-----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, PrZcy5xn6QUbQhHZjamZ5OiQc5vTQ1ggPqqWZkHNszSrMzqpw2vfLDaN1+De5nOZ T9kaEdZ2agbwVni5FbVxNw== 0000898430-99-002497.txt : 19990615 0000898430-99-002497.hdr.sgml : 19990615 ACCESSION NUMBER: 0000898430-99-002497 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990614 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: 99645736 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 - ------------------------------------------------------------------------------ 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 APRIL 30, 1999 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: 11,438,190 shares, par value $.01 per share, as of April 30, 1999. - ------------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements WHITTAKER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME ($ in 000, except for per share amounts) (Unaudited)
For the Three Months For the Six Months Ended April 30, Ended April 30, 1999 1998 1999 1998 --------- ------------ --------- ------------ (restated) (restated) Sales................................................ $ 40,332 $ 33,043 $ 70,935 $ 62,023 Costs and expenses Cost of sales....................................... 16,836 17,060 31,856 33,971 Selling, general and administrative................. 8,185 5,812 14,836 11,845 --------- ------------ --------- ------------ Operating Profit 15,311 10,171 24,243 16,207 Interest expense.................................... 989 3,237 2,314 8,143 Interest income..................................... (86) (762) (450) (980) Other expense....................................... 1,095 769 1,703 1,251 --------- ------------ --------- ------------ Income from continuing operations before provision 13,313 6,927 20,676 7,793 for taxes........................................... Provision for taxes.................................. 4,373 110 4,702 121 --------- ------------ --------- ------------ Income from continuing operations.................... 8,940 6,817 15,974 7,672 Discontinued operations Loss from discontinued operations................... -- (954) -- (1,487) Gain on disposal of discontinued operations......... -- -- -- 10,085 --------- ------------ --------- ------------ Net income........................................... $ 8,940 $ 5,863 $ 15,974 $ 16,270 ========= ============ ========= ============ Average common shares outstanding (000).............. 11,439 11,205 11,410 11,205 ========= ============ ========= ============ Basic income (loss) per share Continuing operations............................... $ 0.78 $ 0.61 $ 1.40 $ 0.68 Discontinued operations Loss from discontinued operations.................. -- (0.09) -- (0.13) Gain on disposal of discontinued operations........ -- -- -- 0.90 --------- ------------ --------- ------------ Net income per share................................. $ 0.78 $ 0.52 $ 1.40 $ 1.45 ========= ============ ========= ============ Diluted income (loss) per share Continuing operations............................... $ 0.71 $ 0.57 $ 1.29 $ 0.67 Discontinued operations Loss from discontinued operations.................. -- (0.08) -- (0.13) Gain on disposal of discontinued operations........ -- -- -- 0.87 --------- ------------ --------- ------------ Net income per share................................. $ 0.71 $ 0.49 $ 1.29 $ 1.41 ========= ============ ========= ============
(2) See Notes to Consolidated Condensed Financial Statements WHITTAKER CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS ($ in 000)
At April 30, At October 31, 1999 1998 --------------- --------------- (Unaudited) ASSETS Current Assets - -------------- Cash............................................................ $ 230 $ -- Receivables..................................................... 20,952 19,415 Inventories..................................................... 43,968 42,060 Other current assets............................................ 1,997 2,578 Income taxes recoverable........................................ -- 195 Deferred income taxes........................................... 16,064 21,800 -------- -------- Total Current Assets............................................ 83,211 86,048 -------- -------- Property and equipment, at cost................................. 29,078 30,462 Less accumulated depreciation and amortization.................. (19,375) (20,623) -------- -------- Net Property and Equipment...................................... 9,703 9,839 -------- -------- Other Assets - ------------ Goodwill, net of amortization................................... 13,499 13,677 Other intangible assets, net of amortization.................... 817 922 Notes and other noncurrent receivables.......................... 8,036 3,152 Other noncurrent assets......................................... 8,044 7,726 Net assets held for sale........................................ -- 15,214 -------- -------- Total Other Assets.............................................. 30,396 40,691 -------- -------- Total Assets $123,310 $136,578 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities - ------------------- Current maturities of long-term debt............................ $ 25 $ 1,043 Accounts payable................................................ 8,256 6,457 Accrued liabilities............................................. 22,128 30,039 -------- -------- Total Current Liabilities....................................... 30,409 37,539 -------- -------- Other Liabilities - ----------------- Long-term debt.................................................. 39,000 60,368 Other noncurrent liabilities.................................... 13,518 13,933 Deferred income taxes........................................... -- 1,260 -------- -------- Total Other Liabilities......................................... 52,518 75,561 -------- -------- Stockholders' Equity - -------------------- Capital stock Preferred stock................................................ 1 1 Common Stock................................................... 114 113 Additional paid-in capital...................................... 78,634 77,703 Retained deficit................................................ (38,366) (54,339) -------- -------- Total Stockholders' Equity...................................... 40,383 23,478 -------- -------- Total Liabilities and Stockholders' Equity $123,310 $136,578 ======== ========
(3) See Notes to Consolidated Condensed Financial Statements WHITTAKER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ($ in 000) (Unaudited)
For the Six Months Ended April 30, --------------------------- 1999 1998 ---------- ------------ (restated) Operating Activities Continuing Operations Income from continuing operations...................................................... $ 15,974 $ 7,672 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization......................................................... 1,270 1,276 Income taxes recoverable.............................................................. 195 977 Deferred taxes........................................................................ 4,476 (1,159) Changes in operating assets and liabilities: Accounts receivable.................................................................. (1,588) 1,736 Inventories and other current assets................................................. (1,327) (4,689) Accounts payable and other liabilities............................................... (6,112) (4,098) ---------- ------------ Total from continuing operations....................................................... 12,888 1,715 ---------- ------------ Discontinued Operations Net loss............................................................................... -- (1,487) Adjustments to reconcile net loss to net cash provided by operations: Depreciation and amortization......................................................... -- 2,712 Deferred taxes........................................................................ -- 1,023 Changes in operating assets and liabilities........................................... -- 1,355 ---------- ------------ Total from discontinued operations..................................................... -- 3,603 ---------- ------------ Net cash provided by operating activities............................................... 12,888 5,318 ---------- ------------ Investing Activities Continuing Operations Proceeds on sale of business........................................................... -- 35,000 Sale of property, plant and equipment.................................................. 146 261 Purchase of property, plant and equipment.............................................. (997) (903) (Increase) decrease of notes receivable................................................ (4,833) 585 Disposal of asset held for sale........................................................ 15,000 -- Other items, net....................................................................... (786) (2,798) ---------- ------------ Total from continuing operations....................................................... 8,530 32,145 ---------- ------------ Discontinued Operations Net proceeds relating to discontinued operations....................................... -- (1,076) ---------- ------------ Net cash provided by investing activities............................................... 8,530 31,069 ---------- ------------ Financing Activities Net decrease in debt.................................................................... (22,386) (42,774) Decrease in deferred debt costs......................................................... 268 455 Tax benefit on stock option exercises................................................... 221 -- Proceeds from shares issued under stock option plans.................................... 711 -- Dividends declared...................................................................... (2) -- ---------- ------------ Net cash used by financing activities................................................... (21,188) (42,319) ---------- ------------ Net increase (decrease) in cash......................................................... 230 (5,932) Cash at beginning of year............................................................... -- 6,366 ---------- ------------ Cash at end of period................................................................... $ 230 $ 434 ========== ============ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest............................................................................... $ 2,261 $ 7,385 ========== ============ Income taxes........................................................................... $ 257 $ 157 ========== ============
(4) See Notes to Consolidated Condensed Financial Statements 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, 1998. 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, 1998. The results of operations for interim periods are not necessarily indicative of the results of operations for the full year. Note 2. Earnings Per Share The following table sets forth for continuing operations the computation of basic and diluted earnings per share (in thousands except per share amounts):
For the Three Months For the Six Months Ended April 30, Ended April 30, ------------------------------- ------------------------- 1999 1998 1999 1998 ------------- ------------- --------- ------------ (Restated) (Restated) Basic Earnings Per Share - ------------------------ Net income from continuing operations $ 8,940 $ 6,817 $15,974 $ 7,672 Less dividends on Series D Convertible Preferred Stock 2 -- 2 -- ------- ------- ------- ------- Net income from continuing operations available to common stockholders $ 8,938 $ 6,817 $15,972 $ 7,672 ======= ======= ======= ======= Weighted average common shares outstanding 11,439 11,205 11,410 11,205 ======= ======= ======= ======= Basic income per share from continuing operations $ 0.78 $ 0.61 $ 1.40 $ 0.68 ======= ======= ======= ======= Diluted Earnings Per Share - -------------------------- Net income from basic earnings per share calculation, above $ 8,938 $ 6,817 $15,972 $ 7,672 Add after-tax interest on convertible debt 161 172 322 -- ------- ------- ------- ------- Net income from continuing operations for diluted earnings per share calculation $ 9,099 $ 6,989 $16,294 $ 7,672 ======= ======= ======= ======= Weighted average common shares outstanding for basic earnings per share calculation, above 11,439 11,205 11,410 11,205 Effect of dilutive securities: Series D Convertible Preferred Stock 188 188 188 188 Employee Stock Options 237 214 194 132 Convertible debt 884 619 884 -- ------- ------- ------- ------- Denominator for diluted earnings per share calculation 12,748 12,226 12,676 11,525 ======= ======= ======= ======= Diluted earnings per share from continuing operations $ 0.71 $ 0.57 $ 1.29 $ 0.67 ======= ======= ======= =======
(5) WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 2. Earnings Per Share--Continued Options to purchase 31,891 shares of common stock at prices ranging from $21.75 to $26.25 and 59,767 shares of common stock at prices ranging from $18.62 to $26.25 were not included in the computation of diluted earnings per share for the second quarter and six months of 1999, respectively, because their inclusion would be antidilutive. Options to purchase 105,900 shares of common stock at prices ranging from $14.94 to $26.25 and 422,831 shares of common stock at prices ranging from $12.00 to $26.25 were not included in the computation of diluted earnings per share for the second quarter and six months of 1998, respectively, because their inclusion would be antidilutive. Earnings per share calculations for the 1998 six months do not include the effects of the convertible debt as such amounts would be antidilutive. The 1998 second quarter and six months earnings per share amounts have been restated to reflect the Company's former Integration Services business as discontinued. The effect of this restatement was to increase basic and diluted earnings per share from continuing operations for the second quarter of 1998 by $0.09 and $0.08, respectively. For the six months of 1998 the effect of this restatement was to increase basic and diluted earnings per share from continuing operations by $0.13. Note 3. Inventories Inventories consisted of the following ($ in thousands):
April 30, October 31, 1999 1998 ---------- ------------ Parts and materials $22,808 $20,999 Work in process 18,080 18,565 Finished goods 3,080 2,496 $43,968 $42,060 ======= =======
