quarter of 1998 increased by $1.2 million from the first quarter of 1997, from $6.1 million in 1997 to $7.3 million in 1998. The Integration Services business, which did not exist in the first quarter of 1997, incurred SG&A costs of $1.5 million in the first quarter of 1998. The Aerospace segment SG&A expenses for the first quarter of 1998 and the first quarter of 1997 were $3.7 million. Higher management incentive costs in 1998 were substantially offset by lower allocations of support services costs in 1998 and the absence in 1998 of costs associated with the 1997 move of the fire and overheat detector business from Concord, California to Simi Valley, California. Interest Expense. Interest expense increased $1.1 million to $4.9 million for the first quarter of 1998 from $3.8 million for the first quarter of 1997. This increase was the result of higher interest rates in 1998 compared to 1997 partially offset by lower levels of debt in the first quarter of 1998 as compared to the first quarter of 1997. Income Taxes. In compliance with FASB 109, the Company has established a full valuation allowance against its current potential carry forward benefits. Sales from discontinued operations for the first quarter of 1998 were $16.9 million lower as compared to the first quarter of 1997. The discontinued Communications segment sales were $13.5 million for the first quarter of 1998 compared to $24.7 million for the first quarter of 1997. Sales for the discontinued defense electronics unit which was sold in September of 1997 were $5.6 million for the first quarter of 1997. (10) MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Gross margin from the discontinued operations for the first quarter of 1998 was lower by $1.0 million as compared to the first quarter of 1997. The effect of the sale of the defense electronics business in 1997 and lower margins in the Communications segment were substantially offset by the absence in the first quarter of 1998 of restructuring and integration costs incurred in the first quarter of 1997. The gain on disposal of discontinued operations of $10,085,000 includes the gain on sale of Xyplex of $12,089,000, (net of estimated selling costs of $532,000), $1,432,000 of 1998 operating losses of Xyplex through the date of sale which where in excess of the estimate of these losses previously recorded, and certain other items. FINANCIAL CONDITION AND LIQUIDITY - --------------------------------- On April 10, 1996, the Company increased the amount of its bank credit facility to $170.0 million. At January 31, 1998, the credit facility consisted of an $85.0 million revolving credit facility that expires in April 2001, of which the Company was permitted to utilize $83.0 million and a $31.9 million term loan payable in quarterly installments until 2001. At January 31, 1998, the interest rate on loans outstanding under the credit agreement was equal to the agent bank's prime rate plus 4.25% with interest payable monthly. At that time, the Company was obligated to pay letter of credit fees which ranged between 4.875% per annum and 5.375% per annum on the aggregate amount of outstanding letters of credit, and commitment fees on the unused amount of the revolving credit facility. Additional borrowings under the credit facility will be used to fund future working capital and other corporate requirements. At January 31, 1998, the Company had $2.1 million of letters of credit outstanding and unused and available credit of $0.8 million under its revolving credit facility. The Company's obligations under the credit agreement are secured by a pledge of shares of stock of subsidiaries of the Company, accounts receivable, inventory, equipment, intellectual property and other assets of the Company and its subsidiaries. The agreement includes four financial ratio covenants with respect to financial leverage, cash flow, and net worth. Since July 31, 1996, the Company has not been in compliance with one or more of the four financial ratio covenants and at January 31, 1998 the Company was not in compliance with any of such covenants. The Company has obtained successive waivers of these defaults. The latest waiver dated January 31, 1998 waives the defaults up to but not including March 31, 1998. There can be no assurance that in future periods the Company will be in compliance with any of the financial ratio covenants contained in its credit agreement, or that, after expiration of the latest waiver on March 31, 1998, additional waivers of the financial covenants will be obtained. There can be no assurance that any future waivers would contain terms which would be as favorable to the Company as, or would materially differ from, waivers granted in the past. Consequently, bank