-----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, WKbBEsUryOzBS1Pik+6/gYqqzqHcddxd9vM1WBzObAKU7C3o7wkl5gtlN4DaoRpQ 8buC/J2AYG5xU3X6aTaRQw== 0000007533-96-000004.txt : 19960515 0000007533-96-000004.hdr.sgml : 19960515 ACCESSION NUMBER: 0000007533-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960514 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARROW AUTOMOTIVE INDUSTRIES INC CENTRAL INDEX KEY: 0000007533 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 041449115 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07737 FILM NUMBER: 96563451 BUSINESS ADDRESS: STREET 1: 3 SPEEN ST CITY: FRAMINGHAM STATE: MA ZIP: 01701 BUSINESS PHONE: 5088723711 MAIL ADDRESS: STREET 1: 3 SPEEN STREET CITY: FRAMINGHAM STATE: MA ZIP: 01701 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________________________ [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 30, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________to____________ ______________________________________________ Commission file number 1-7737 ARROW AUTOMOTIVE INDUSTRIES, INC. ________________________________________________________________________ (Exact name of registrant as specified in its charter) ____________MASSACHUSETTS_________ ___________04-1449115__________ (State or other jurisdiction of (I.R.S. Employer I.D. No.) incorporation or organization) 3 SPEEN STREET, FRAMINGHAM, MASSACHUSETTS ___01701____ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (508) 872-3711 Indicate by check mark whether the registrant (1) has filed all reports 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 issuer's classes of common stock, as of the latest practicable date: 2,873,083 shares of the Company's Common Stock ($.10 par value) were outstanding as of May 6, 1996. Page 1 of 18 ARROW AUTOMOTIVE INDUSTRIES, INC. INDEX PAGE NUMBER PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited): Condensed Balance Sheets - March 30, 1996 and June 24, 1995 ................. 3 Condensed Statements of Operations - Three Months Ended March 30, 1996 and March 25, 1995 ................................... 4 Nine Months Ended March 30, 1996 and March 25, 1995 ................................... 5 Condensed Statements of Cash Flows - Nine Months Ended March 30, 1996 and March 25, 1995 ................................... 6 Notes to Condensed Financial Statements ........... 7 ITEM 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations .... 8 - 10 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings ................................. 11 ITEM 2. Changes in Securities ............................. 11 ITEM 3. Default upon Senior Securities .................... 11 ITEM 4. Submission of Matters to a Vote of Security Holders .......................................... 11 ITEM 5. Other Information ................................. 11 ITEM 6. Exhibits and Reports on Form 8-K .................. 11 SIGNATURES .................................................... 12 Page 2 PART I. - ITEM 1 -- FINANCIAL INFORMATION ARROW AUTOMOTIVE INDUSTRIES, INC. CONDENSED BALANCE SHEETS (Unaudited)
March 30, June 24, 1996 1995 _____________ _____________ ASSETS CURRENT ASSETS Cash and equivalents $ 446,352 $ 753,010 Accounts receivable, less allowances 14,875,271 12,535,646 Inventories - Note B 37,841,565 36,307,861 Prepaid expenses and other current assets 3,283,367 4,200,578 ____________ ____________ TOTAL CURRENT ASSETS 56,446,555 53,797,095 PROPERTY, PLANT AND EQUIPMENT 36,062,131 35,459,351 Less allowances for depreciation 23,163,715 22,174,393 ____________ ____________ 12,898,416 13,284,958 OTHER ASSETS 2,028,662 1,923,519 ____________ ____________ TOTAL ASSETS $ 71,373,633 $ 69,005,572 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of advances under revolving line of credit $ 1,519,152 $ 2,729,975 Accounts payable 6,488,540 3,089,034 Cash overdrafts 2,778,378 1,216,348 Other current liabilities 5,428,634 5,237,342 Current portion of long-term debt 1,379,342 1,372,486 ____________ ____________ TOTAL CURRENT LIABILITIES 17,594,046 13,645,185 LONG-TERM DEBT 18,321,009 19,265,190 DEFERRED INCOME TAXES 1,634,000 1,634,000 ACCRUED RETIREMENT BENEFITS 1,905,467 1,721,867 STOCKHOLDERS' EQUITY Common stock 296,887 296,887 Other stockholders' equity 32,071,548 32,891,767 Less cost of Common Stock in treasury 449,324 449,324 ____________ ____________ TOTAL STOCKHOLDERS' EQUITY 31,919,111 32,739,330 ____________ ____________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 71,373,633 $ 69,005,572 ============ ============