Note 4. 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. The Company currently purchases workers' compensation insurance and product liability insurance. 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 of the past 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 occupied by previously owned or discontinued operating units. There are also various other claims and suits pending against the Company. (6) WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 4. Commitments and Contingencies--Continued At April 30, 1999, the Company had provided for its estimated aggregate liability related to various claims, including uninsured risks and the environmental matters noted above. 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 made cash expenditures of approximately $1.1 million for these environmental matters during the six months ended April 30, 1999. 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 environmental remediation where the Company is a potentially responsible party under CERCLA and similar state laws. These accruals are adjusted periodically as further assessment and remediation efforts progress or as technical and legal information becomes available. As of April 30, 1999, the Company estimates that the total remaining unpaid remediation costs for the sites associated with these federal and state actions is $4.9 million. As of April 30, 1999, 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. Costs of future expenditures for environmental remediation efforts are not discounted to their present value. Although the Company, at this time, does not anticipate that any additional significant costs (beyond those already recognized) will be incurred in the remediation efforts for these sites there can be no assurance that significant additional costs for remediation of these, or new sites, will not be incurred in the future. In connection with the discontinuance of various businesses, the Company remains liable for certain retained obligations and for certain future claims, principally environmental and product liability. The noncurrent portion of such items is included in "Other Noncurrent Liabilities" in the consolidated balance sheet. Note 5. Long-Term Debt At April 30, 1999, the Company's debt totaled $39.0 million, which consisted of $24.0 million of loans outstanding under its revolving credit facility and $15.0 million of 7% convertible subordinated notes. In addition there were $1.8 million of letters of credit outstanding under the revolving credit facility. On April 8, 1999 the Company prepaid the entire $23.3 million balance outstanding under its term loan. Funds available to the Company at April 30, 1999 under its revolving credit facility totaled $19.2 million. The weighted average interest rate on loans outstanding under its bank credit facility at April 30, 1999 was 6.75%. On January 11, 1999, the Company sold its 996-acre land parcel located in the City of Santa Clarita, California and certain other additional rights and assets related to this land for $10.0 million in cash, a $5.0 million promissory note and a contingent interest in any final profit from the development of this land. The net cash proceeds from the sale were used to prepay debt outstanding under the Company's credit facility. Under the Company's 7% convertible subordinated notes, the Company is prohibited from paying or declaring cash dividends or redeeming shares of the Company if the Company's tangible net worth is less than $15.0 million. From April 30, 1996 to December 31, 1998, the Company's tangible net worth was less than $15.0 million and the Company did not pay or declare dividends (including the quarterly dividend for the Series D Preferred Stock) or redeem shares during that period. However, dividends on the Series D Preferred Stock were accrued during that period. Since January 31, 1999, the Company's tangible net worth has exceeded $15.0 million. On March 26, 1999, the Company declared a dividend on the outstanding shares of Series D Preferred Stock for the period of February 1, 1996 to April 30, 1999 in the amount of $0.25 per share per quarter, for an aggregate amount of $3.25 per share, payable on May 1, 1999 to holders of record on April 30, 1999. (7) WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 6. Income Taxes The continuing operations provision for taxes for the first six months of 1999 was $4.7 million and included, in connection with the sale of the Company's 996-acre land parcel in the City of Santa Clarita, California, a $2.2 million federal tax benefit which represented the reversal of a portion of the valuation allowances against the net capital loss carryforward. Also included in the 1999 first six months tax provision was a $0.8 million state tax benefit from the utilization of the state net operating loss carryforward and a $0.5 million federal tax benefit on a prior year write-off. For the second quarter of 1999, the continuing operations provision for taxes was $4.4 million and included a $0.5 million federal tax benefit on a prior year write-off and a $0.3 million state tax benefit from the utilization of the state net operating loss carryforward. (8) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Comparison of Three Months Ended April 30, 1999 and 1998 Sales. The Company's second quarter 1999 sales from continuing operations of $40.3 million increased by $7.3 million (22.1%) from the sales in the second quarter of 1998. This increase reflects increased sales of spare fluid and pneumatic control devices and parts in both the commercial and military markets, higher levels of repair and overhaul business in the commercial and military markets and increased sales of fire and overheat detectors in the aircraft market. Partially offsetting these increases were decreases in sales of cable products and original equipment fluid and pneumatic control devices during the second quarter of 1999 as compared to the second quarter of 1998. Gross Margin. The Company's gross margin from continuing operations for the second quarter of 1999 as a percentage of sales was 58.3% compared with 48.4% for the second quarter of 1998. For 1999 the gross margin was $23.5 million compared to a gross margin of $16.0 million in 1998. The improvement in gross margin as a percentage of sales in 1999 as compared to 1998 was attributable to increased sales in 1999 of higher margin spare fluid and pneumatic control devices and parts in the commercial and military markets, increased repair and overhaul business for fluid and pneumatic control devices in both the commercial and military markets and increased after-market business for fire and overheat detectors. Also contributing to the improvement in gross margin percentage were the overall efficiencies associated with higher sales volume. Selling, General and Administrative. Selling, general and administrative expenses (SG&A) for continuing operations in the second quarter of 1999 increased by $2.4 million from the second quarter of 1998. In the second quarter of 1999 SG&A expenses were $8.2 million compared to $5.8 million in the second quarter of 1998. This increase was attributable to higher management incentive costs partially offset by lower payroll costs due to a reduction in headcount in the second quarter of 1999 as compared to the second quarter of 1998. Interest Expense. Interest expense for the Company's continuing operations in the second quarter of 1999 decreased by $2.2 million from the second quarter of 1998, from $3.2 million in 1998 to $1.0 million in 1999. This reduction was due to reduced levels of debt outstanding during the 1999 second quarter as compared to the 1998 second quarter and lower interest rates on borrowings under the Company's bank credit facilities. The average amount of debt outstanding during the second quarter of 1999 was approximately $44.3 million while in the second quarter of 1998, the average amount of debt outstanding was approximately $97.6 million. The weighted average interest rate of borrowings under the Company's bank credit facility during the second quarter of 1999 was approximately 7.3% compared to 12.75% on borrowings under its bank credit facility during the second quarter of 1998. Interest Income. Interest income for the Company's continuing operations during the second quarter of 1999 was $0.1 million compared to $0.8 million during the second quarter of 1998. In April 1998, the Company received an interest payment of $0.7 million related to a $0.5 million tax refund for the 1987 tax year. Other Expense. Other expense for the Company's continuing operations was $1.1 million in the second quarter of 1999 compared to $0.8 million in the second quarter of 1998. During the second quarter of 1999 and 1998 the Company accrued $1.0 million and $0.5 million, respectively, for estimated environmental remediation costs. Also included in other