debt in the amount of $103.1 million, which otherwise would have been classified as noncurrent, has been classified as current. Acceleration of the debt under the credit agreement by the bank lending group upon the Company's failure, after March 30, 1998, to comply with any of the financial ratio covenants noted above would be an event of default under the Company's $15 million 7% convertible subordinated note. Because of this possible cross default, the entire $15 million principal balance of the 7% convertible subordinated note has also been classified as current debt. Under the Company's 7% convertible subordinated note, the Company may not pay or declare cash dividends or redeem shares of the Company if the Company's tangible net worth is less than $15 million. As of April 30, 1996, the Company's tangible net worth was less than $15 million and the Company has not paid or declared dividends (including the quarterly dividend for the Series D Preferred Stock) or redeemed shares since that date. However, dividends on the Series D Preferred Stock have been accrued since that date. In order to reduce the risk of higher interest expense under the Company's credit agreement that could result from an increase in the level of market interest rates, the Company in June 1996 purchased an interest rate cap with an initial notional amount of $42.5 million. Under the terms of the interest rate cap, the Company will receive a payment at the end of each quarterly period, as defined in the interest rate cap agreement, if three-month LIBOR at the beginning of the period exceeds 7.5%. The amount of such payment will be the interest for such period on the notional amount of the interest rate cap at the beginning of such period calculated using an interest rate equal to the positive difference, if any, between LIBOR at the beginning of such period and 7.5%. The interest rate cap expires in July 1999. The cost of this interest rate cap is being amortized over its 37-month term. At January 31, 1998, the unamortized cost was $129,000. (11) MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) FINANCIAL CONDITION AND LIQUIDITY - CONTINUED - --------------------------------------------- The Company believes that its existing cash and available credit under its revolving credit facility will be adequate to meet future operating cash needs. On January 30, 1998, the Company sold Whittaker Xyplex, Inc. On February 2, 1998 the net proceeds of $34.5 million from the sale were used to prepay all of the $31.9 million of term debt under the Company's credit agreement and $2.6 million of loans outstanding under the Company's revolving credit facility. Also on February 2, 1998, commitments under the revolving credit facility were reduced to $82.4 million. Debt as a percent of total capitalization (stockholders' equity plus debt) was 119.0% at January 31, 1998, compared with 131.1% at October 31, 1997. The current ratio at January 31, 1998 was 0.71, compared with 0.55 at October 31, 1997, while working capital was ($47.1) million at January 31, 1998, compared with ($76.4) million at October 31, 1997. Excluding the debt reclassifications discussed above, the current ratio would have been 2.57 and working capital would have been $71.0 million at January 31, 1998 and at October 31, 1997 the current ratio and working capital would have been 1.88 and $44.0 million, respectively. Cash flow used by continuing operations for the first three months of 1998 was $4.5 million, compared to cash flow provided by continuing operations of $1.8 million for the same period in 1997. The $6.3 million decrease from 1997 to 1998 was due primarily to a decrease in accounts payable and accrued liabilities, a smaller reduction in accounts receivable during the first quarter of 1998 compared to the first quarter of 1997, no change in recoverable income taxes in 1998, and an increase in deferred taxes in 1998 compared to a decrease in 1997. Partially offsetting these items was net income in the first quarter of 1998 compared to a net loss in the first quarter of 1997 and smaller increases in inventories and prepaids in 1998 as compared to 1997. Capital expenditures of continuing operations during the first three months of 1998 were $0.5 million, compared to $0.9 million for the same period of 1997. At January 31, 1998, there were approximately $0.3 million of approved capital expenditures outstanding for the replacement and upgrade of existing plant and equipment at the Company's various facilities. Funds for these and other capital expenditures are expected to be provided from operations and advances under the credit agreement. Capital expenditure amounts are a component of one of the financial ratio