-----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, GqSmN34qU7saq3B0vLExDIogv4hj0XiVJ5r+nkU9YgWAHOgLjIl/gjM8FhgmdQ58 J2KQkZVI+Zask7G9Ma1q0A== /in/edgar/work/20000629/0000912057-00-030429/0000912057-00-030429.txt : 20000920 0000912057-00-030429.hdr.sgml : 20000920 ACCESSION NUMBER: 0000912057-00-030429 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IFR SYSTEMS INC CENTRAL INDEX KEY: 0000785546 STANDARD INDUSTRIAL CLASSIFICATION: [3825 ] IRS NUMBER: 480777904 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-14224 FILM NUMBER: 664566 BUSINESS ADDRESS: STREET 1: 10200 W YORK ST CITY: WICHITA STATE: KS ZIP: 67215 BUSINESS PHONE: 3165224981 MAIL ADDRESS: STREET 1: 10200 WEST YORK STREET CITY: WICHITA STATE: KS ZIP: 67215 10-K405 1 a10-k405.txt 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2000 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-14224 ------------------------ IFR SYSTEMS, INC. (Exact name of registrant as specified in its charter) DELAWARE 48-1197645 (State or other jurisdiction of (IRS Employer incorporation of organization) Identification No.) 10200 WEST YORK STREET, WICHITA, KANSAS 67215 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (316) 522-4981 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE (Title of class) ------------------------ 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 2, 2000 was approximately $48,981,986 (based on the June 2, 2000 closing price of $5.938 per share). As of June 2, 2000, there were 8,248,903 shares of Registrant's common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy statement for the 2000 Annual Meeting of Stockholders are incorporated by reference in Part III hereof. The Exhibit Index to this Form 10-K is located on pages 41 through 43. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE -------- PART I...................................................... 1 Item 1. Business....................................... 1 Item 2. Properties..................................... 6 Item 3. Legal Proceedings.............................. 7 Item 4. Submission of Matters to a Vote of Security Holders................................................. 7 PART II..................................................... 7 Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters............................. 7 Item 6. Selected Financial Data........................ 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 9 Item 7A. Quantitative and Qualitative Disclosures about Market Risk............................................. 12 Item 8. Financial Statements and Supplementary Data.... 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......... 40 PART III.................................................... 40 Item 10. Directors and Executive Officers of the Registrant.............................................. 40 Item 11. Executive Compensation......................... 40 Item 12. Security Ownership of Certain Beneficial Owners and Management.......................................... 40 Item 13. Certain Relationships and Related Transactions............................................ 40 PART IV..................................................... 40 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..................................... 40 Exhibit Index................................... 41 Signatures...................................... 44
PART I ITEM 1. BUSINESS GENERAL IFR Systems, Inc. ("IFR" or the "Company") is a Delaware corporation, incorporated in 1998 as a successor by merger to a corporation incorporated in 1985, with its principal offices in Wichita, Kansas. IFR's predecessor corporation was originally founded in 1968 as a supplier of specialized test solutions to the avionics industry. IFR expanded its activities in 1974 to apply its knowledge of radio frequency ("RF") and related technologies to the development of test solutions for the then emerging wireless communications market. Today, through its Electronics Test and Measurement Segment ("ETM"), IFR designs, manufactures, and markets communications, test and measurement, and avionics test instruments that are used to test a wide variety of radio products, aircraft and avionics systems. In the description of the Company's business, reference to IFR and to the Company includes all subsidiaries of the Company, unless otherwise stated. DISCONTINUED OPERATIONS--see NOTE 10 to the consolidated financial statements On June 25, 1999, the Board of Directors approved a formal plan to sell the Company's Optical Test and Measurement Division ("OTM Division"). The sale was completed on July 7, 1999 to GN Nettest, a company in the GN Great Nordic Group, Copenhagen, Denmark for $43,988,000 in cash. A net of tax gain of approximately $11,031,000 (approximately $1.34 per share) was recorded. The proceeds from the sale were used to reduce the Company's outstanding debt obligation in July 1999, with $31,740,000 applied to long-term debt and $11,260,000 used to reduce short-term debt. The results of operations for the OTM Division have been segregated and classified as discontinued operations in the consolidated statements of operations and prior periods have been restated. The consolidated balance sheets have been segregated to reflect the OTM Division as discontinued operations and prior periods have been restated. The consolidated statements of cash flows and the consolidated statements of shareholders' equity include operations of the OTM Division through the date of disposition. PRODUCTS While the Company makes a broad variety of products, substantially all of the Company's products are test instruments. Since the sale of the OTM Division, the Company has one segment, the ETM Segment. The following table sets forth the contribution to total net sales of each of the Company's three classes of test instruments for the periods ended (amounts in thousands of dollars):
TWELVE MONTHS NINE MONTHS TWELVE MONTHS ENDED ENDED ENDED JUNE 30, 1998 MARCH 31, 1999 MARCH 31, 2000 ------------------- ------------------- ------------------- AMOUNT % AMOUNT % AMOUNT % -------- -------- -------- -------- -------- -------- Communications................. $46,516 42.7 $31,654 29.8 $39,727 28.0 Test & Measurement............. 19,671 18.1 26,441 24.9 37,905 26.7 Avionics....................... 9,520 8.7 11,387 10.7 13,209 9.3 Other.......................... 33,184 30.5 36,677 34.6 51,050 36.0
Set forth below are discussions of each of the three classes of test instruments that are designed, manufactured, and sold by the Company: communications test equipment, test and measurement test equipment, and avionics test equipment. In addition, the Company sells software computer solutions to be used in connection with certain of the Company's test equipment products. 1 COMMUNICATIONS TEST EQUIPMENT. The Company's communications test equipment products are designed to test mobile radio products, such as mobile telephones and cellular telephones, as well as base station equipment. IFR products emulate the required system or parameters so the systems can be tested for proper frequency transmission, signal modulation, power levels, and other key performance parameters. The Company produces self-contained portable test sets for both the digital and analog communications markets. IFR's communications service monitors are used to test and maintain radio products, including pagers, scanners, military communication transceivers, and cellular, land mobile, marine and citizen band radios. Service monitors test mobile radio equipment for proper frequency transmission, signal modulation and power output. The principal end users of communications service monitors are original equipment manufacturers, service and repair companies, government agencies, and users of mobile radio equipment. The mobile radio product industry is undergoing a transformation as the result of the increased use of digital technology. Digital technology offers spectral efficiencies, better voice quality, and more data services. As a result, there is an increasing demand for products that use complex digital modulation schemes. Cellular telephone systems currently deployed use CDMA, GSM, and TDMA technologies. IFR provides a wide range of mobile radio test products for both GSM and TDMA technologies and has secured software licensing agreements with Qualcomm for marketing Qualcomm's production test software for CDMA technology. The professional mobile radio market, a traditionally strong market for IFR, is also beginning to move towards digital technology with a new worldwide terrestrial trunked radio access ("TETRA") protocol. IFR has been one of the contributing suppliers for the initial test equipment requirements for TETRA system design and production. IFR released its 2968 TETRA mobile radio test set in 1999. IFR is presently designing products for other new technologies, including the Project 25 ("P25") standard proposed by the Association of Public Safety Communications Officials, "iDEN", a Motorola technology used predominately by Nextel for general trunked radio access, and "EDACS Prism" developed by Ericsson. IFR continues to sell products to test mobile and professional analog telephones and systems. Analog telephone systems continue to be deployed in South America and a majority of the professional mobile radio market, which includes users such as police, ambulance, and other mission-critical environments, still relies on analog technology. TEST AND MEASUREMENT TEST EQUIPMENT. The Company's electronic test and measurement products are sophisticated instruments for the test and maintenance of digital and analog communication systems, laboratory and field measurement of electromagnetic signals and radio frequency test equipment for the aviation industry, and automated test equipment. Included in the Company's test and measurement equipment are spectrum analyzers, signal generators, counter power meters, and microwave and modulation analyzers. These products are primarily used to bench test equipment and are sold to original equipment manufacturers, service and repair companies, and educational institutions. The Company's spectrum analyzers, which display and measure the level of a signal across a swept range of frequencies, signal amplitude versus frequency, are used as a tool in the design of communications transmitting and receiving equipment. The Company does not have a significant share of the spectrum analyzer market. The Company's signal generators create time-varying waveforms with defined characteristics that simulate radio frequency signals under test. This product series is used in the design, manufacture, and test of electronic subassemblies, intermodulation distortion measurements and cordless telephone manufacturing. IFR manufactures microwave products and multifunction microwave test sets, which are used to measure the output and frequency of a device under test. The products are used in establishing the 2 microwave links that form the core infrastructure of a communication network. The Company does not have a significant share of the microwave test product market. Microwave and modulation analyzers are used to measure the characteristics of forward and reverse gain input and output impedance on radio frequency or microwave networks. AVIONICS TEST EQUIPMENT. The Company's avionics test instruments include portable and stationary precision simulators which duplicate airborne conditions to test the communications, weather radar, and instrument landing and navigational systems installed in aircraft and ground stations. Principal products tested by IFR equipment include transponder simulation systems, navigation systems, collision avoidance systems, weather radar systems, global positioning systems ("GPS") and military variants of such products. IFR's precision simulators are used to test the avionics systems in commercial, military, and general aviation aircraft. These products are primarily used by general aviation service and repair companies, commercial airlines, manufacturers, and the federal government. IFR navigation test products are designed for testing instrument landing systems, VHF omnidirectional radio range, marker beacons, automatic direction finders, and selective calling systems and microwave landing system angle receivers installed in aircraft. IFR traffic alert and collision avoidance ("TCAS") products simulate the airborne environment necessary to perform many of the required tests for supplemental type certification. IFR also has a weather radar simulation product, the RD-301A, that is designed to test weather radar and narrow-pulse marine radar systems. This fully integrated test set permits complete testing of routine radar functions and provides the capabilities to satisfy simulation requirements for new generation non-coherent radar systems. IFR's global positioning simulator provides accurate and repeatable testing of GPS receivers. It achieves this testing capability by simulating a GPS satellite and generating specific vehicle and navigational data patterns. OTHER PRODUCTS AND SERVICES. Within the ETM segment, IFR also offers calibration, repair, and onsite field services for most types and makes of electronic test equipment. IFR maintains major customer service facilities in the United States and the United Kingdom, which are ISO accredited facilities. Services performed include full maintenance and calibration, express calibration and facilities management, including in-house calibration, repair, asset management, and consultant services. The Company's line of high-volume automated test equipment ("ATE") includes products designed for the automotive, consumer electronics, and communications industries. Such products include manufacturing defect analyzers, in-circuit analyzers, and functional analyzers, all of which are used to test printed circuit boards. The following table sets forth the total sales of other products and services of the Company for the periods ended (amounts in thousands of dollars):