expense for the second quarter of 1998 were $0.6 million of costs associated with the Company's 996-acre land parcel located in Santa Clarita, California which was sold in the first quarter of 1999. Income Taxes. The continuing operations provision for taxes for the second quarter of 1999 was $4.4 million and included a $0.5 million federal tax benefit on a prior year write-off and a $0.3 million state tax benefit from the utilization of the state net operating loss carryforward. Discontinued Operations. The 1998 second quarter results reflected the after-tax operating losses of the Company's discontinued integration services business of $1.0 million. (9) MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Comparison of Six Months Ended April 30, 1999 and 1998 Sales. The Company's sales for the first six months of 1999 from continuing operations were $70.9 million compared to $62.0 million for the first six months of 1998. This increase reflects increased sales of spare parts for fluid and pneumatic control devices in the commercial and military markets, increased sales of fire and overheat detectors in the aircraft market, increased sales of original equipment and spare fluid and pneumatic control devices in the commercial market and higher levels of repair and overhaul business in the commercial market Partially offsetting these increases were decreases in sales of cable products and fire and overheat detectors in the industrial market during the first six months of 1999 as compared to the first six months of 1998. Gross Margin. The Company's gross margin from continuing operations for the first six months of 1999 as a percentage of sales was 55.1% compared with 45.2% for the first six months of 1998. For 1999 the gross margin was $39.1 million compared to a gross margin of $28.1 million in 1998. The improvement in gross margin as a percentage of sales in 1999 as compared to 1998 was attributable to increased sales in 1999 of higher margin spare pneumatic and fluid control parts in both the commercial and military markets, increased repair and overhaul business for fluid and pneumatic control devices in the commercial market, increased sales of higher margin spare fluid and pneumatic control devices in the commercial market and increased sales of fire and overheat detectors in the aircraft market. Selling, General and Administrative. Selling, general and administrative expenses (SG&A) for continuing operations in the first six months of 1999 increased by $3.0 million from the first six months 1998. In 1999 SG&A expenses were $14.8 million compared to $11.8 million in 1998. This increase was attributable to higher management incentive costs and legal fees partially offset by lower payroll costs due to a reduction in headcount in the first six months of 1999 as compared to the first six months of 1998. Interest Expense. Interest expense for the Company's continuing operations in the first six months of 1999 decreased by $5.8 million from the first six months of 1998, from $8.1 million in 1998 to $2.3 million in 1999. This reduction was due to reduced levels of debt outstanding during 1999 as compared to 1998 and lower interest rates on borrowings under the Company's bank credit facilities. The average amount of debt outstanding during the first six months of 1999 was approximately $51.8 million while in the first six months of 1998, the average amount of debt outstanding was approximately $110.4 million. The weighted average interest rate of borrowings under the Company's bank credit facility during 1999 was approximately 7.8% compared to 12.67% on borrowings under its bank credit facility during 1998. Interest Income. Interest income for the Company's continuing operations during the first six months of 1999 was $0.5 million compared to $1.0 million during the first six months of 1998. In April 1998, the Company received an interest payment of $0.7 million related to a $0.5 million tax refund for the 1987 tax year. Other Expense. Other expense for the Company's continuing operations was $1.7 million in the first six months of 1999 compared to $1.3 million in the first six months of 1998. During the first six months of 1999 and 1998 the Company accrued $1.0 million and $0.5 million, respectively, for estimated environmental remediation costs. Also included in other expense for the first six months of 1999 and 1998 were $0.6 million and $1.0 million, respectively, of costs associated with the Company's 996-acre land parcel located in Santa Clarita, California which was sold in the first quarter of 1999. Income Taxes. The continuing operations provision for taxes for the first six months of 1999 was $4.7 million and included, in connection with the sale of the Company's 996-acre land parcel in the City of Santa Clarita, California, a $2.2 million federal tax benefit which represented a reversal of a portion of the valuation allowances against the net capital loss carryforward. Also included in the 1999 first six months tax provision was a $0.5 million federal tax benefit from a prior year write-off and a $0.8 million state tax benefit from the utilization of the state net operating loss carryforward. Discontinued Operations. The 1998 six month results reflected primarily the $10.1 million after-tax gain on disposal of the Company's discontinued communications and defense electronics businesses and the $1.5 million after-tax operating losses of its discontinued integration services business. (10) MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Financial Condition and Liquidity At April 30, 1999, the Company's debt totaled $39.0 million, which consisted of $24.0 million of loans outstanding under its revolving credit facility and $15.0 million of convertible subordinated debt. In addition there were $1.8 million of letters of credit outstanding under the revolving credit facility. On April 8, 1999, the Company prepaid the $23.3 million balance outstanding under its term loan. Funds available to the Company at April 30, 1999 under its revolving credit facility were $19.2 million. The weighted average interest rate on loans outstanding under its revolving credit facility at April 30, 1999 was 6.75%. On January 11, 1999, the Company sold its 996-acre land parcel located in Santa Clarita, California and certain other additional rights and assets related with this land for $10.0 million in cash, a $5.0 million promissory note and a contingent interest in any final profit from the development of this land. The net cash proceeds from the sale were used to prepay debt then outstanding under the Company's credit facility. Under the terms of the Company's 7% convertible subordinated notes, the Company is prohibited from paying or declaring cash dividends or redeeming shares of the Company if the Company's tangible net worth is less than $15.0 million. From April 30, 1996 to December 31, 1998 the Company's tangible net worth was less than $15.0 million and the Company did not pay or declare dividends (including the quarterly dividend for the Series D Preferred Stock) or redeem shares during that period. However, dividends on the Series D Preferred Stock were accrued during that period. Since January 31, 1999, the Company's tangible net worth has exceeded $15.0 million. On March 26, 1999, the Company declared a dividend on the outstanding shares of Series D Preferred Stock for the period of February 1, 1996 to April 30, 1999 in the amount of $0.25 per share per quarter, for an aggregate amount of $3.25 per share, payable on May 1, 1999 to holders of record on April 30, 1999. The Company believes that cash from operations and available credit under its bank credit facility will be adequate to meet future operating, debt service and capital expenditure needs. Debt as a percent of total capitalization (stockholders' equity