covenants contained in the Company's credit agreement. Included in the cash being reported by the Company at January 31, 1998 are the proceeds of $35.0 million received on the sale of Whittaker Xyplex, Inc. These proceeds, less estimated selling expenses, were used in February, to reduce the Company's bank debt. Cash expenditures related to the environmental remediation of a 996-acre parcel of land located in Santa Clarita, California were $0.2 million during the first three months of 1998. DISPOSITION During the first quarter of 1998 the Company completed of the sale of Whittaker Xyplex, Inc. to MRV Communications, Inc., for $35.0 million in cash plus warrants to purchase 421,402 shares of common stock of MRV. Under the terms of its agreement with MRV, Whittaker shall be entitled to receive warrants to purchase an additional 78,598 shares of common stock of MRV upon Whittaker's timely performance of certain covenants. The net proceeds from the sale were used in February to reduce Whittaker's bank debt. The gain on disposal of Xyplex recorded by Whittaker was $12.1 million is net of estimated selling costs of $0.5 million. In calculating gain on disposal, the 421,402 warrants were valued at $2.2 million based on their estimated market value at January 31, 1998. No value was placed on the 78,598 warrants. Statements made herein that are not based on historical fact are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The risk factors that could cause actual results to differ from the forward looking statements include delay in developing new programs and products, inability to qualify for new programs or to develop new products, loss of existing business and inability to attract new business and customers, reduced spending by commercial and defense customers and development of competing products. (12) EXHIBITS TO PART I - ------------------ I(a) Calculation of Earnings (Loss) Per Share. (13) Exhibit I(a) WHITTAKER CORPORATION CALCULATION OF EARNINGS (LOSS) PER SHARE (In thousands, except per share data)
FOR THE THREE MONTHS ENDED JANUARY 31, 1998 1997 ---------- ---------- BASIC EARNINGS (LOSS) PER SHARE EARNINGS (LOSS) Net income (loss) $ 10,407 $ (18,083) Adjustments: -- -- ---------- ---------- Net income (loss) used in basic earnings per share calculations $ 10,407 $ (18,083) ========== ========== Weighted average number of common shares outstanding $ 11,205 $ 11,116 ========== ========== Basic Earnings (Loss) Per Share $ 0.93 $ (1.63) ========== ==========
Unaudited (14) Exhibit I(a) WHITTAKER CORPORATION CALCULATION OF EARNINGS (LOSS) PER SHARE - (CONTINUED) (In thousands, except per share data)
FOR THE THREE MONTHS ENDED JANUARY 31, 1998 1997 --------- --------- DILUTED EARNINGS (LOSS) PER SHARE EARNINGS (LOSS) Net income (loss) used in basic earnings per share calculation (above) $ 10,407 $ (18,083) Adjustments: -- -- --------- --------- Net income (loss) used in diluted earnings per share calculations $ 10,407 $ (18,083) ========= ========= DENOMINATOR USED TO CALCULATE DILUTED EARNINGS (LOSS) PER SHARE Weighted average common shares outstanding for basic earnings per share calculation (above) 11,205 11,116 Effect of diluted securities: Series D Convertible Preferred Stock 188 -- Employee Stock Options 63 -- -------- -------- Denominator for diluted earnings per share calculation 11,456 11,116 Diluted Earnings (Loss) Per Share $ 0.91 $ (1.63) ========= ========
NOTES Loss per share calculation for 1997 does not include the effect of the Series D Convertible Preferred Stock or Employee Stock Options as such amounts would be antidilutive. Unaudited (15) PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ENVIRONMENTAL MATTERS As a result primarily of the activities of its discontinued operations, the Company is a potentially responsible party in a number of actions filed under the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted to address public health and environmental concerns arising with respect to the past treatment and disposal of hazardous substances. The Company is also a potentially responsible party in a number of other actions brought under state laws patterned after CERCLA. In nearly all of these matters, the Company contributed a small amount (generally less than 1%) of the total treated or disposed of waste. In addition to the CERCLA and similar actions described above, the Company also, from time to time, conducts or participates in remedial investigations and cleanup activities at facilities currently or formerly occupied by its operating units. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. * 10.1 Tenth Amendment and Waiver dated as of January 31, 1998 among Registrant, NationsBank of Texas, N.A., as Agent, and certain other financial institutions as signatories thereto. 