See accompanying notes to the condensed financial statements. Page 3 ARROW AUTOMOTIVE INDUSTRIES, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) THREE MONTHS ENDED _____________________________
MARCH 30, MARCH 25, 1996 1995 (13 weeks) (12 weeks) _____________ _____________ Net sales $ 26,226,073 $ 19,820,409 Cost and expenses: Cost of products sold 20,742,553 15,037,720 Selling, administrative and general 5,486,176 5,524,400 Interest 532,587 467,885 ____________ ____________ 26,761,316 21,030,005 ____________ ____________ Loss before income taxes (535,243) (1,209,596) Benefit from income taxes (176,000) (461,000) ____________ ____________ NET LOSS $ (359,243) $ (748,596) ============ ============ Weighted average number of shares outstanding 2,873,083 2,872,395 ============ ============ NET LOSS PER SHARE $(0.13) $(0.26) ====== ======
See accompanying notes to the condensed financial statements. Page 4 ARROW AUTOMOTIVE INDUSTRIES, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) NINE MONTHS ENDED _____________________________
MARCH 30, MARCH 25, 1996 1995 (39 weeks) (39 weeks) _____________ _____________ Net sales $ 79,101,309 $ 81,800,935 Cost and expenses: Cost of products sold 62,842,821 62,243,079 Selling, administrative and general 15,971,539 18,363,833 Interest 1,567,500 1,413,353 ____________ ____________ 80,381,860 82,020,265 ____________ ____________ Loss before income taxes (1,280,551) (219,330) Benefit from income taxes (460,000) (84,000) ____________ ____________ NET LOSS $ (820,551) $ (135,330) ============ ============ Weighted average number of shares outstanding 2,873,083 2,872,201 ============ ============ NET LOSS PER SHARE $(0.29) $(0.05) ====== ======
See accompanying notes to the condensed financial statements. Page 5 ARROW AUTOMOTIVE INDUSTRIES, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) NINE MONTHS ENDED _____________________________
MARCH 30, MARCH 25, 1996 1995 (39 weeks) (39 weeks) _____________ _____________ Operating Activities Net cash provided by operating activities $ 2,618,020 $ 2,808,215 ____________ ____________ Investing Activities Purchase of property, plant and equipment (502,409) (1,456,023) Other (174,081) (79,759) ____________ ____________ Net cash used in investing activities (676,490) (1,535,782) ____________ ____________ Financing Activities Payment of long-term debt and capital lease obligations (1,037,697) (1,024,138) Decrease in advances under revolving line of credit (1,210,823) (393,070) Proceeds from exercise of stock option 332 5,188 ____________ ____________ Net cash provided by financing activities (2,248,188) (1,412,020) ____________ ____________ Decrease in cash and equivalents (306,658) (139,587) ____________ ____________ Cash and equivalents at beginning of period 753,010 445,320 ____________ ____________ CASH AND EQUIVALENTS AT END OF PERIOD $ 446,352 $ 305,733 ============ ============
See accompanying notes to the condensed financial statements. Page 6 ARROW AUTOMOTIVE INDUSTRIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE A -- BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended March 30, 1996 are not necessarily indicative of the results that may be expected for the year ending June 29, 1996. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended June 24, 1995. The balance sheet at June 24, 1995 has been derived from the audited financial statements at that date. NOTE B -- INVENTORIES The components of inventory consist of the following:
March 30, June 24, 1996 1995 _____________ _____________ Stated at cost on first-in, first-out (FIFO) method: Finished goods $ 11,906,751 $ 10,471,077 Work in process and materials 32,749,814 32,651,784 ____________ ____________ 44,656,565 43,122,861 Less reserve required to state inventory on the last-in, first-out (LIFO) method 6,815,000 6,815,000 ____________ ____________ $ 37,841,565 $ 36,307,861 ============ ============