plus debt) was 49.1% at April 30, 1999 compared with 72.3% at October 31, 1998. The current ratio at April 30, 1999 was 2.74:1 compared with 2.29:1 at October 31, 1998 while working capital was $52.8 million at April 30, 1999 compared with $48.5 million at October 31, 1998. Cash flow provided by continuing operations for the first six months of 1999 was $12.9 million compared to $1.7 million in the first six months of 1998. The $11.2 million increase from 1998 to 1999 was due primarily to income from continuing operations of $16.0 million in 1999 compared to $7.7 million in 1998, an increase in inventory and other assets of $1.3 million in 1999 compared to an increase of $4.7 million in 1998 and a decrease in deferred taxes of $4.5 million in 1999 compared to an increase of $1.2 million in 1998. Partially offsetting these items were a net increase in receivables in the first six months of 1999 of $1.6 million compared to a net decrease in the first six months of 1998 of $1.7 million and a net decrease in accounts payable and accrued liabilities of $6.1 million in 1999 compared to a net decrease of $4.1 million in 1998. Capital expenditures of continuing operations during the first six months of 1999 and 1998 were $1.0 million and $0.9 million, respectively. At April 30, 1999 there were approximately $0.2 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 Company's credit agreement. Under the terms of the Company's credit agreement, capital expenditures may not exceed specified annual amounts. Cash expenditures related to the environmental remediation of a 996-acre parcel of land located in Santa Clarita, California were $0.6 million during the first six months of 1999. On January 11, 1999, the Company sold this land parcel and certain other additional rights and assets related to this land for $10.0 million in cash, a $5.0 million promissory note and a contingent interest in any final profit from the development of this land. The net cash proceeds from the sale were used to prepay debt outstanding under the Company's credit facility. (11) MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Impact of Year 2000 The Year 2000 ("Y2K") issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in normal business activities. Since 1997, the Company has undertaken a number of initiatives to address the anticipated impact of the Y2K on its business, including information and non- information systems, customers and suppliers and third party service providers. These initiatives include assessments of it systems and products, discussions with its suppliers and customers, and the implementation of remedial action plans where necessary. Based on these assessments, the Company determined that a computer system (both hardware and software) used in its fire and overheat detector business was not Y2K compliant and needed to be replaced with a system that was fully Y2K compliant. During the second quarter of 1999, the Company completed the replacement of this system at a total cost of $2.4 million. Customers and suppliers of the Company are in various stages of addressing any potential Y2K problems. In view of the large number of alternative suppliers, the Company believes that the failure of a supplier to become Y2K compliant would not have a material adverse effect on the Company. The Company has contacted or is in the process of contacting its third party service providers to determine their ability to become Y2K compliant. To date, all of the service providers who have been contacted have indicated that they are or will be fully Y2K compliant. While the Company believes that it has identified all potential Y2K issues and has implemented a program to resolve any potential Y2K problems, all necessary phases of this program have not yet been completed. The failure by the Company to complete the remaining phases of this program prior to December 31, 1999 or the failure by the Company to have identified all potential Y2K issues could materially adversely effect the Company. The amount of any potential liability or lost revenue cannot be reasonably estimated at this time. The Company currently has no contingency plans in place in the event it does not complete the remaining phases of its Y2K program in a timely manner or has failed to identify a potential issue. The Company does intend to develop a contingency plan prior to December 31, 1999. Item 3. Qualitative and Quantitative Disclosures About Market Risk The interest on the Company's bank debt is based on prevailing market interest rates and interest on the Company's 7% convertible subordinated notes is based on a fixed interest rate. For market rate based debt, interest rate changes generally do not affect the market value of the debt but do impact future earnings and cash flows, assuming other factors are held constant. Conversely for fixed rate debt, interest rate changes affect the fair market value of the debt but do not impact earnings or cash flows. A theoretical one percentage point change in market rates in effect on April 30, 1999 would impact the after-tax earnings of the Company by approximately $0.1 million per year. The effect of this change on the market value of the Company's fixed rate debt would not be material. Subsequent Events On June 9, 1999 the Company entered into a definitive merger agreement pursuant to which it will be acquired by Meggitt PLC ("Meggitt"). The merger agreement has been approved by the boards of directors of the Company and Meggitt. Pursuant to this agreement, Meggitt will commence a cash tender offer for all outstanding shares of Whittaker common stock at a price of $28 per share. Upon consummation of the tender offer, any remaining shares of Whittaker will be acquired in a cash merger at the same price. The value of the transaction, including the refinancing of Whittaker's debt, is approximately $380 million. The tender offer is subject to various conditions including the tender of a majority of the outstanding shares of common stock on a fully diluted basis, expiration of review periods under the Hart-Scott-Rodino Antitrust Improvements Act and the Exon-Florio Amendment and approval of Meggitt's shareholders. The transaction is not conditioned on financing. (12) MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Statements made herein that are not based on historical fact are "forward looking statements" within the meaning of the Private Litigation Reform Act of 1995. Actual results could differ from these forward looking statements for many reasons, including failure to obtain necessary approvals for the consummation of the transaction or to complete the proposed merger, failure to retain customers or to attract new customers, development of competing products, delays in developing new products and markets, and the cyclical nature of the aerospace industry. (13) EXHIBITS TO PART I - ------------------ I(a) Calculation of Earnings Per Share. (14) Exhibit I(a) WHITTAKER CORPORATION CALCULATION OF EARNINGS PER SHARE (In thousands, except per share data) (Unaudited)
For the Six Months Ended April 30, 1999 1998 ------------- -------------- BASIC EARNINGS PER SHARE Earnings Net income $15,974 $16,270 Deduct: Dividends on Series D Participating Convertible Preferred Stock 2 -- ------- ------- Net income used in basic earnings per share calculations $15,972 $16,270 ======= ======= Weighted average number of common shares outstanding 11,410 11,205 ======= ======= Basic Earnings Per Share $ 1.40 $ 1.45 ======= =======
(15) Exhibit I(a) WHITTAKER CORPORATION CALCULATION OF EARNINGS PER SHARE - (Continued) (In thousands, except per share data) (Unaudited)