TWELVE MONTHS NINE MONTHS TWELVE MONTHS ENDED ENDED ENDED JUNE 30, 1998 MARCH 31, 1999 MARCH 31, 2000 ------------- -------------- -------------- Service............................. $ 14,218 $ 17,497 $ 26,233 Other............................... 10,421 8,311 10,669 ATE & Solutions..................... 8,545 10,869 14,148
COMPETITION IFR competes with numerous companies, foreign and domestic, many of which have greater financial, marketing, and technical resources than IFR. According to Prime Data, the test instrument global market 3 is estimated at approximately $8.0 billion. IFR's market share is estimated as approximately two percent. Two suppliers control over 40% of the test instrument market. Competition is based primarily on product quality, technological innovation, product features and customer service. IFR believes it is an effective competitor in all these areas. MARKETING AND DISTRIBUTION IFR products and services are marketed and sold throughout the world by a combination of IFR sales persons and distributors. The Company employs approximately 156 salespersons located in the United States, the United Kingdom, Hong Kong, France, Germany, Spain, and China, who call on various "house" accounts as well as call on and assist independent distributors in selling IFR products. The Company has been reducing the number of its nonexclusive independent distributors to reflect its increasing emphasis on direct sales. IFR's sales personnel and distributors are supported by an internal marketing staff that performs market research and creates brochures and other marketing materials. SOURCES AND AVAILABILITY OF RAW MATERIALS The Company's products require a wide variety of electronic and mechanical components, most of which are purchased. The Company has multiple sources for the vast majority of the components and materials it uses; however, there are some instances where the components are obtained from a sole-source supplier. If a sole-source supplier ceased to deliver, the Company could experience a temporary adverse impact on its operations; however, management believes alternative sources could be identified quickly. With occasional exceptions, purchased materials and components have generally been available to the Company as needed with acceptable lead times. PATENTS, TRADEMARKS, LICENSES, FRANCHISES, AND CONCESSIONS The Company owns a number of patents in the United States and various foreign countries and is licensed to use patents owned by others. IFR has granted licenses to use certain of its patents, but does not anticipate revenues from licensing activities will be material. There can be no assurances that any of the Company's current patents will provide the Company with adequate protection. IFR has registered its "IFR" trademark. While the Company considers its patents and trademark registrations to be valuable in the aggregate, it does not consider that the loss of any single patent or trademark registration would have a material effect on the Company or its operations. Likewise, while the Company believes its products do not infringe the patent or other intellectual property rights of third parties, there can be no assurance that third parties will not assert infringement claims against the Company or that the Company will prevail on any such claim or that a license, if needed, would be available on acceptable terms. SEASONALITY The Company's business is not seasonal in nature. WORKING CAPITAL ITEMS IFR is typically able to meet its delivery schedules without maintaining large inventories of completed goods and its customers generally do not require extended payment terms. Accordingly, the ability to fund working capital requirements for inventory and receivables financing is not a significant factor and the Company does not consider itself to have any unusual working capital needs. 4 CUSTOMERS IFR's products are marketed to a diverse customer base and no single product line is a predominant factor in determining revenues or profits. IFR does not have a single customer or a few customers, the loss of any one or more of which would have a significant adverse effect. BACKLOG Backlog is not a significant factor in the Company's business because most orders are in smaller quantities or on terms that allow the customer to cancel or delay delivery without significant penalty. The Company's backlog of firm orders was approximately $37,500,000 at March 31, 1999, and $26,056,000 at March 31, 2000. It is anticipated that all of the backlog orders will be filled during the current fiscal year unless canceled or deferred by customers. GOVERNMENT AND MILITARY CONTRACTS During the past fiscal year, approximately 4.3% of the Company's revenues were derived from sales to the United States and its various agencies including the armed services. All contracts with the United States Government and its agencies are subject to termination at the convenience of the government. IFR has maintained a portion of its business in military contracting. Over the past five fiscal years, the percentage of total revenues from sales to the military has ranged from a high of 21.6% in 1995 to a low of 3.1% in fiscal 1999. Military contracts generally provide an opportunity to diversify the customer base, but typically involve lower margins than commercial sales to private industry. IFR anticipates continuing to make military sales on a selective basis but has no present plan to significantly increase its military contracting. RESEARCH AND DEVELOPMENT The test equipment industry is characterized by continuous technology changes that require an ongoing effort to enhance existing products and to develop new products. IFR relies primarily on its internal research and development programs for the development of new products and for improvement of existing products. The Company does not perform basic research but uses new component and software technologies in the development of new products. The Company's research and development expenditures excluding discontinued operations were approximately $14,077,000 in fiscal 2000, $11,816,000 in fiscal 1999, and $9,208,000 in fiscal 1998. As of May 31, 2000, the Company had approximately 160 professional employees engaged in research and development activities. GOVERNMENTAL REGULATION IFR is subject to laws and regulations affecting manufacturers and employers generally and to certain Federal Communications Commission regulations that affect equally all suppliers of similar products and are not considered a significant factor in the Company's competitive position. Compliance with federal, state, and local provisions which have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment have not had and are not expected to have a material effect upon IFR's capital expenditures, earnings, or competitive position. EMPLOYEES At May 31, 2000, the Company had approximately 1,200 full-time employees. None of the Company's employees is covered by a collective bargaining agreement or is represented by a labor union. The Company considers its relationship with its employees to be satisfactory. The design and manufacture of the Company's products require technical capabilities in many disciplines. While the Company believes that the capability and experience of its employees compare 5 favorably with other similar manufacturers, there can be no assurance that it can retain existing employees or attract and hire a sufficient number of the highly capable employees it may need in the future on satisfactory terms. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES For information concerning the Company's export sales, see NOTE 7 of the "Notes to Consolidated Financial Statements" for the year ended March 31, 2000. More than half of the Company's revenues are to customers located outside the United States which, as a consequence, the Company's results are affected by economic conditions in other countries and by changes in various foreign currency exchange rates. The Company believes that its foreign subsidiaries and other larger international markets are in countries where the economic and political climate is generally stable. PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995--FORWARD-LOOKING STATEMENTS In addition to historical information, this report contains forward-looking statements and information that are based on management's beliefs and assumptions, as well as information currently available to management. Forward-looking statements are all statements other than statements of historical fact included in this report. When used in this document, the words "anticipate", "estimate", "expect", "intend", "believe", and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable and are based on reasonable assumptions within the bounds of its knowledge of its business and operations, it can give no assurance that such expectations will prove to be correct and that actual results will not differ materially from the Company's expectations. Such forward-looking statements speak only as of the date of this report, and the Company cautions readers not to place undue reliance on such statements. Factors that could cause actual results to differ from expectations include: (1) the degree and nature of competition, including pricing pressure and the development of new products or discoveries of new technologies by competitors, (2) fluctuations in the global economy and various foreign countries including recent developments adversely affecting the economies of various Asian countries, (3) demand for the Company's products, (4) loss of significant customers, (5) the Company experiencing delays in developing new products and technologies, (6) the ability of the Company to continue the transition to digital technologies in the communications test equipment products, (7) the failure of such technologies or products to perform according to expectations, (8) difficulties in manufacturing new products so they may be profitably priced on a competitive basis, (9) lack of adequate market acceptance of new products or technologies, (10) changes in products or sales mix and the related effects on gross margins, (11) availability of components, parts, and supplies from third party suppliers on a timely basis and at reasonable prices, (12) currency fluctuations, (13) inventory risks due to changes in market demand or the Company's business strategies, (14) inability to hire sufficient personnel at reasonable levels of compensation and other labor problems, (15) inability to realize anticipated efficiencies and savings from the Company's acquisition of Marconi Instruments, Limited and (16) other risks described herein. ITEM 2. PROPERTIES IFR's principal executive offices and principal manufacturing facilities are located at 10200 West York Street, Wichita, Kansas, 67215. IFR also operates manufacturing facilities and sales offices in the United Kingdom and has sales offices in four other countries. IFR generally considers the productive capacity of its plants adequate and suitable for the requirements of the company. The extent of utilization of such manufacturing facilities varies from plant to plant and from time to time during the year. 6 The following table describes the Company's principal facilities.