Page 7 PART I Item 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales in the first nine months of fiscal year 1996 were $79,101,000, down 3.3% from net sales for the first nine months of fiscal 1995. Net sales in fiscal 1996 were $29,137,000, $23,738,000 and $26,226,000, for the first, second and third quarters, respectively. Net sales dipped in the second quarter of the current fiscal year due to a sudden downturn in orders early in the quarter. The Company attributes the lower demand during the period, at least in part, to restrained purchasing by our customers in anticipation of a mild winter similar to fiscal 1995. The return of more typical weather patterns saw net sales increase in the third quarter of fiscal 1996 compared to the previous quarter and, more significantly, compared to the third quarter of fiscal 1995. The third quarter of fiscal 1996 contained thirteen weeks, in comparison to the third quarter of fiscal 1995, which contained twelve weeks. When adjusted for the one week differential, third quarter net sales in the current year of $26,226,000 still represented a significant increase (22%) over the same period last year. Approximately 45% of the increase in net sales was due to the acquisition of new customers. The remaining increase is primarily the result of the prior year's third quarter sales level being lower than normal because of the unseasonably warm winter of 1995. The results of operations for the third quarter, while improved over the same period last year, did not achieve management's expectations. For the three months ended March 30, 1996, operations resulted in a net loss of $359,000, compared to a net loss of $749,000 for the third quarter in the prior year. The current fiscal year's third quarter operating results contributed to the year to date net loss of $821,000, compared to fiscal 1995's year to date net loss of $135,000. The gross profit margin on net sales in the third quarter of the current fiscal year was 20.9%, down from the same period last year of 24.1%. Numerous factors contributed to the lower gross profit percentage in the quarter. One factor that contributed to the higher costs in the current quarter, was start-up costs incurred to service the new customers mentioned above. To service properly the large initial orders of this new business, material sourcing expenses were incurred. Freight expense increased as initial shipments for new west coast business were supplemented by shipments from our South Carolina and Arkansas facilities. Further, it was necessary to add a second shift, at one location, to produce this new business. The second shift represented an approximate 20% increase in labor requirements at this location, which resulted in temporary labor inefficiencies and additional costs during Page 8 the training period. Company-wide labor levels have not increased, but have shifted among the three plant locations. The Company scrutinizes labor requirements on a weekly basis and makes adjustments as necessary. During the current quarter, the Company continued to experience additional costs due to down time and inefficient output from certain new manufacturing related equipment and the necessity of running parallel systems. While some start-up issues remain with the new equipment, the operation of parallel systems concluded by quarter end and more efficient operations are expected. Continuing the efforts begun in the second quarter of the fiscal year to improve manufacturing efficiencies, the Company has been in the process of consolidating the production of certain product lines to specific manufacturing facilities as opposed to the Company's previous practice of manufacturing most product lines at all manufacturing facilities. This consolidation process has resulted in temporary labor inefficiencies which to some degree will continue into the fourth quarter of fiscal 1996. Year to date, the current fiscal year's gross profit margin on net sales was 20.6%, down from 23.9% for the same period in fiscal 1995. The current year has experienced lower profit margins throughout the entire year. The previously mentioned product consolidation process adversely impacted the second quarter as well as the third quarter. Furthermore, throughout most of the fiscal year, the Company experienced higher than usual levels of customer product returns. These returns are for warranty, stock adjustments and rebuildable "cores" (our basic raw material) which are received in the normal course of business. While over longer periods of time the relationship of returns to gross sales remains relatively