For the Six Months Ended April 30, 1999 1998 ------------- -------------- DILUTED EARNINGS PER SHARE Earnings Net income used in basic earnings per share calculation (above) $ 15,972 $ 16,270 Add interest on convertible debt 322 -- ---------- ---------- Net income used in diluted earnings per share calculation $ 16,294 $ 16,270 ========== ========== Denominator used to Calculate Diluted Earnings Per Share Weighted average common shares outstanding for basic earnings per share 11,410 11,205 calculation (above) Effect of dilutive securities: Series D Convertible Preferred Stock 188 188 Employee stock options 194 132 Convertible debt 884 -- ---------- ---------- Denominator for diluted earnings per share calculation 12,676 11,525 ========== ========== Diluted Earnings Per Share $ 1.29 $ 1.41 ========== ==========
NOTES Earnings per share calculation for 1998 does not include the effects of the convertible debt as such amounts would be antidilutive in the calculation of earnings per share from continuing operations. (16) PART II. OTHER INFORMATION Item 1. Legal Proceedings Environmental Matters As a result of the past 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 occupied by previously owned or discontinued operating units. There are also various other claims and suits pending against the Company. Item 4. Submission of Matters to a Vote of Security-Holders The Company's Annual Meeting of Stockholders was held on March 26, 1999. At the Annual Meeting, the stockholders voted on the election of Joseph F. Alibrandi and Ronald B. Woodard as directors for a three-year term and ratified the appointment of Ernst & Young LLP as the Company's independent auditor for the fiscal year ending October 31, 1999. The votes cast with respect to each of these matters were as follows:
Votes Against or Votes For Withheld Abstentions Broker Non-Votes ------------------ ------------------ ------------------ ------------------ 1. Election of Directors Joseph F. Alibrandi 10,584,854 56,482 0 0 Ronald B. Woodard 10,583,904 57,432 0 0 2. Ratification of Appointment of Ernst & Young LLP 10,290,977 209,227 141,132 0
Directors elected at the meeting were Joseph F. Alibrandi and Ronald B. Woodard and directors whose term of office continued following the Annual Meeting were George H. Benter, Jr., George Deukmejian, Jack L. Hancock, Edward R. Muller and Gregory T. Parkos. Malcolm T. Stamper did not stand for re- election as a director because of the Company's age limit on eligibility of directors. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. * 3.2 Restated Bylaws (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1989), as amended on September 30, 1994 (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1994), on December 16, 1996 (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1996), on October 2, 1998 (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1998) and on March 26, 1999. 10.1 Agreement and Plan of Merger dated as of June 9, 1999 among the Registrant, Meggitt PLC and Meggitt Acquisition Inc. (Exhibit 10.1 to Form 8-K dated June 9, 1999). 10.2 Amendment No. 1 to the Rights Agreement dated as of June 9, 1999 between the Registrant and Mellon Bank, N.A. (Exhibit 10.2 to Form 8-K dated June 9, 1999). (17) 10.3 Agreement, as Restated and Amended, between the Registrant and Lynne M. O. Brickner, dated as of April 5, 1999. 10.4 Agreement, as Restated and Amended, between the Registrant and John K. Otto, dated as of April 5, 1999. 11. Statements re computation of per share earnings for the six months ended April 30, 1999 (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 April 30, 1999, the following reports were filed on Form 8-K: 1. A report on Form 8-K was filed on March 1, 1999. The form reports, in Item 5 thereof, the Registrant's earnings for its first quarter of 1999. 2. A report on Form 8-K/A dated January 11, 1999 was filed on March 5, 1999. The form reports, in Item 7 thereof, the pro forma financial information in connection with the sale by the Registrant of its Porta Bella Project to Santa Clarita, L.L.C. (18) 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: June 14, 1999 By: /s/ John K. Otto ----------------------------- John K. Otto Vice President, Chief Financial Officer and Treasurer S-1 EXHIBIT INDEX
Sequentially Exhibit No. Description Numbered Page - ----------- ----------- ------------- 3.2 Restated Bylaws (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1989), as amended on September 30, 1994 (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1994), on December 16, 1996 (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1996), on October 2, 1998 (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1998) and March 26, 1999. 10.3 Agreement as Restated and Amended, between the Registrant and Lynne M. O. Brickner, dated as of April 5, 1999. 10.4 Agreement, as Restated and Amended, between the Registrant and John K. Otto, dated as of April 5, 1999. 11 Statements re computation of per share earnings for the six months ended April 30, 1999 (Exhibit I(a) of Part I to this Form 10-Q). 27 Financial Data Schedule
EX-3.2 2 CERTIFICATE OF ADOPTION EXHIBIT 3.2 CERTIFICATE OF ADOPTION OF RESOLUTIONS BY THE BOARD OF DIRECTORS OF WHITTAKER CORPORATION --------------------- WHEREAS, the Board of Directors is authorized under Article III, Section 2(a) of the Bylaws of this corporation to fix the number of directors of this corporation from time to time by resolution. NOW, THEREFORE, BE IT RESOLVED, that effective March 26, 1999, the number of the Board of Directors shall be seven (7). * * * * * * * * * * I, Lynne M. O. Brickner, do hereby certify that I am the duly elected and acting Secretary of Whittaker Corporation; that the foregoing is a full, true and correct copy of the resolutions adopted at a meeting of the Board of Directors of Whittaker Corporation held on March 26, 1999, at which meeting a quorum of said Board was at all times present and acting and that said Board resolutions have not been modified or rescinded and are in full force and effect as of the date of this certificate. Dated: April 9, 1999 /s/ Lynne M. O. Brickner ______________________________ Lynne M. O. Brickner Secretary EX-10.3 3 AGREEMENT Exhibit 10.3 AGREEMENT THIS AGREEMENT (this "Agreement") made and entered into as of the 5th day of April, 1999, as amended and restated, by and between WHITTAKER CORPORATION, a Delaware corporation with its principal office located in Simi Valley, California (together with its successors and permitted assigns, the "Company"), and Lynne M.O. Brickner (the "Employee"). W I T N E S S E T H: WHEREAS, the Employee is employed by the Company; WHEREAS, the Company is in the process (the "Process") of reviewing its strategic alternatives; WHEREAS, the Company desires that the Employee continue in the employ of the Company during the Process and through the consummation of any transaction the Company determines to be in the best interests of its shareholders; and WHEREAS, the Company, in order to achieve its objectives as set forth above and as an inducement for the Employee to continue in the employ of the Company during such Process, is desirous of providing a bonus to the Employee as provided herein; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Employee agree as follows: 1. Definitions (a) "Bonus" shall mean an amount equal to $100,000. (b) "Board" shall mean the Board of Directors of the Company. (c) "Change of Control" shall mean the (i) acquisition by any person or group of more than fifty percent (50%) of the outstanding voting stock of the Company or (ii) the change within any 12-month period of more than fifty percent (50%) of the directors of the Company. (d) "Change of Control Transaction" shall mean a transaction which results in a Change of Control. (e) "Confidential Information" shall mean (i) information about the Company or any of its subsidiaries or their respective businesses, products and practices, disclosed to or known or obtained by the Employee as a direct or indirect consequence of or through the Employee's employment with the Company, which information is not generally known in the business in which the Company is or may be engaged or (ii) any trade secrets, information, data or other confidential information relating to the business or affairs of the Company or any affiliate or subsidiary of the Company. Confidential Information shall not, however, include under any circumstances any information with respect to the foregoing matters which is (i) available to the public from a source other than the Employee, (ii) released in writing by the Company to the public, (iii) required to be disclosed by any court process or any government or agency or department of any government or agency or (iv) the subject of a written waiver executed by the Company for the benefit of the Employee. (f) "Term" shall mean the term of this Agreement as described in Section 13. 