(1) SQUARE LEASE LOCATION FOOTAGE LEASE/OWNED EXPIRES DESCRIPTION - -------- -------- ---------------- -------- --------------------------- Wichita, Kansas................ 156,000 Capital lease(2) 2017 Mfg., Eng., Admin., Sales Stevenage,Hertfordshire, England Longacres House.............. 46,000 Operating lease 2020 Admin., Sales Six Hills Way Bldg........... 81,000 Owned N/A Mfg., Eng. Gunnelswood Road Bldg........ 34,000 Owned N/A Manufacturing Sanders Bldg................. 27,000 Owned N/A Inventory, Customer Service Chelmsford, England............ 3,000 Leased 2001 Customer Service Portsmouth, England............ 5,000 Leased 2002 Customer Service Donibristle, Scotland.......... 20,000 Leased 2020 Customer Service, Eng.
- ------------------------ (1) Includes renewal option periods where appropriate. (2) Industrial revenue bond financing in which the Company has an option to purchase for a nominal price. ITEM 3. LEGAL PROCEEDINGS IFR is not a party to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of IFR's security holders during the fiscal quarter ended March 31, 2000. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Company's common stock is traded on the national over-the-counter market under the NASDAQ symbol IFRS. The approximate number of shareholders of record as of June 26, 2000, was 1,100. The high and low sales prices of the Company's common stock for the fiscal quarters for the periods ended are set forth below (in dollars).
TWELVE MONTHS NINE MONTHS TWELVE MONTHS ENDED ENDED ENDED MARCH 31, 2000 MARCH 31, 1999 JUNE 30, 1998 ------------------- ------------------- ------------------- QUARTERS HIGH LOW HIGH LOW HIGH LOW - -------- -------- -------- -------- -------- -------- -------- First.......................................... 5 3 7/8 23 1/4 4 1/8 22 11 1/2 Second......................................... 6 1/2 2 15/16 6 1/2 3 1/8 23 1/2 15 1/8 Third.......................................... 13 3 7 4 5/8 25 1/2 14 1/8 Fourth......................................... 11 7/8 5 1/8 -- -- 22 1/2 17 1/2
No cash dividends were paid during the fiscal periods ended March 31, 2000 and March 31, 1999. The Company paid cash dividends in the fiscal year ended June 30, 1998 of $0.033 per share. The Company's credit agreement with Bank One and other lenders precludes the payment of cash dividends by the Company. 7 ITEM 6. SELECTED FINANCIAL DATA (UNAUDITED)
(NINE MONTHS) 2000 1999 1998 1997 1996 -------- ------------- -------- -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA Sales.................................. $141,891 $106,159 $108,891 $67,710 $57,234 Research & development expense......... 14,077 11,816 9,208 6,223 4,153 Operating income (loss)................ 1,829 3,468 (16,137) 8,417 7,112 Operating income--excluding non-recurring charges(1)............. 1,829 3,468 11,407 8,417 7,112 Continuing operations: Income (loss)........................ (4,098) (2,149) (18,078) 5,254 4,516 Income (loss) excluding non-recurring charges(1)......................... (4,098) (2,149) 5,797 5,254 4,516 -------- -------- -------- ------- ------- BALANCE SHEET DATA Total assets........................... $151,146 $187,043 $190,757 $65,830 $60,713 Working capital........................ 29,924 46,163 49,692 33,515 27,273 Shareholders' equity................... 34,818 28,228 32,081 48,154 43,368 Long-term debt and capital lease obligations.......................... 59,383 96,567 100,080 3,765 2,110 -------- -------- -------- ------- ------- PROFITABILITY RATIOS Gross profit........................... 41.3% 44.6% 32.7% 39.4% 36.7% Gross profit--excluding non-recurring charges(1)........................... 41.3 44.6 43.6 39.4 36.7 Continuing operations: Income (loss)........................ (2.9) (2.0) (16.6) 7.8 7.9 Income (loss) excluding non-recurring charges(1)......................... (2.9) (2.0) 5.3 7.8 7.9 Effective income tax rate(1)......... 36.1 41.3 34.3 37.0 37.9 Return on assets(2).................... (2.4) (1.5) (14.1) 8.3 7.6 Return on equity(2).................... (13.0) (9.5) (45.1) 11.5 11.0 -------- -------- -------- ------- ------- EARNINGS PER SHARE--DILUTED Continuing operations: Income (loss)........................ $ (0.50) $ (0.26) $ (2.21) $ 0.62 $ 0.53 Income (loss) excluding non-recurring charges(1)......................... (0.50) (0.26) 0.66 0.62 0.53 Book value............................. 3.83 3.67 4.90 5.43 4.84 Dividends.............................. -- -- 0.07 -- -- -------- -------- -------- ------- -------
Amounts differ from previously reported amounts since the results of the OTM Division have been reflected as discontinued operations (see NOTE 10 to the consolidated financial statements). (1) In 1998, excludes pre-tax acquisition related charges of $11,844,000 in cost of products sold and $15,700,000 in operating expenses. The effective income tax rate excludes the effect of the acquisition adjustments. (2) In 1999, annualized the nine month loss from continuing operations ($2,149,000) to calculate these returns. 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995--FORWARD-LOOKING STATEMENTS In addition to historical information, this report contains forward-looking statements and information that are based on management's beliefs and assumptions, as well as information currently available to management. Forward-looking statements are all statements other than statements of historical fact included in this report. When used in this document, the words "anticipate", "estimate", "expect", "intend", "believe", and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable and are based on reasonable assumptions within the bounds of its knowledge of its business and operations, it can give no assurance that such expectations will prove to be correct and that actual results will not differ materially from the Company's expectations. Such forward-looking statements speak only as of the date of this report, and the Company cautions readers not to place undue reliance on such statements. Factors that could cause actual results to differ from expectations include: (1) the degree and nature of competition, including pricing pressure and the development of new products or discoveries of new technologies by competitors, (2) fluctuations in the global economy and various foreign countries including recent developments adversely affecting the economies of various Asian countries, (3) demand for the Company's products, (4) loss of significant customers, (5) the Company experiencing delays in developing new products and technologies, (6) the ability of the Company to continue the transition to digital technologies in the communications test equipment products, (7) the failure of such technologies or products to perform according to expectations, (8) difficulties in manufacturing new products so they may be profitably priced on a competitive basis, (9) lack of adequate market acceptance of new products or technologies, (10) changes in products or sales mix and the related effects on gross margins, (11) availability of components, parts, and supplies from third party suppliers on a timely basis and at reasonable prices, (12) currency fluctuations, (13) inventory risks due to changes in market demand or the Company's business strategies, (14) inability to hire sufficient personnel at reasonable levels of compensation and other labor problems, (15) inability to realize anticipated efficiencies and savings from the Company's acquisition of Marconi Instruments, Limited and (16) other risks described herein. SALE OF THE OTM DIVISION On June 25, 1999, the Board of Directors approved a formal plan to sell the Company's Optical Test and Measurement (OTM) Division. The sale was completed on July 7, 1999 to GN Nettest, a company in the GN Great Nordic Group, Copenhagen, Denmark for $43,988,000 in cash. A net of tax gain of approximately $11,031,000 (approximately $1.34 per share) was recorded. The proceeds from the sale were used to reduce the Company's outstanding debt obligation in July 1999, with $31,740,000 applied to long-term debt and $11,260,000 used to reduce short-term debt. As a consequence of the divestiture, the results of operations for the OTM Division have been segregated and classified as discontinued operations in the consolidated statements of operations and prior periods have been restated. The consolidated balance sheets have been segregated to reflect the OTM Division as discontinued operations and prior periods have been restated. The consolidated statements of cash flows and consolidated statements of shareholders' equity include the OTM Division through the date of divestiture. The net gain on disposal was recognized in the period the sale was completed. See NOTE 10 to the consolidated financial statements for further discussion. COMPARISON OF FISCAL 2000 (12 MONTHS) VS. 1999 (9 MONTHS) Sales for the fiscal year ended March 31, 2000 were $141,891,000 compared to $106,159,000 for the nine-month fiscal period ended March 31, 1999. This represents an increase of 33.7%. Sales increased by 9 $35,732,000 or 33.7% due mainly to one more quarter in the current fiscal year. International sales were $79,867,000 (56.3% of sales) in fiscal year 2000 compared to $67,776,000 (63.8% of sales) in the nine-month fiscal period ended in 1999. The increase in foreign sales dollars is due to one more quarter in fiscal year 2000. The decrease in foreign sales percentage is due to the increased demand in the US market. The majority of the increase in international sales took place