constant, occasional fluctuations do occur. The softening of the market in the second quarter exacerbated this situation when numerous customers "cleaned up" their inventory, by using the means of returning inventory to the manufacturer to lower their inventory levels. The Company has also determined that "recovery" from product returns (i.e., restoration to finished goods inventory) has not been satisfactory. Recovery of returned product is an integral part of remanufacturing and significantly mitigates the negative financial impact of product returns. Accordingly, the recovery departments at all plant locations are being expanded to maximize recovery of product returns. Selling, general and administrative expenses consistently declined both in dollars and as a percentage of sales when compared to the prior year. For the third quarter of fiscal 1996, selling, general and administrative expenses of $5,486,000, or 20.9% of net sales are down from similar expenses in the corresponding period last year of $5,524,000 or 27.87% of net sales. On a year to date basis, the current Page 9 year's selling, general and administrative expenses were $15,972,000 or 20.2% of net sales compared to the prior year of $18,364,000 or 22.4% of net sales. Interest expense was $533,000 in the third quarter of fiscal 1996, up 13.8% from the same period last year of $468,000. Year to date, fiscal 1996's interest expense was $1,568,000, an increase of 10.9% over the comparable period of the previous fiscal year. Higher interest rates and higher average borrowing levels combined to generate the higher interest expense in the current fiscal periods. The Company's obligations under its financing agreement with a commercial bank contains certain provisions and covenants which, among other things, restrict the amount of future indebtedness, the amount of cash dividends and capital expenditures and require the Company to maintain specified levels of tangible net worth, debt service and net worth ratios. Compliance with the debt service covenant of this financing agreement was waived during the second and third quarters of fiscal 1996 such that the loss sustained by the Company during those periods did not result in a default under the agreement. The revolving line of credit which allows the Company to borrow up to $20 million through January 31, 1996 has been extended to June 30, 1997. Further, the revolving line of credit has been amended such that the interest rate borne on a given date will change depending upon the achieved debt service ratio. The rate charged can range from the lender's base rate to 2.0% over such base rate. If the Company achieves specified debt service ratios, a lending rate becomes available which ranges from 2.0% to 2.5% above the Eurodollar rate. Similarly, the term loan, which had outstanding borrowings as of March 30, 1996, of $6,429,000, has been amended such that the interest rate borne on a given date will change depending upon the debt service ratio achieved by the Company. The rate charged can range from 0.25% over the lender's base rate to 2.25% over such base rate. At specific debt service levels, a lending rate is available ranging from 2.25% to 2.75% above the Eurodollar rate. All of the foregoing rates are adjusted quarterly based on the Company's debt service ratio. Due to the foregoing amendments to the Company's financing agreement, effective May 13, 1996, interest charged under the Company's revolving line of credit will increase to the lender's base rate plus 1.0% (previously the lender's base rate plus 0.5%) and interest under the Company's term loan will increase to the lender's base rate plus 1.25% (previously the lender's base rate plus 0.75%). During the month of April, 1996, the Company experienced lower unit sales than expected. April's sales resulted in a loss from operations during that period. However, it is uncertain at this time if the sales and operating results for the month of April will be indicative of the Company's performance for its fourth quarter. The Company anticipates that cash available from operations, combined with available credit lines, will be adequate to provide for the Company's cash requirements for the next twelve months. Page 10 ARROW AUTOMOTIVE INDUSTRIES, INC. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings. None. ITEM 2. Changes in Securities. None. ITEM 3. Default upon Senior Securities. None. ITEM 4. Submission of Matters to a Vote of Security Holders. None. ITEM 5. Other Information. None. ITEM 6. Exhibits and Reports on Form 8-K. A. Exhibits Exhibit 10.1 Fourth Amendment and Waiver Page 13 to Revolving Credit and Term Loan Agreement with The First National Bank of Boston dated as of March 30, 1996 Exhibit 27. Financial Data Schedule Page 18 Page 11 ARROW AUTOMOTIVE INDUSTRIES, INC. 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. ARROW AUTOMOTIVE INDUSTRIES, INC. (Registrant) May 14, 1996 /s/ Jim L. Osment _____________________________________ Jim L. Osment President and Chief Executive Officer May 14, 1996 /s/ James F. Fagan _____________________________________ Executive Vice President, Treasurer and Chief Financial Officer Page 12 EX-1 2 ARROW AUTOMOTIVE INDUSTRIES, INC. FOURTH AMENDMENT AND WAIVER TO REVOLVING CREDIT AND TERM LOAN AGREEMENT THIS FOURTH AMENDMENT AND WAIVER (this "Amendment"), dated as of March 30, 1996, by and between Arrow Automotive Industries, Inc. (the "Borrower") and The First National Bank of Boston (the "Bank") as parties to a certain Revolving Credit and Term Loan Agreement, dated as of December 29, 1993, as amended by the First Amendment to Revolving Credit and Term Loan Agreement, dated as of March 24, 1995, the Second Amendment to Revolving Credit and Term Loan Agreement, dated as of June 24, 1995, and the Third Amendment to Revolving Credit and Term Loan Agreement, dated as of December 30, 1995, (the "Credit Agreement"). Capitalized terms not otherwise defined herein shall have the same meanings ascribed thereto in the Credit Agreement. WHEREAS, the Borrower has requested the Bank to make certain amendments to the Credit Agreement; WHEREAS, the Borrower has informed the Bank that for the fiscal quarter ended March 30, 1996, the Borrower has failed to comply with the financial covenant set forth in Section 11.2 of the Credit Agreement and has requested that the Bank waive to the limited extent necessary to permit such non- compliance as of March 30, 1996, the provisions of Section 11.2 of the Credit Agreement; and WHEREAS, the Bank is willing to make such amendments to, and grant such waiver of, the Credit Agreement subject to the terms and conditions set forth herein. NOW THEREFORE, the Borrower and the Bank hereby covenant and agree as follows: 1. AMENDMENT TO CREDIT AGREEMENT. The Credit Agreement is hereby amended by: (a) The definition of Borrowing Base contained in Section 1.1 of the Credit Agreement is amended by deleting the percentage "55%" contained in clause (d) of such definition and substituting the percentage "50%" therefor. (b) The definition of Revolving Credit Loan Maturity Date is amended by deleting the date "January 31, 1997" contained in such definition and substituting the date "June 30, 1997" therefor. (c) Section 1.1 of the Credit Agreement is further amended by adding the following new definitions in the appropriate alphabetical order: Adjustment Date. The first day of the fiscal quarter immediately following the fiscal quarter in which a certificate of compliance is to be delivered by the Borrower pursuant to Section 9.4(d). Applicable Margin. For each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date (each a "Rate Adjustment Period"), the Applicable Margin shall be the applicable margin set forth below with respect to the Borrower's Debt Service coverage ratio, as determined for the fiscal quarter specified in the certificate of compliance delivered by the Borrower during the fiscal quarter immediately preceding the applicable Rate Adjustment Period. Term Revolving Debt Service Revolving Base Credit/ Term (Coverage See Credit/Base Rate Eurodollar Eurodollar LEVEL SECTION 11.2) RATE LOANS LOANS RATE LOANS RATE LOANS I Less than or equal to Not Not 0.75:1.00 2.0% 2.25% Available Available II Greater than or equal to 0.76:1.00 but less than Not Not 1.00:1.00 1.0% 1.25% Available Available III Greater than or equal to 1.01:1.00 but less than Not Not 1.25:1.00 0.5% 0.75% Available Available IV Greater than or equal to 1.26:1.00 but less than 1.50:1.00 0.0% 0.25% 2.5% 2.75% V Greater than or equal to 1.50:1.00 0.0% 0.25% 2.0% 2.25% Notwithstanding the foregoing, (a) for Loans outstanding during the period commencing on May 13, 1996 through the date