11. Statements recomputation of pershare earnings for the three months ended January 31, 1998 (Exhibit I(a) of Part I to this Form 10-Q). 27. Financial Data Schedule. - ------------- * Exhibits followed by a parenthetical reference are incorporated by reference to the documents described therein. (b) Reports on Form 8-K. During the quarter ended January 31, 1998, the following reports were filed on Form 8-K: 1. A report on Form 8-K was filed on December 16, 1997. The form reports, in Item 5 thereof, the Company's earnings for its fiscal year ended October 31, 1997 and its fourth quarter of 1997. (16) 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. WHITTAKER CORPORATION Date: March 11, 1998 By: /s/ John K. Otto -------------------------------- John K. Otto Vice President, Chief Financial Officer and Treasurer S-1 EXHIBIT INDEX EXHIBIT NO. * DESCRIPTION - ----------- ----------- 10.1 Tenth Amendment and Waiver dated as of January 31, 1998 among Registrant, NationsBank of Texas, N.A., as Agent, and certain other financial institutions as signatories thereto. 11. Statements re computation of per share earnings for the three months ended January 31, 1998 (Exhibit I(a) of Part I to this Form 10-Q). 27. Financial Data Schedule. - --------------------- * Exhibits followed by a parenthetical reference are incorporated by reference to the documents described therein. EX-10.1 2 10TH AMENDMENT & WAIVER DATED 1/31/98 Exhibit 10.1 TENTH AMENDMENT AND WAIVER TO WHITTAKER CORPORATION AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JANUARY 31, 1998 This TENTH AMENDMENT AND WAIVER (the "Amendment") is among WHITTAKER CORPORATION, a Delaware corporation (the "Borrower"), the Financial Institutions party to the Credit Agreement referred to below (the "Lenders"), and NATIONSBANK OF TEXAS, N.A., as agent (the "Agent") for the Lenders thereunder. PRELIMINARY STATEMENTS: 1. The Borrower, the Lenders, CIBC Inc., as co-agent, and the Agent entered into an Amended and Restated Credit Agreement dated as of April 10, 1996 (as amended to date, the "Credit Agreement"; capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement). 2. The Borrower has requested that the Lenders, among other things, waive, during the period starting on and including January 31, 1998 to (but not including) March 31, 1998 (the "Waiver Period"), any Default arising as a result of non-compliance with Section 6.04(a), (b), (c) or (d) of the Credit Agreement. 3. The Lenders are, on the terms and conditions stated below, willing to grant the request of the Borrower. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date ------------------------------ hereof and subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, the Credit Agreement is hereby amended as follows: (a) During the Waiver Period, the definition of "Applicable Margin" is amended and restated in its entirety as follows: "APPLICABLE MARGIN" means 4.25% per annum. ----------------- (b) During the Waiver Period, the third sentence of Section 2.01(b) of the Credit Agreement is hereby amended and restated in its entirety as follows: "Each Revolving Borrowing shall be in an aggregate amount of $500,000 or an integral multiple of $500,000 in excess thereof unless such Revolving Borrowing is in the amount of the aggregate Unused Revolving Commitment of each Revolving Lender and shall consist of Revolving Advances made by the Revolving Lenders ratably according to their respective Revolving Commitments." (c) During the Waiver Period, the proviso of Section 2.05(a) is hereby amended to read as follows: "provided, however, that each partial prepayment of Revolving Advances shall be in the aggregate principal amount of $500,000 or any multiple of $500,000 in excess thereof." (d) During the Waiver Period, notwithstanding anything to the contrary in the Credit Agreement, the aggregate outstanding amount of Revolving Advances plus Letter of Credit Obligations shall not exceed (i) $83,000,000, minus (ii) any amounts by which the Revolving Commitments shall be automatically and permanently reduced pursuant to Section 2.05(b) on and after January 30, 1998. (e) During the Waiver Period, Section 3.05(a) of the Credit Agreement is hereby amended and restated in its entirety as follows: "SECTION 3.05. LETTER OF CREDIT COMPENSATION. ----------------------------- (a) The Borrower shall pay to the Agent: (i) for the account of the Issuing Bank which Issues a Letter of Credit, an issuance fee in an amount equal to 1/8 of 1% per annum of the average daily Available Amount of such Letter of Credit outstanding from time to time; and (ii) for the account of each Revolving Lender, a letter of credit fee with respect