in the Americas and the Pacific Rim. Gross profit as a percent of sales decreased from 44.6% in the nine months ended in 1999 to 41.3% in fiscal year 2000. The current year includes $667,000 (0.5% of sales) of non-recurring charges due to the recording of cost reduction charges (termination and severance benefits) in the third quarter. Excluding the cost reduction charges, the normalized gross profit percentage for 2000 was 41.7% or 2.9% lower than the prior year. The decrease is due to the product mix. Operating expenses decreased 1.3% to 40.0% of sales. The current year includes non-recurring cost reduction charges of $2,213,000 or 1.6% of sales in fiscal year 2000, which are excluded for comparison purposes. Excluding the effect of the cost reduction charges, operating expenses decreased to 38.4% compared to 41.3% in the nine months ended in 1999. Engineering expenses decreased 1.5% as a percentage of sales from 12.9% in the nine months ended in 1999 to 11.4% for fiscal year 2000. Selling expenses decreased 0.6% as a percentage of sales from 17.3% in the nine months ended in 1999 to 16.7% for fiscal year 2000. Administrative expenses decreased as a percentage of sales from 11.1% in the nine months ended in 1999 to 10.2% for fiscal year 2000. Operating income as a percent of sales decreased from 3.3% for the nine months ended in 1999 to 1.3% for fiscal year 2000. Excluding the non-recurring cost reduction charges in fiscal year 2000 noted above, normalized operating income was $4,709,000 or 3.3% of sales compared to 3.3% in the nine months ended in 1999. Interest expense for fiscal year 2000 was $8,121,000 compared to interest expense for the nine months ended in March 1999 of $7,685,000. Interest income decreased $407,000 from the prior year. Other expense was $293,000 compared to $22,000 in the prior year. The effective income tax rate from continuing operations was 41.3% for the nine months ended in 1999 compared to 36.1% for fiscal year 2000. The decrease in rate results from a prior period increase in valuation allowances not repeated in the current year. The loss from continuing operations including the cost reduction charges, as a percent of revenue, was 2.9% in fiscal year 2000 compared to 2.0% in the prior period. COMPARISON OF FISCAL 1999 (9 MONTHS) VS. 1998 (12 MONTHS) The Company completed the purchase of Marconi Instruments Limited on February 6, 1998, resulting in fiscal 1998 purchase accounting related adjustments, specifically the $15,700,000 write off of in-process research and development and $11,844,000 of inventory valuation expenses, increasing cost of products sold, which were recorded in the third and fourth quarter of fiscal 1998. Sales for the nine month fiscal year ended March 31, 1999 were $106,159,000 compared to $108,891,000 for the twelve month fiscal year ended June 30, 1998. This represents a decrease of 2.5%. The prior fiscal year includes approximately five months sales of $46,822,000 from the Marconi acquisition compared to nine months sales of $67,916,000 in fiscal period 1999. Excluding the acquisition, sales declined by $23,826,000 or 38.4%, due mainly to one less quarter in the fiscal period 1999. International sales were $67,776,000 (63.8% of sales) in the nine months ended in 1999 compared to $52,630,000 (48.3% of sales) in fiscal year 1998. The increase in foreign sales was due to the purchase of Marconi and its presence in the foreign markets. The majority of the increase in international sales took place in Europe and the Pacific Rim. Gross profit as a percent of sales increased from 32.7% in fiscal year 1998 to 44.6% in the nine months ended in 1999. The prior year includes $11,844,000 (10.9% of sales) of non-recurring charges due to the 10 recording of inventory valuations related to the Marconi acquisition. Excluding the acquisition related charges; the normalized gross profit percentage for 1998 was 43.6% or 1.0% lower than the current year. Operating expenses decreased 6.2% to 41.3% of sales in the nine months ended in 1999. The prior year includes a non-recurring write-off ($15,700,000) of in-process research and development technology related to the Marconi acquisition. Excluding the effect of the acquisition adjustment, operating expenses increased to 41.3% compared to 33.1% in fiscal year 1998. Significant cost reductions were made in the latter part of the fiscal period ended in 1999. Engineering expenses increased as a percentage of sales from 10.4% in fiscal year 1998 to 12.9% for the nine months ended in 1999. This was due to the increased focus on the development of new test instruments for the emerging wireless digital telecommunications markets. Selling expenses increased as a percentage of sales from 14.5% in fiscal year 1998 to 17.3% for the nine months ended in 1999. The 2.8% increase was due to the redirection of the Company to a direct sales force after the purchase of Marconi and the increased cost of marketing communications due to the purchase. Administrative expenses increased as a percentage of sales from 8.2% in fiscal year 1998 to 11.1% for the nine months ended in 1999. The 2.9% increase was due to higher amortization costs related to the acquisition. Operating income as a percent of sales increased from a negative 14.8% for fiscal year 1998 to a positive 3.3% for the nine months ended in 1999. Excluding the non-recurring acquisition adjustments in fiscal year 1998 noted above, the $15,700,000 in process research and development and the $11,844,000 inventory valuation, normalized operating income was $11,407,000 or 10.5% of sales compared to 3.3% in the nine months ended in 1999. The 7.2% decrease was due to higher operating expenses. Interest expense in the nine months ended in 1999 increased by $3,805,000 compared to the prior year due to higher interest expense related to the Marconi acquisition (nine months expense compared to five months in the prior year) and higher short-term bank borrowings ($6,700,000). Interest income decreased $64,000 from the prior year. Other expense in the nine months ended in 1999 was $22,000 compared to $0 in the prior year. Excluding the effect of the acquisition adjustments, the effective income tax rate from continuing operations was 34.3% for fiscal year 1998 compared to 41.3% for the nine months ended in 1999. The loss from continuing operations, as a percent of revenue was 2.0% in the nine months ended in 1999 compared to 16.6% in the prior year. In fiscal year 1998, the components include the $15,700,000 in process research and development, the $11,844,000 before tax inventory valuation and the increased interest incurred in the purchase of Marconi. Income from continuing operations is 5.3% after normalization of these components compared to negative 2.0% in the nine months ended in 1999. The 7.3% decrease is mainly due to higher operating expenses. EURO CONVERSION Effective January 1, 1999, the European Economic and Monetary Union created a single Eurocurrency (the euro) for its member countries. A transition period is in effect that began January 1, 1999, and goes through December 31, 2001, during which time transactions will be executed in both the euro and the member country currencies. Effective January 1, 2002 the euro will be the sole legal tender of the European Economic and Monetary Union countries. In general, the adoption of a single currency for the participating countries is expected to result in greater transparency of pricing, making Europe a more competitive environment for businesses. In addition, conversion to the euro is expected to affect many financial systems and business applications. At the time IFR switches to using the euro as a functional currency for certain of its affiliates, information system modifications will be required. It is not anticipated, at this time, that the euro will have a material impact on the competitive environment in which IFR operates or a significant impact on IFR's fundamental risk management philosophy. Any costs incurred associated with the adoption of the euro will 11 be expensed as incurred, and are not anticipated to be material to IFR's results of operations, financial condition, or liquidity. YEAR 2000 IFR successfully completed its Year 2000 readiness project. The January 1, 2000 rollover went smoothly, as expected. The Company's facilities and operational systems were successfully made Year 2000 ready and are functioning effectively. The expenses associated with Year 2000 readiness effort were not significant. LIQUIDITY AND CAPITAL RESOURCES The Company maintains an adequate financial position with working capital of $29,924,000 at March 31, 2000. The Company used cash in operations of $3,719,000 in fiscal year 2000 and generated cash from operations of $5,059,000 in the nine months ended in 1999. Cash flows used in investing activities and cash flows provided in financing activities reflect primarily the proceeds from the sale of the OTM Division, acquisition payment and resulting loans, subsequent debt payments and capital expenditures. No cash dividends were paid in fiscal year 2000 and 1999. The Company's credit agreement with Bank One and other lenders precludes the payment of cash dividends by the Company. At March 31, 2000, the Company had no significant commitments for capital expenditures. The Company anticipates that the available line of credit and funds generated from operations will be adequate to meet capital asset expenditures, interest and working capital needs for the next twelve months. In June 2000, the Company signed an amendment to its credit agreement. The amendment restated certain financial ratio covenants, waived violations of its minimum fixed charge coverage and maximum leverage ratio covenants, which occurred during fiscal 2000, as well as modified the repayment schedule of the loans. See NOTE 2 to the consolidated financial statements. INFLATION Changes in product mix from year to year and highly competitive markets make it very difficult to define accurately the impact of inflation on profit margins. The Company believes that during the recent period of moderate inflation it has been able to reduce inflationary effects by vendor partnering arrangements and continuing expense control. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rates. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company is exposed to interest rate risk primarily from its Credit Agreement (Agreement) in which floating rates are based upon the relationship between earnings before interest, depreciation and taxes (EBITDA) and total debt. To mitigate the impact of fluctuations in interest rates, the Company has entered into interest rate swap agreements on $50,000,000 of the associated debt. Because of the Company's interest rate swap agreements a hypothetical 10% movement in interest rates would not have a material impact on net income. Due to the global nature of its operations, the Company conducts its business in various foreign currencies (primarily the currencies of Western Europe) and as a result, is subject to the exposures that arise from foreign exchange rate movements. Such exposures arise primarily from the translation of results of operations from outside the United States. Because the Company intends to maintain its international operations and not repatriate earnings from those operations, IFR does not hedge its net investment exposure. 12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA IFR SYSTEMS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Responsibility for Financial Statements..................... 14 Report of Independent Auditors.............................. 15 Consolidated Balance Sheets as of March 31, 2000 and March 31, 1999............................................ 16 Consolidated Statements of Operations for the year ended March 31, 2000, nine months ended March 31, 1999, and year ended June 30, 1998....................................... 18 Consolidated Statements of Shareholders' Equity for the year ended March 31, 2000, nine months ended March 31, 1999, and year ended June 30, 1998.............................. 19 Consolidated Statements of Cash Flows for the year ended March 31, 2000, nine months ended June 30, 1999, and year ended June 30, 1998....................................... 20 Notes to Consolidated Financial Statements.................. 21 Quarterly Results of Operations (unaudited)................. 37
13 RESPONSIBILITY FOR FINANCIAL STATEMENTS The management of IFR Systems, Inc. is responsible for the preparation of the financial statements and financial statement schedule, the Annual Report and for the integrity and objectivity of the information presented. The financial statements and financial statement schedule have been prepared in conformity with accounting principles generally accepted in the United States and necessarily include amounts which are estimates and judgments. The fairness of the presentation in these statements of the Company's financial position, results of operations and cash flows is reported on by the independent auditors. To assist in carrying out the above responsibility, the Company has internal systems which provide for selection of personnel, segregation of duties and the maintenance of accounting policies, systems, procedures and related controls. Although no cost effective system can ensure the elimination of errors, the Company's systems have been designed to provide reasonable but not absolute assurances that assets are safeguarded, that policies and procedures are followed, and that the financial records are adequate to permit the production of reliable financial statements. The Audit Committee of the Board of Directors, which is composed of Directors who are not employees of the Company, meets regularly with Company officers and independent auditors in connection with the adequacy and integrity of the Company's financial reporting and internal controls. /s/ Dennis H. Coley Dennis H. Coley CHIEF FINANCIAL OFFICER AND TREASURER 14 REPORT OF INDEPENDENT AUDITORS Board of Directors IFR Systems, Inc. We have audited the accompanying consolidated balance sheets of IFR Systems, Inc. as of March 31, 2000 and 1999, and the related consolidated statements of operations, shareholders' equity and cash flows for the year ended March 31, 2000, nine months ended March 31, 1999 and year ended June 30, 1998. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of IFR Systems, Inc. at March 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for the year ended March 31, 2000, nine months ended March 31, 1999 and year ended June 30, 1998, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Indianapolis, Indiana May 5, 2000 except for Note 2, as to which that date is June 15, 2000 15 IFR SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS
MARCH 31, --------------------- 2000 1999 --------- --------- (IN THOUSANDS, EXCEPT SHARE INFORMATION) ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 3,169 $ 5,086 Accounts receivable, less allowance for doubtful accounts of $600 in 2000 and $731 in 1999........................ 29,267 27,306 Inventories: Finished products....................................... 13,278 15,568 Work in process......................................... 9,174 8,811 Materials............................................... 14,537 13,650 -------- -------- 36,989 38,029 Prepaid expenses and sundry............................... 4,301 6,042 Deferred income taxes (NOTE 3)............................ 2,248 2,492 Current assets of discontinued operations................. -- 17,460 -------- -------- TOTAL CURRENT ASSETS........................................ 75,974 96,415 PROPERTY AND EQUIPMENT: Land...................................................... 4,650 4,670 Buildings................................................. 8,223 8,183 Machinery................................................. 26,299 23,226 Allowances for depreciation (deduction)................... (17,976) (13,835) -------- -------- 21,196 22,244 PROPERTY UNDER CAPITAL LEASE (NOTE 2): Building.................................................. 2,757 2,757 Machinery................................................. 2,444 2,444 Allowances for depreciation (deduction)................... (2,414) (1,962) -------- -------- 2,787 3,239 PROPERTY AND EQUIPMENT PENDING DISPOSITION, NET OF ALLOWANCES FOR DEPRECIATION OF $4,380 IN 1999............. -- 3,058 OTHER ASSETS (NOTE 11): Cost in excess of net assets acquired, less accumulated amortization of $1,556 in 2000 and $812 in 1999......... 20,125 21,485 Developed technology, less accumulated amortization of $2,028 in 2000 and $1,092 in 1999....................... 16,772 17,708 Other intangibles, less accumulated amortization of $2,446 in 2000 and $1,594 in 1999.............................. 12,320 13,172 Other..................................................... 1,972 2,090 Other assets related to discontinued operations--net...... -- 7,632 -------- -------- 51,189 62,087 -------- -------- TOTAL ASSETS................................................ $151,146 $187,043 ======== ========
16 IFR SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS
MARCH 31, --------------------- 2000 1999 --------- --------- (IN THOUSANDS, EXCEPT SHARE INFORMATION) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term bank borrowings (NOTE 2)....................... $ 15,700 $ 17,700 Accounts payable.......................................... 12,493 9,883 Accrued compensation and payroll taxes.................... 4,262 4,401 Other liabilities and accrued expenses (NOTE 8)........... 6,355 8,890 State and local taxes..................................... 887 564 Federal income taxes...................................... 913 556 Current maturity of capital lease obligations............. 190 185 Current maturity of long-term debt........................ 5,250 4,250 Current liabilities of discontinued operations............ -- 3,823 -------- -------- TOTAL CURRENT LIABILITIES................................... 46,050 50,252 CAPITAL LEASE OBLIGATIONS (NOTE 2).......................... 3,248 3,442 LONG-TERM DEBT (NOTE 2)..................................... 56,135 93,125 DEFERRED INCOME TAXES (NOTE 3).............................. 10,895 11,828 DEFERRED INCOME TAXES OF DISCONTINUED OPERATIONS............ -- 168 SHAREHOLDERS' EQUITY (NOTE 5): Preferred Stock, $.01 par value: Authorized shares--1,000,000, none issued............... -- -- Common Stock, $.01 par value: Authorized shares--50,000,000 Issued shares--9,266,250................................ 93 93 Additional paid-in capital................................ 7,330 7,368 Cost of common stock in treasury--1,025,722 shares in 2000 and 1,056,985 shares in 1999............. (8,357) (8,611) Accumulated other comprehensive loss...................... (2,072) (1,187) Retained earnings......................................... 37,824 30,565 -------- -------- Total shareholders' equity.................................. 34,818 28,228 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $151,146 $187,043 ======== ========