immediately preceding the first Adjustment Date to occur after the such date, the Applicable Margin shall be as set forth in Level II above, and (b) if the Borrower fails to deliver any certificate of compliance when required by Section 9.4(d) hereof then, for the period commencing on the next Adjustment Date to occur subsequent to such failure through the date immediately following the date on which such certificate of compliance is delivered, the Applicable Margin shall be the highest Applicable Margin set forth above. (d) Effective as of May 13, 1996, clauses (a) and (b) of Section 2.5 of the Credit Agreement are amended by deleting such clauses and restating them in their entirety as follows: (a) Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the interest period with respect thereto at the rate per annum equal to the Base Rate PLUS the Applicable Margin; (b) Each Eurodollar Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate per annum equal to the Eurodollar Rate PLUS the Applicable Margin; (e) Effective as of May 13, 1996, clauses (a) and (b) of Section 4.5 of the Credit Agreement are amended by deleting such clauses and restating them in their entirety as follows: (a) To the extent that all or any portion of the Term Loan bears interest during such Interest Period at the Base Rate, the Term Loan or such portion shall bear interest during such Interest Period at the rate per annum equal to the Base Rate PLUS the Applicable Margin; (b) To the extent that all or any portion of the Term Loan bears interest during such Interest Period at the Eurodollar Rate, the Term Loan or such portion shall bear interest during such Interest Period at the rate per annum equal to the Eurodollar Rate PLUS the Applicable Margin. (f) Clause (g) of Section 9.4 of the Credit Agreement is amended by adding the following words at the end of such clause (g): and within seven (7) days after the end of each two (2) week period (the first such period commencing on June 10, 1996) or, after the occurrence and during the continuance of a Default or an Event of Default at such earlier time as the Bank may reasonably request, an Accounts Receivable and sales report substantially in the form set forth in the Borrowing Base Report with respect thereto setting forth an accounting of Accounts Receivable and sales at the end of such two (2) week period or other date as requested by the Bank during the continuance of a Default or Event of Default. (g) Section 11.1 of the Credit Agreement is amended by deleting such Section 11.1 and restating it in its entirety as follows: Section 11.1 Capital Expenditures. The Borrower will not make Capital Expenditures that exceed in the aggregate, (a) $125,000 during the fiscal quarter ending on June 29, 1996, and (b) $500,000 during any fiscal year thereafter. (h) Section 11.2 of the Credit Agreement is amended by deleting such Section 11.2 and restating it in its entirety as follows: Section 11.2 Debt Service. The Borrower will not permit, as at the end of each fiscal period described in the table set forth below, the ratio of (a) the sum of (i) Net Income, plus (ii) Total Interest Expense, plus (iii) depreciation, plus (iv) amortization to (b) Total Debt Service to be less than the ratio set forth opposite such period in such table: FISCAL PERIOD RATIO Q4, 1996 0.8:1.0 3 month period: Q1, 1997 1.2:1.0 6 month period: Q1, 1997 through Q2, 1997 1.2:1.0 9 month period: Q1, 1997 through Q3, 1997 1.2:1.0 12 month period: Q1, 1997 through Q4, 1997 1.2:1.0 Each period of four consecutive fiscal quarters thereafter, commencing with the four consecutive fiscal quarters ending on the last day of Q1, 1998 1.2:1.0 2. BORROWING BASE REPORT. Notwithstanding Section 9.4(g) as amended by this Amendment, if the Borrower determines that for any two (2) week period described in Section 9.4(g) as amended by this Amendment (the "Non-Compliance Period") it can not deliver an Accounts Receivable and sales report, failure to deliver such Accounts Receivable and sales report for such period shall not constitute a Default or Event of Default under Section 9.4 so long as during the Non-Compliance Period the Borrower maintains excess availability under the Borrowing Base of $1,500,000 as set forth in the monthly Borrowing Base Report delivered pursuant to Section 9.4 of the Credit Agreement. 