to each Letter of Credit, in each case in an amount equal to (A) with respect to each Financial Standby Letter of Credit, a percentage per annum equal to the Applicable Margin plus 1%, times the amount of such Lender's Revolving Pro Rata Share of the average daily Available Amount of such Letter of Credit outstanding from time to time; (B) with respect to each Performance Standby Letter of Credit, a percentage per annum equal to the Applicable Margin plus 1/2%, times the amount of such Lender's Revolving Pro Rata Share of the average daily Available Amount of such Letter of Credit outstanding from time to time; and (C) with respect to each Commercial Letter of Credit, 0.25% of the amount of such Lender's Revolving Pro Rata Share of the Available Amount of such Letter of Credit as of the date of Issuance thereof. The letter of credit and issuance fees payable under this Section 3.05(a) shall be payable monthly on the last Business Day of each month, commencing January 31, 1998, and on the Revolving Commitment Termination Date except that the letter of credit fee payable under Section 3.05(a)(ii)(C) shall be payable 2 upon issuance of the applicable Letter of Credit. For purposes of computing any fees under this Section 3.05(a), the determination of the maximum amount available to be drawn under a Letter of Credit at any time shall assume strict compliance with all conditions for drawing. Any fees paid pursuant to this Section 3.05(a) are nonrefundable." (f) During the Waiver Period, the permissive exceptions to the prohibitions of Section 6.02(g) contained in Sections 6.02(g)(v), 6.02(g)(vi), and 6.02(g)(viii) are suspended. SECTION 2. CONSENT TO XYPLEX SALE. Lenders hereby consent, but only ---------------------- during the Waiver Period, to the sale by the Borrower of all of the issued and outstanding shares of Whittaker Xyplex, Inc., a Delaware corporation, to MRV Communications, Inc. pursuant to the terms of a Stock Purchase Agreement entered into as of January 19, 1998, between the Borrower and MRV Communications, Inc., provided that the Net Cash Proceeds from such sale are not less than $33,000,000. In that connection, simultaneously with the payment of the Net Cash Proceeds of such sale to reduce the Obligation of the Borrower, as set forth in the Credit Agreement, and the pledge of the warrants described in such Stock Purchase Agreement and received by the Borrower at the closing of such sale as part of the Collateral, Whittaker Xyplex, Inc. and Xyplex, Inc. shall be released as Guarantors under the Guaranty and Grantors under the Security Agreement, and all of the stock and assets of such corporations shall be released as part of the Collateral. By this consent, and effective as set forth above, the Collateral Documents shall be deemed amended to reflect such sale and the consent thereto, and the Agent is authorized and directed to take such actions as may be necessary to effect same and to release such Collateral. SECTION 3. WAIVER. (a) Subject to the terms and conditions hereof, ------ Lenders hereby waive, but only during the Waiver Period, the Specified Defaults (hereinafter defined); provided, however, that Lenders' waiver of the Specified -------- ------- Defaults and their rights and remedies as a result of the occurrence thereof shall not constitute and shall not be deemed to constitute a waiver of any other Event of Default, whether arising as a result of further violations of any provision of the Credit Agreement previously violated by the Borrower, or a waiver of any rights and remedies arising as a result of such other Events of Default. As used herein, "Specified Defaults" shall mean the failure of the ------------------ Borrower to comply with Sections 6.04(a), (b), (c) and (d) of the Credit Agreement. At the end of the Waiver Period, the waiver of the Specified Defaults will automatically terminate. (b) In consideration of Lenders' waiver of the Specified Defaults and certain other good and valuable consideration, the Borrower hereby expressly acknowledges and agrees that neither it nor any Guarantor or Grantor has any setoffs, counterclaims, adjustments, recoupments, defenses, claims or actions of any character, whether contingent, non-contingent, liquidated, unliquidated, fixed, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, against any Lender or Agent or any grounds or cause for reduction, modification or subordination of the Obligations under the Loan Documents or any liens or security interests of any Lender or the Agent. To the extent the Borrower or any Guarantor or Grantor may possess any such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds or causes, the Borrower and each Guarantor and Grantor hereby waive, and hereby release each Lender and Agent from, any and all such setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds and causes, such waiver and release being with full knowledge and understanding of the circumstances and effects of such waiver and release and after having consulted counsel with respect thereto. 