SEE ACCOMPANYING NOTES. 17 IFR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS YEAR ENDED ENDED YEAR ENDED MARCH 31, MARCH 31, JUNE 30, 2000 1999 1998 ---------- ----------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) SALES....................................................... $141,891 $106,159 $108,891 COST OF PRODUCTS SOLD....................................... 83,350 58,858 73,257 -------- -------- -------- GROSS PROFIT................................................ 58,541 47,301 35,634 OPERATING EXPENSES: Selling................................................... 24,035 18,329 15,810 Administrative............................................ 16,152 11,799 8,942 Engineering............................................... 16,525 13,705 11,319 Acquired research and development (NOTE 11)............... -- -- 15,700 -------- -------- -------- 56,712 43,833 51,771 -------- -------- -------- OPERATING INCOME (LOSS)..................................... 1,829 3,468 (16,137) OTHER EXPENSE: Interest income........................................... 171 578 642 Interest expense.......................................... (8,121) (7,685) (3,880) Other, net................................................ (293) (22) -- -------- -------- -------- (8,243) (7,129) (3,238) -------- -------- -------- LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (BENEFIT)................................................. (6,414) (3,661) (19,375) INCOME TAX BENEFIT (NOTE 3)................................. (2,316) (1,512) (1,297) -------- -------- -------- LOSS FROM CONTINUING OPERATIONS............................. (4,098) (2,149) (18,078) INCOME (LOSS) FROM DISCONTINUED OPERATIONS LESS APPLICABLE INCOME TAXES (NOTE 10).................................... 11,357 (446) 2,141 -------- -------- -------- NET INCOME (LOSS)........................................... $ 7,259 $ (2,595) $(15,937) ======== ======== ======== EARNINGS (LOSS) PER SHARE--BASIC: Loss from continuing operations........................... $ (0.50) $ (0.26) $ (2.21) Income (loss) from discontinued operations................ 1.38 (0.06) 0.26 -------- -------- -------- Net income (loss)......................................... $ 0.88 $ (0.32) $ (1.95) ======== ======== ======== EARNINGS (LOSS) PER SHARE--DILUTED: Loss from continuing operations........................... $ (0.50) $ (0.26) $ (2.21) Income (loss) from discontinued operations................ 1.38 (0.06) 0.26 -------- -------- -------- Net income (loss)......................................... $ 0.88 $ (0.32) $ (1.95) ======== ======== ======== AVERAGE COMMON SHARES OUTSTANDING........................... 8,233 8,207 8,191 ======== ======== ======== DILUTIVE COMMON SHARES OUTSTANDING.......................... 8,233 8,207 8,191 ======== ======== ========
SEE ACCOMPANYING NOTES. 18 IFR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK ADDITIONAL TREASURY STOCK OTHER ------------------- PAID-IN ------------------- COMPREHENSIVE RETAINED SHARES AMOUNT CAPITAL SHARES AMOUNT INCOME (LOSS) EARNINGS TOTAL -------- -------- ---------- -------- -------- ------------- -------- -------- (IN THOUSANDS) BALANCE AT JUNE 30, 1997.... 9,266 $62 $6,400 (1,130) $(8,040) $ 58 $ 49,674 $ 48,154 Net loss.................... -- -- -- -- -- -- (15,937) (15,937) Translation adjustments..... -- -- -- -- -- 328 -- 328 -------- Comprehensive loss.......... (15,609) Purchases for treasury...... -- -- -- (128) (2,057) -- -- (2,057) Incentive stock options exercised................. -- -- (237) 193 1,418 -- -- 1,181 Stock split effected in the form of a dividend........ -- 31 -- -- -- -- (31) -- Dividends--$.067 per share..................... -- -- -- -- -- -- (546) (546) Tax benefit from exercise of stock options............. -- -- 958 -- -- -- -- 958 ----- --- ------ ------ ------- ------- -------- -------- BALANCE AT JUNE 30, 1998.... 9,266 $93 $7,121 (1,065) $(8,679) $ 386 $ 33,160 $ 32,081 Net loss.................... -- -- -- -- -- -- (2,595) (2,595) Translation adjustments..... -- -- -- -- -- (1,573) -- (1,573) -------- Comprehensive loss.......... (4,168) Incentive stock options exercised................. -- -- (17) 5 44 -- -- 27 Tax benefit from exercise of stock options............. -- -- 288 -- -- -- -- 288 Restricted stock grants (NOTE 5).................. -- -- (24) 3 24 -- -- -- ----- --- ------ ------ ------- ------- -------- -------- BALANCE AT MARCH 31, 1999... 9,266 $93 $7,368 (1,057) $(8,611) $(1,187) $ 30,565 $ 28,228 Net Income.................. -- -- -- -- -- -- 7,259 7,259 Translation adjustments..... -- -- -- -- -- (885) -- (885) -------- Comprehensive income........ 6,374 Incentive stock options exercised................. -- -- (37) 9 79 -- -- 42 Issuance of stock options... -- -- 20 -- -- -- -- 20 Restricted stock grants (NOTE 5).................. -- -- (21) 22 175 -- -- 154 ----- --- ------ ------ ------- ------- -------- -------- BALANCE AT MARCH 31, 2000... 9,266 $93 $7,330 (1,026) $(8,357) $(2,072) $ 37,824 $ 34,818 ===== === ====== ====== ======= ======= ======== ========
SEE ACCOMPANYING NOTES. 19 IFR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS YEAR ENDED ENDED YEAR ENDED MARCH 31, MARCH 31, JUNE 30, 2000 1999 1998 ---------- ----------- ---------- (IN THOUSANDS) OPERATING ACTIVITIES Net income (loss)........................................... $ 7,259 $(2,595) $(15,937) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation of property and equipment.................... 4,545 4,422 4,234 Amortization of intangibles............................... 2,532 2,276 2,207 Amortization of loan origination fees..................... 403 -- -- Gain on sale of discontinued operations................... (17,207) -- -- Write off of acquired research and development............ -- -- 15,700 Deferred income taxes..................................... (689) 910 (3,622) Deferred compensation expense............................. 135 -- -- Utilization of acquired tax loss carryforwards............ -- -- 416 Changes in operating assets and liabilities (net of effects of acquired businesses): Accounts receivable..................................... (1,961) 8,971 (3,081) Inventories............................................. 1,040 (494) 13,810 Other current assets.................................... 233 (2,974) 1,320 Accounts payable and accrued liabilities................ 552 (6,549) (7,044) Other current liabilities............................... (561) 1,092 (4,320) -------- ------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES......... (3,719) 5,059 3,683 INVESTING ACTIVITIES Proceeds from sale of discontinued operations............... 43,988 -- -- Payments for acquired businesses............................ -- -- (108,851) Purchases of property and equipment......................... (3,358) (3,239) (4,543) Proceeds from sale of equipment............................. 70 -- 1,071 Sundry...................................................... (293) (525) (1,832) -------- ------- -------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES......... 40,407 (3,764) (114,155) FINANCING ACTIVITIES Purchases of capital stock for treasury..................... -- -- (2,057) Principal payments on capital lease obligations............. (189) (138) (175) Principal payments on long-term debt........................ (35,990) (2,625) -- Principal payments on short-term bank borrowings............ (36,660) (8,100) (3,535) Proceeds from short-term bank borrowings.................... 34,660 14,800 12,150 Proceeds from acquisition loan.............................. -- -- 100,000 Proceeds from exercise of common stock options.............. 216 315 2,139 Payment of dividends........................................ -- -- (546) -------- ------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES......... (37,963) 4,252 107,976 Effect of exchange rate changes on cash..................... (642) (620) 276 -------- ------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (1,917) 4,927 (2,220) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 5,086 159 2,379 -------- ------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 3,169 $ 5,086 $ 159 ======== ======= ========