3. WAIVER. The Bank hereby waives the provisions of Section 11.2 of the Credit Agreement solely to the extent necessary to permit non-compliance with such Section 11.2, and only for the fiscal quarter ended March 30, 1996. 4. CONDITIONS TO EFFECTIVENESS. This Amendment shall be effective as of March 30, 1996, upon satisfaction of the following conditions: (a) This Amendment shall have been duly and properly executed and delivered to the Bank by the Borrower; (b) All corporate action necessary for the valid execution, delivery and performance by the Borrower of this Amendment and the Credit Agreement as amended hereby shall have been duly and effectively taken, and evidence thereof satisfactory to the Bank shall have been provided to the Bank; and (c) The Borrower shall have paid to the Bank an amendment fee of $25,000. 5. REPRESENTATIONS AND WARRANTIES. The Borrower, hereby represents and warrants to the Bank as follows: (a) REPRESENTATIONS AND WARRANTIES IN CREDIT AGREEMENT. The representations and warranties of the Borrower contained in the Credit Agreement (i) were true and correct in all material respects when made, and (ii) except to the extent such representations and warranties by their terms are made solely as of a prior date, continue to be true and correct in all material respects on the date hereof. (b) RATIFICATION, ETC. Except as expressly provided by this Amendment, the Credit Agreement and all documents, instruments and agreements related thereto, including, but not limited to the Security Documents, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The Credit Agreement and this Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended hereby. (c) AUTHORITY, ETC. The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of all of its agreements and obligations under the Credit Agreement as amended hereby are within the corporate authority of the Borrower and have been duly authorized by all necessary corporate action on the part of the Borrower. (d) ENFORCEABILITY OF OBLIGATIONS. This Amendment and the Credit Agreement as amended hereby constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their terms. (e) NO DEFAULT. After giving effect to this Amendment, no Default or Event of Default has occurred and is continuing. 6. NO OTHER AMENDMENTS OR WAIVERS. Except as expressly provided in this Amendment, all of the terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and effect. 7. EXPENSES. Pursuant to Section 16 of the Credit Agreement, all costs and expenses incurred or sustained by the Bank in connection with this Amendment, including the fees and disbursements of legal counsel for the Bank in producing, reproducing and negotiating the Amendment, will be for the account of the Borrower whether or not the transactions contemplated by this Amendment are consummated. 8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but which together shall constitute one instrument. 9. MISCELLEANOUS. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). The captions in this Amendment are for the convenience of reference only and shall not define or limit the provisions hereof. IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment under seal as of the date first set forth above. ARROW AUTOMOTIVE INDUSTRIES, INC. By: /S/ JAMES F. FAGAN Name: James F. Fagan Title: Executive Vice President THE FIRST NATIONAL BANK OF BOSTON By: /S/ MATT A. ROSS, VP Matthew A. Ross, Vice President EX-2 3 [ARTICLE] 5 [LEGEND] THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND STATEMENT OF OPERATIONS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. [MULTIPLIER] 1,000 [PERIOD-TYPE] 9-MOS [FISCAL-YEAR-END] JUN-29-1996 [PERIOD-END] MAR-30-1996 [CASH] 446 [SECURITIES] 0 [RECEIVABLES] 15,464 [ALLOWANCES] 589 [INVENTORY] 37,842 [CURRENT-ASSETS] 56,447 [PP&E] 36,062 [DEPRECIATION] 23,164 [TOTAL-ASSETS] 71,374 [CURRENT-LIABILITIES] 17,594 [BONDS] 18,321 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [COMMON] 297 [OTHER-SE] 31,622 [TOTAL-LIABILITY-AND-EQUITY] 71,374 [SALES] 79,101 [TOTAL-REVENUES] 79,101 [CGS] 62,843 [TOTAL-COSTS] 62,843 [OTHER-EXPENSES] 0 [LOSS-PROVISION] 0 [INTEREST-EXPENSE] 1,568 [INCOME-PRETAX] (1,281) [INCOME-TAX] (460) [INCOME-CONTINUING] (821) [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] (821) [EPS-PRIMARY] (0.29) [EPS-DILUTED] (0.29)
-----END PRIVACY-ENHANCED MESSAGE-----