3 SECTION 4. AMENDMENT AND WAIVER FEE. In consideration of the ------------------------ execution by and agreement to this Amendment by the Lenders, the Borrower shall pay to the Agent for the account of each Lender such Lender's Revolving Pro Rata Share of 0.35% of its Revolving Commitment outstanding on January 30, 1998, and 0.35% of its Term Advances outstanding on January 30, 1998. SECTION 5. CONDITIONS TO EFFECTIVENESS. This Amendment shall not be --------------------------- effective until all proceedings of the Borrower taken in connection herewith and the transactions contemplated hereby shall be satisfactory in form and substance to Agent and Required Lenders, and each of the following conditions precedent shall have been satisfied: (a) The Agent has received counterparts of this Amendment executed by the Borrower and Required Lenders and counterparts of the Consent appended hereto (the "Consent") executed by each of the Guarantors and Grantors (as defined in the Security Agreement) listed therein (such Guarantors and Grantors, together with the Borrower, each a "Loan Party" and, collectively, the "Loan Parties"); (b) The Agent shall have received for the account of the Lenders the fee described in Section 4 above. (c) All fees and expenses, including legal and other professional fees and expenses incurred, payable on or prior to the date of this Amendment to Agent, including, without limitation, the fees and expenses of its counsel, shall have been paid to the extent that same had been billed prior to the date of this Amendment; and (d) Agent and each Lender shall have received each of the following: (1) a certificate of the Borrower certifying (i) as to the accuracy, after giving effect to this Amendment, of the representations and warranties set forth in Article V of the Credit Agreement, the other Loan Documents and in this Amendment, and (ii) that there exists no Default or Event of Default, after giving effect to this Amendment and the execution, delivery and performance of this Amendment will not cause a Default or Event of Default; and (2) such other documents, instruments, and certificates, as Agent or Required Lenders shall deem necessary or appropriate in connection with this Amendment and the transactions contemplated hereby, including without limitation copies of resolutions of the board of directors of the Borrower authorizing the transactions contemplated by this Amendment. SECTION 6. REPRESENTATIONS AND WARRANTIES. The Borrower represents ------------------------------ and warrants as follows: (a) AUTHORITY. The Borrower and each other Loan Party has the --------- requisite corporate power and authority to execute and deliver this Amendment or the Consent, as applicable, and to perform its obligations hereunder and under the Loan Documents (as modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Amendment and by each other Loan Party of the Consent, and the performance by each Loan Party of each Loan Document to which it is a party have been duly approved by all necessary corporate action of such Loan Party and no other corporate proceedings on the part of such Loan Party are necessary to consummate such transactions. 4 (b) ENFORCEABILITY. This Amendment has been duly executed and delivered by -------------- the Borrower. The Consent has been duly executed and delivered by each Guarantor and Grantor. This Amendment and each Loan Document (as modified hereby) is the legal, valid and binding obligation of each Loan Party hereto or thereto, enforceable against such Loan Party in accordance with its terms, and is in full force and effect. (c) REPRESENTATIONS AND WARRANTIES. The representations and ------------------------------ warranties contained in each Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (d) NO DEFAULT. After giving effect to this Amendment, no event has ---------- occurred and is continuing that constitutes a Default or Event of Default. SECTION 7. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) Upon --------------------------------------------- and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified hereby. (b) Except as specifically modified above, the Credit Agreement and all other Loan Documents are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Secured Obligations under and as defined therein, in each case as amended hereby. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as an amendment of any right, power or remedy of any Lender or the Agent under any of the Loan Documents, nor constitute an amendment of any provision of any of the Loan Documents. SECTION 8. FURTHER ASSURANCES. The Borrower shall execute and ------------------ deliver such further agreements, documents, instruments, and certificates in form and substance satisfactory to Agent, as Agent or any Lender may deem necessary or appropriate in connection with this Amendment. SECTION 9. EXECUTION IN COUNTERPARTS. This Amendment may be executed ------------------------- in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment or the Consent by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent. SECTION 10. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY -------------------- LAW, EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY, OR OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. 5 SECTION 11. GOVERNING LAW. This Amendment shall be governed by, and ------------- construed in accordance with, the laws of the State of New York. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK. SIGNATURE PAGES FOLLOW.] 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. WHITTAKER CORPORATION, a Delaware corporation By:/s/ John K. Otto ------------------------------- John K. Otto Treasurer NATIONSBANK OF TEXAS, N.A., as Agent By:/s/ William E. Livingstone, IV ------------------------------- William E. Livingstone, IV Senior Vice President Lenders: ------- NATIONSBANK OF TEXAS, N.A. By:/s/ William E. Livingstone, IV ------------------------------ William E. Livingstone, IV Senior Vice President BT HOLDINGS (NEW YORK), INC. By:/s/ Robert W. Hevner ------------------------------- Robert W. Hevner Vice President DK ACQUISITION PARTNERS, L.P. By: M.H. DAVIDSON & CO., its general partner By:/s/ Michael J. Leffell ------------------------------- Michael J. Leffell General Partner GOLDMAN SACHS CREDIT PARTNERS L.P. By:/s/ John Urban ------------------------------- John Urban MERRILL LYNCH, PIERCE, FENNER, & SMITH INCORPORATED By:/s/ Neil Brisson ------------------------------- Neil Brisson Director MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By:/s/ Anthony R. Clemente ------------------------------- Anthony R. Clemente Authorized Signatory MERRILL LYNCH SENIOR HIGH INCOME PORTFOLIO, INC. By:/s/ Anthony R. Clemente ------------------------------- Anthony R. Clemente Authorized Signatory MERRILL LYNCH DEBT STRATEGIES PORTFOLIO By: MERRILL LYNCH ASSET MANAGEMENT, L.P., as Investment Advisor By:/s/ Anthony R. Clemente ------------------------------- Anthony R. Clemente Authorized Signatory CANPARTNERS INVESTMENTS IV, LLC By: ------------------------------- Title: CONSENT Each of the undersigned, as Guarantors under the "Guaranty" and as grantors under the "Security Agreement" (as such terms are defined in the Credit Agreement referred to in the foregoing Amendment), each hereby consents and agrees to the foregoing Amendment and to be bound by the terms and provisions thereof, and agrees that (i) the Guaranty and the Security Agreement are and shall continue to be in full force and effect and are hereby ratified and confirmed in all respects except that, upon the effectiveness of and on and after the date of such Amendment each reference to the Credit Agreement, "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by such Amendment, and (ii) subject to Section 2 of the foregoing Amendment, the collateral described in the Security Agreement shall continue to secure the payment of the indebtedness therein described. AVIANT INFORMATION, INC. (formerly BLUE BELL LEASE, INC.), a California corporation, METROPOLITAN FINANCIAL SERVICES CORPORATION, a Colorado corporation, PARK CHEMICAL COMPANY, a Michigan corporation, WHITTAKER COMMUNICATIONS, INC., a California corporation, WHITTAKER CONTROLS, INC., a California corporation, WHITTAKER CORP., a Maine corporation, WHITTAKER ORDNANCE, INC., a Delaware corporation, WHITTAKER PORTA BELLA DEVELOPMENT, INC., a California corporation, WHITTAKER SERVICES CORPORATION, a California corporation, WHITTAKER TECHNICAL PRODUCTS, INC., a Colorado corporation, WHITTAKER DEVELOPMENT CO., a Delaware corporation, WHITTAKER XYPLEX, INC., a Delaware corporation, and XYPLEX, INC., a Massachusetts corporation By:/s/ John K. Otto ---------------------------------------------------- John K. Otto Treasurer of each of the foregoing Loan Parties EX-27 3 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS OCT-31-1998 JAN-31-1998 37,550 0 24,597 1,468 33,194 116,219 31,850 22,060 168,696 163,315 91 0 1 112 (20,429) 168,696 31,799 31,799 18,689 7,612 482 0 4,906 328 6 322 10,085 0 0 10,407 0.93 0.91
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