SEE ACCOMPANYING NOTES. 20 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements of IFR Systems, Inc. (Company or IFR) include the accounts of all subsidiaries after elimination of intercompany accounts and transactions. STOCK SPLIT On November 7, 1997, the Company's Board of Directors approved a three-for-two stock split to be effected in the form of a 50% stock dividend. The additional stock was distributed on December 5, 1997 to shareholders of record on November 21, 1997. All references to number of shares, share prices and per share amounts reflect the stock split. USE OF ESTIMATES Preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. FOREIGN CURRENCY TRANSLATION The functional currency for the Company's foreign operations is the applicable local currency. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The gains or losses resulting from such translation are included in other comprehensive income. Gains or losses resulting from foreign currency transactions are included in other income. CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. INVENTORIES Inventories are valued at the lower of cost (first-in, first-out method) or market. PROPERTY AND EQUIPMENT Property and equipment is stated at cost. Depreciation is computed by straight-line and declining balance methods at rates based on the estimated useful lives of the assets from 3 to 30 years. PROPERTY UNDER CAPITAL LEASE Property under capital lease is recorded at the lower of the fair market value of the leased property or the present value of the minimum lease payments. Depreciation of leased property is computed by the straight-line method over the useful life of the asset. 21 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INTANGIBLE ASSETS The cost in excess of net assets acquired (goodwill), developed technology and other intangibles are being amortized by the straight-line method over periods ranging from 10 to 30 years. Goodwill, developed technology and other intangibles are reviewed to assess recoverability when impairment indicators are present. Assets are considered to be impaired and are written down to fair value if expected future operating cash flows of the related assets are less than their carrying amounts. Fair value is the present value of the expected future cash flows of the related assets using a discount rate commensurate with the risk involved. Assets are grouped at the lowest level for which there are identifiable cash flows for purposes of impairment testing. INTEREST SWAP AGREEMENTS The Company is required by its bank syndicate to enter into interest rate swaps to manage interest rate exposures. The Company designates the interest rate swaps as hedges of the underlying debt. Interest expense on the debt is adjusted to include the payments made or received under the swap agreements. INCOME TAXES Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. Federal income taxes are provided on the portion of the income of foreign subsidiaries that is expected to be remitted to the United States and be taxable. REVENUE RECOGNITION Revenue from the sale of products is recognized at the time products are shipped or when services have been rendered to the customer. Sales and cost of sales on long-term contracts are recorded as deliveries are made. Estimates of cost to complete are revised periodically throughout the lives of the contracts, and any estimated losses on contracts are recorded in the accounting period in which the revisions are made. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is calculated based on the weighted-average number of outstanding common shares. Diluted earnings (loss) per share is calculated based on the weighted-average number of outstanding common shares, plus the effect of dilutive stock options. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. A recent amendment to this statement extended the required implementation date to fiscal years beginning after June 15, 2000. The statement permits early adoption as of the beginning of any fiscal quarter after its issuance. The Company expects to adopt the new statement effective April 1, 2001. The statement will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through 22 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company has not yet determined what the effect of Statement 133 will be on the earnings and financial position of the Company. CHANGE IN FISCAL YEAR In January 1999, the Company's Board of Directors approved an amendment of the Bylaws to change the fiscal year end from June 30 to March 31. The change in year end was done to allow more efficient alignment of the planning and accounting functions of the business which has changed significantly with the increase in the Company's international presence. 2. DEBT AND LEASE ARRANGEMENTS Long-term debt consisted of the following (IN THOUSANDS):
MARCH 31, ------------------- 2000 1999 -------- -------- Term Loan A............................................... $44,000 $47,750 Term Loan B (see Note 10)................................. 17,385 49,625 ------- ------- 61,385 97,375 Less current maturities................................... 5,250 4,250 ------- ------- Total long-term debt...................................... $56,135 $93,125 ======= =======
TERM LOANS PAYABLE TO BANK: In June 2000, the Company entered into an amendment of its Credit Agreement with the bank syndication (the Agreement). The amendment restated certain financial ratio covenants, waived violations of its minimum fixed charge coverage and maximum leverage ratio covenants which occurred during fiscal 2000 as well as modified the repayment schedule of the loans. Both of the term loans are payable in quarterly installments of principal pursuant to a schedule contained in the Agreement which calls for such payments to increase over the term of the loan. Term Loan A and Term Loan B are due June 30, 2002. Under certain conditions, the Company has the ability to extend the term to June 30, 2003. Summary payments by year are as follows (IN THOUSANDS): 2001........................................................ $ 5,250 2002........................................................ 9,250 2003........................................................ 46,885 Thereafter.................................................. -- ------- Total....................................................... $61,385 =======
23 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 2. DEBT AND LEASE ARRANGEMENTS (CONTINUED) Under the terms of the Agreement, borrowings bear interest at a spread up to 3.75% per annum over the London Interbank Offered Rate (LIBOR) which varies depending on the Term Loan and the current leverage ratio as defined in the Agreement. At March 31, 2000, the spread was 3.0% on Term Loan A and 3.5% on Term Loan B. The interest rate on the loans at March 31, 2000 was 9.01% on Term Loan A and 9.58% on Term Loan B. The fair value of the Company's long-term debt approximates carrying value since the facilities bear a current market rate of interest. In July 1999 Term Loan B was paid down $31,740,000 from the proceeds of the sale of the OTM Division (SEE NOTE 10). LINES OF CREDIT: The Company also has available lines of credit with the bank syndicate aggregating $23,000,000. The Credit Agreement expires on June 30, 2002. Under the terms of the Agreement, borrowings bear interest at a spread over LIBOR based on certain financial criteria. At March 31, 2000, this spread was 3.0%. The total interest rate on the outstanding portion of the lines of credit was 9.88% at March 31, 2000. As of March 31, 2000, the Company has unused available lines of credit aggregating $7,300,000. SWING LINE NOTE: The Agreement allows for swing line loans for an amount not to exceed $5,000,000. At March 31, 2000, the Company had available funds aggregating $5,000,000 at an interest rate of 11.0%. INTEREST SWAP AGREEMENT: In February 1998, the Company entered into two separate interest swap agreements for $25,000,000 each. The first swap agreement is for a fixed interest rate of 5.8% and expires on March 30, 2001 with an option to extend an additional two years. The second swap agreement is for a fixed interest rate of 5.76% and expires on March 30, 2001. The swap agreements limit the exposure to increased LIBOR rates on the Term Loans. The fair value of the swap is approximately $370,000 and is determined using the current market rate of the instrument. CAPITAL LEASES: In March 1997, the Company entered into a capital lease to refund and redeem the industrial revenue bonds dated May 1, 1989 which were issued in the original principal amount of $3,500,000 of which $2,330,000 were outstanding; and to finance manufacturing support equipment and building improvements to the existing facility. This lease was entered into in connection with an issuance of industrial revenue bonds dated March 15, 1997 (the 97 Bonds) by the City of Goddard, Kansas (the City). The transaction for the 97 Bonds totaled $3,940,000. The Company has guaranteed the future repayment of all amounts due relating to the 97 Bonds. The City has retained title to the facilities and related equipment. The Company has the option to purchase the facilities and equipment for a nominal amount after repayment in full of all amounts due relating to the 97 Bonds. Under the terms of the lease, the Company is required to make quarterly payments in an amount sufficient to pay the principal and interest installments of the 97 Bonds when due. The 97 Bonds mature serially over a 15 year period which commenced May 1, 1997, and are callable for early redemption by the Company on or after May 1, 2004. Upon the occurrence of certain events, the 97 Bonds are subject to immediate redemption at the option of each Bond holder. These events include the acquisition or right to acquire beneficial ownership of 25% of the outstanding Common Stock (unless waived by the Board of Directors), the subsequent determination that the Bonds are taxable or other specified events. Amortization of the building and equipment pledged for the 97 Bonds is included in depreciation expense. 24 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 2. DEBT AND LEASE ARRANGEMENTS (CONTINUED) Future minimum lease payments, based upon scheduled redemptions of the Bonds as of March 31, 2000, are as follows (IN THOUSANDS): 2001........................................................ $ 399 2002........................................................ 404 2003........................................................ 402 2004........................................................ 404 2005........................................................ 402 Thereafter.................................................. 2,930 ------ Total minimum lease payments................................ 4,941 Amounts representing interest............................... 1,503 ------ Present value of minimum lease payments..................... 3,438 Current maturities.......................................... 190 ------ Long-term portion........................................... $3,248 ======