2. Bonus. Subject to the following sentence, the Employee shall be entitled to receive the Bonus from the Company upon the earlier of (i) the effective time of a Change of Control Transaction or (ii) the first anniversary of the date hereof if no Change of Control Transaction shall have occurred by such date, (each of the foregoing, a "Triggering Event") so long as the Employee is employed by the Company or one of its affiliates upon the date of the Triggering Event. Notwithstanding the foregoing, if a Change of Control is effected by a series of related transactions, the Triggering Event shall be deemed to occur on the consummation of the last of the related transactions regardless of whether an actual Change of Control is effected by an earlier transaction; provided however, that in such scenario, the Employee shall be entitled to the Bonus if the Employee is employed by the Company or one of its affiliates on the date of the first of the related transactions effecting a Change of Control even if Employee is terminated by the Company or its affiliate without cause prior to the date of the Change of Control. The Bonus shall be paid immediately upon the Triggering Event in a cash lump sum. 3. Effects of Agreement on Other Benefits and Rights of Employee. Nothing in this Agreement shall prevent or limit the Employee's continuing or 2 future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any contract or agreement with the Company or any of its affiliated companies. 4. Assignability; Binding Nature. This Agreement shall be binding upon and inure to the benefit of the Company and the Employee and their respective successors, heirs (in the case of the Employee) and permitted assigns. As used in this Agreement, the "Company" shall mean the Company and any successor to its business which assumes and agrees to perform this Agreement, by operation of law or otherwise. 5. Entire Agreement. Except to the extent otherwise provided herein, this Agreement contains the entire understanding and agreement between the parties concerning the subject matter hereof and supersedes any prior agreement. 6. Amendment or Waiver. No provision in this Agreement may be amended unless such amendment is agreed upon in writing and signed by both the Employee and an authorized officer of the Company. No waiver by either party of any breach by the other party of any condition or provision contained in this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Employee or an authorized representative of the Company, as the case may be. 7. Governing Law/Jurisdiction. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of California, without reference to principles of conflict of laws. 8. Disputes. In the event of a dispute by the Company, the Employee or others as to the validity or enforceability of, or liability under, any provision of this Agreement, the Company shall reimburse the Employee for all reasonable costs, fees and expenses, including reasonable legal fees and expenses incurred by her in connection with such dispute to the extent the Employee shall substantially prevail in such dispute. The obligation of the Company under this Section 8 shall survive the termination of this Agreement (whether such termination is by the Company or the Employee, upon the expiration of this Agreement, or otherwise). 9. Notices. Any notice given to either party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the 3 other party at the address indicated below or to such changed address as such party may subsequently give by like notice: If to the Company or the Board: 1955 N. Surveyor Avenue Simi Valley, California 93603 Attention: Chief Executive Officer If to the Employee, at the address listed on the signature page hereof. 10. Confidential Information. (a) Non-Disclosure. During the Term or at any time thereafter, the Employee will not directly or indirectly reveal, divulge, disclose or communicate to any person or entity, other than authorized officers, directors and employees of the Company or its subsidiaries, in any manner whatsoever, any Confidential Information without the prior written consent of the Board. (b) Return of Property. Upon the termination of employment of the Employee, the Employee will surrender to the Company all Confidential Information, including, without limitation, all lists, charts, schedules, reports, financial statements, books and records of the Company, any subsidiary or any affiliate of the Company, and all copies thereof, and all other property belonging to the Company any subsidiary or any affiliate of the Company; provided, however, the Employee shall be accorded reasonable access to such Confidential Information subsequent to the termination of employment of the Employee for any proper purpose as determined in the reasonable judgment of the Company. 11. Headings. The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. 12. Counterparts. This Agreement may be executed in two or more counterparts. 13. Term of Agreement. This Agreement shall remain in effect from the date hereof until the date of the Triggering Event. Notwithstanding the foregoing, the respective rights and obligations of the parties hereunder, including but not limited to the Company's rights to enforce the provisions of Section 10 hereof, 4 shall survive any termination of this Agreement to the extent necessary to preserve such rights and obligations. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. WHITTAKER CORPORATION By: /s/ Joseph F. Alibrandi ------------------------------------- Name: Joseph F. Alibrandi ----------------------------------- Title: President and Chief Executive Officer ------------------------------------- EMPLOYEE /s/ Lynne M. O. Brickner ------------------------------------------ Lynne M. O. Brickner Address: 424 N. Kenter Avenue Los Angeles, CA 90049-1933 5 EX-10.4 4 AGREEMENT Exhibit 10.4 AGREEMENT THIS AGREEMENT (this "Agreement") made and entered into as of the 5th day of April, 1999, as amended and restated, by and between WHITTAKER CORPORATION, a Delaware corporation with its principal office located in Simi Valley, California (together with its successors and permitted assigns, the "Company"), and John Otto (the "Employee"). W I T N E S S E T H: WHEREAS, the Employee is employed by the Company; WHEREAS, the Company is in the process (the "Process") of reviewing its strategic alternatives; WHEREAS, the Company desires that the Employee continue in the employ of the Company during the Process and through the consummation of any transaction the Company determines to be in the best interests of its shareholders; and WHEREAS, the Company, in order to achieve its objectives as set forth above and as an inducement for the Employee to continue in the employ of the Company during such Process, is desirous of providing a bonus to the Employee as provided herein; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Employee agree as follows: 1. Definitions (a) "Bonus" shall mean an amount equal to $100,000. (b) "Board" shall mean the Board of Directors of the Company. (c) "Change of Control" shall mean the (i) acquisition by any person or group of more than fifty percent (50%) of the outstanding voting stock of the Company or (ii) the change within any 12-month period of more than fifty percent (50%) of the directors of the Company. (d) "Change of Control Transaction" shall mean a transaction which results in a Change of Control. (e) "Confidential Information" shall mean (i) information about the Company or any of its subsidiaries or their respective businesses, products and practices, disclosed to or known or obtained by the Employee as a direct or indirect consequence of or through the Employee's employment with the Company, which information is not generally known in the business in which the Company is or may be engaged or (ii) any trade secrets, information, data or other confidential information relating to the business or affairs of the Company or any affiliate or subsidiary of the Company. Confidential Information shall not, however, include under any circumstances any information with respect to the foregoing matters which is (i) available to the public from a source other than the Employee, (ii) released in writing by the Company to the public, (iii) required to be disclosed by any court process or any government or agency or department of any government or agency or (iv) the subject of a written waiver executed by the Company for the benefit of the Employee. (f) "Term" shall mean the term of this Agreement as described in Section 13. 2. Bonus. Subject to the following sentence, the Employee shall be entitled to receive the Bonus from the Company upon the earlier of (i) the effective time of a Change of Control Transaction or (ii) the first anniversary of the date hereof if no Change of Control Transaction shall have occurred by such date, (each of the foregoing, a "Triggering Event") so long as the Employee is employed by the Company or one of its affiliates upon the date of the Triggering Event. Notwithstanding the foregoing, if a Change of Control is effected by a series of related transactions, the Triggering Event shall be deemed to occur on the consummation of the last of the related transactions regardless of whether an actual Change of Control is effected by an earlier transaction; provided however, that in such scenario, the Employee shall be entitled to the Bonus if the Employee is employed by the Company or one of its affiliates on the date of the first of the related transactions effecting a Change of Control even if Employee is terminated by the Company or its affiliate without cause prior to the date of the Change of Control. The Bonus shall be paid immediately upon the Triggering Event in a cash lump sum. 3. Effects of Agreement on Other Benefits and Rights of Employee. Nothing in this Agreement shall prevent or limit the Employee's continuing or 2 future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any contract or agreement with the Company or any of its affiliated companies. 4. Assignability; Binding Nature. This Agreement shall be binding upon and inure to the benefit of the Company and the Employee and their respective successors, heirs (in the case of the Employee) and permitted assigns. As used in this Agreement, the "Company" shall mean the Company and any successor to its business which assumes and agrees to perform this Agreement, by operation of law or otherwise. 5. Entire Agreement. Except to the extent otherwise provided herein, this Agreement contains the entire understanding and agreement between the parties concerning the subject matter hereof and supersedes any prior agreement. 6. Amendment or Waiver. No provision in this Agreement may be amended unless such amendment is agreed upon in writing and signed by both the Employee and an authorized officer of the Company. No waiver by either party of any breach by the other party of any condition or provision contained in this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Employee or an authorized representative of the Company, as the case may be. 7. Governing Law/Jurisdiction. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of California, without reference to principles of conflict of laws. 8. Disputes. In the event of a dispute by the Company, the Employee or others as to the validity or enforceability of, or liability under, any provision of this Agreement, the Company shall reimburse the Employee for all reasonable costs, fees and expenses, including reasonable legal fees and expenses incurred by him in connection with such dispute to the extent the Employee shall substantially prevail in such dispute. The obligation of the Company under this Section 8 shall survive the termination of this Agreement (whether such termination is by the Company or the Employee, upon the expiration of this Agreement, or otherwise). 9. Notices. Any notice given to either party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the 3 other party at the address indicated below or to such changed address as such party may subsequently give by like notice: If to the Company or the Board: 1955 N. Surveyor Avenue Simi Valley, California 93603 Attention: Chief Executive Officer If to the Employee, at the address listed on the signature page hereof. 10. Confidential Information. (a) Non-Disclosure. During the Term or at any time thereafter, the Employee will not directly or indirectly reveal, divulge, disclose or communicate to any person or entity, other than authorized officers, directors and employees of the Company or its subsidiaries, in any manner whatsoever, any Confidential Information without the prior written consent of the Board. (b) Return of Property. Upon the termination of employment of the Employee, the Employee will surrender to the Company all Confidential Information, including, without limitation, all lists, charts, schedules, reports, financial statements, books and records of the Company, any subsidiary or any affiliate of the Company, and all copies thereof, and all other property belonging to the Company any subsidiary or any affiliate of the Company; provided, however, the Employee shall be accorded reasonable access to such Confidential Information subsequent to the termination of employment of the Employee for any proper purpose as determined in the reasonable judgment of the Company. 11. Headings. The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. 12. Counterparts. This Agreement may be executed in two or more counterparts. 13. Term of Agreement. This Agreement shall remain in effect from the date hereof until the date of the Triggering Event. Notwithstanding the foregoing, the respective rights and obligations of the parties hereunder, including but not limited to the Company's rights to enforce the provisions of Section 10 hereof, 4 shall survive any termination of this Agreement to the extent necessary to preserve such rights and obligations. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. WHITTAKER CORPORATION By: /s/ Joseph F. Alibrandi ------------------------------------- Name: Joseph F. Alibrandi ----------------------------------- Title: President and Chief Executive Officer ------------------------------------- EMPLOYEE /s/ John K. Otto ---------------------------------------- John Otto Address: 12340 Montana Avenue Apartment #304 Los Angeles, CA 90049 5 EX-27 5 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. 6-MOS OCT-31-1999 APR-30-1999 230 0 21,671 719 43,968 83,211 29,078 19,375 123,310 30,409 39,000 0 1 114 40,268 123,310 70,935 70,935 31,856 14,836 1,703 0 2,314 20,676 4,702 15,974 0 0 0 15,974 1.40 1.29
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