OPERATING LEASES: The Company also leases certain facilities and equipment under operating leases that expire at various dates. The equipment leases provide the Company with the option after the initial lease term to purchase the property at the then fair value, renew its lease at the then fair rental value for a period of one year or return the equipment to the lessor. Generally, management expects that, after the initial lease term, the equipment will be purchased for the then fair value. Minimum payments for operating leases having initial or remaining noncancelable terms in excess of one year are as follows (IN THOUSANDS): 2001........................................................ $ 2,543 2002........................................................ 2,099 2003........................................................ 1,453 2004........................................................ 1,014 2005........................................................ 950 Thereafter.................................................. 9,728 ------- Total minimum lease payments................................ $17,787 =======
Minimum lease payments have not been reduced by sublease rentals of $812,000 due in the future under noncancelable subleases. Total rent expense for all operating leases amounted to approximately $1,976,000, $1,776,000, and $691,000 for 2000, 1999 and 1998, respectively. INTEREST PAID: Interest paid during 2000, 1999 and 1998 was approximately $7,828,000, $7,257,000, and, $3,681,000, respectively. 25 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 3. INCOME TAXES The Company files a consolidated federal income tax return for all U.S. subsidiaries and files group relief or separate returns for foreign subsidiaries. Income reported for federal and foreign tax purposes differs from pre-tax accounting income due to variations between the requirements of the jurisdictional tax codes and the Company's accounting practices. For financial reporting purposes, loss from continuing operations before income taxes is as follows (IN THOUSANDS):
YEAR ENDED NINE MONTHS ENDED YEAR ENDED MARCH 31, MARCH 31, JUNE 30, 2000 1999 1998 ---------- ----------------- ---------- U.S.................................... $(5,699) $(2,672) $ 6,812 Foreign................................ (715) (989) (26,187) ------- ------- -------- Total.................................. $(6,414) $(3,661) $(19,375) ======= ======= ========
Income tax benefit from continuing operations is summarized as follows (IN THOUSANDS):
YEAR ENDED NINE MONTHS ENDED YEAR ENDED MARCH 31, MARCH 31, JUNE 30, 2000 1999 1998 ---------- ----------------- ---------- Federal: Current.............................. $(2,197) $(1,308) $ 1,425 Deferred............................. 533 343 619 Foreign: Current.............................. (1,338) 1,369 343 Deferred............................. 1,140 (1,633) (4,202) State.................................. (454) (283) 518 ------- ------- ------- Income tax benefit..................... $(2,316) $(1,512) $(1,297) ------- ------- -------
26 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 3. INCOME TAXES (CONTINUED) Significant components of the Company's deferred tax liabilities and assets are as follows (IN THOUSANDS):
MARCH 31, ------------------- 2000 1999 -------- -------- Deferred tax liabilities: Tax over book depreciation.............................. $ 599 $ 822 Purchased intangibles................................... 9,915 10,468 Other................................................... 381 538 ------- ------- Total deferred tax liabilities............................ 10,895 11,828 Deferred tax assets: Net operating loss carryforwards........................ 627 1,242 Capital loss carryforward............................... -- 170 Inventory reserve....................................... 434 594 Accrued vacation........................................ 477 395 Warranty reserve........................................ 375 303 Allowance for bad debts................................. 132 154 Foreign interest deduction.............................. -- 614 Other--net.............................................. 599 563 ------- ------- Total deferred tax assets................................. 2,644 4,035 Valuation allowance for deferred tax assets............... (396) (1,543) ------- ------- Net deferred tax assets................................... 2,248 2,492 ------- ------- Net total deferred tax liabilities........................ $(8,647) $(9,336) ======= =======
At March 31, 1999, the Company had loss carryforwards and foreign interest deductions, the utilization of which was dependent upon future income and gains. For financial reporting purposes, a valuation allowance has been recognized to offset the deferred tax assets related to a portion of these assets. In fiscal 2000, the Company was able to utilize the foreign interest deductions and certain net operating losses due to a recognized gain on the sale of discontinued operations. Thus, at March 31, 2000, the valuation allowance related to these interest deductions and certain net operating losses was no longer necessary. Because the Company's ability to utilize these assets is a direct result of the gain on the segment disposal as well as certain other actions occurring in the fourth quarter of 2000, the reduction of the valuation allowance is displayed as a reduction of the tax expense related to the gain from discontinued operations. Deferred taxes have not been provided on undistributed earnings of foreign subsidiaries since substantially all of these earnings are expected to be permanently reinvested in foreign operations. Determination of the amount of unrecognized deferred U.S. income tax liabilities and potential foreign tax credits is not practical to calculate because of the complexity related with this hypothetical calculation. 27 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 3. INCOME TAXES (CONTINUED) The effective income tax rate from continuing operations varied from the statutory federal income tax rate as follows for the periods ended:
NINE MONTHS YEAR ENDED ENDED YEAR ENDED MARCH 31, MARCH 31, JUNE 30, 2000 1999 1998 ---------- ----------- ---------- Statutory federal income tax rate........... 34.0% 34.0% 34.0% Increases (decreases): State income taxes, net of federal tax benefit................................. 3.8 3.4 (1.9) Amortization of goodwill and intangibles............................. (3.1) (7.5) (0.2) Valuation allowance....................... -- 7.2 -- Change in tax rate........................ 0.8 4.5 -- Acquired Research and Development......... -- -- (27.6) Foreign Rate Differential................. (4.4) (4.6) (0.6) Research and development tax credits...... -- -- 0.7 Other..................................... 5.0 4.3 2.3 ---- ---- ----- 36.1% 41.3% 6.7% ==== ==== =====
Income taxes paid during 2000, 1999 and 1998 were approximately $1,367,000, $2,732,000, and $4,001,000, respectively. 4. RESEARCH AND DEVELOPMENT COSTS Research and development costs, excluding the acquired research and development, were approximately $14,077,000, $11,816,000, and $9,208,000 for 2000, 1999 and 1998, respectively. 5. SHAREHOLDERS' EQUITY INCENTIVE STOCK OPTION PLAN: The Company has an incentive stock option plan--the 1996 Plan (the Plan). At March 31, 2000, under the 1996 Plan, 600,000 shares of Common Stock have been reserved for issuance. The Company grants qualified stock options to officers and key employees. The option price per share under the Plan is not to be less than the fair market value of a share of Common Stock on the date of grant. Generally options vest over 3 years and have a term of 10 years. All grants are made by the Compensation Committee. NONQUALIFIED STOCK OPTION PLAN: In November 1992, shareholders of the Company approved the 1992 Nonqualified Stock Option Plan whereby all employees of the Company are eligible to be granted nonqualified stock options. A total of 750,000 authorized but unissued or treasury shares of the Company's Common Stock were reserved for grant under the plan. The Compensation Committee determines the time or times at which options will be granted, selects the employees to whom options will be granted, and determines the number of shares covered by each option, purchase price, vesting periods and other terms. 28 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 5. SHAREHOLDERS' EQUITY (CONTINUED) OUTSIDE DIRECTOR PLAN: In August 1999, an Amended Outside Director Compensation, Stock Option and Retirement Plan (Outside Director Plan) was approved by the shareholders. The Outside Director Plan provides that each director who is not an employee of the Company will be granted an option to purchase 1,500 shares of the Company's Common Stock on the third business day after the annual meeting of the shareholders in each of the next ten years, commencing in fiscal 2000. The option price under the Outside Director Plan is the fair market value of a share of Common Stock on the date of grant. The following table summarizes information concerning options outstanding and exercisable at March 31, 2000 for all plans:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ---------------------------------------------------------------------------- ---------------------------- WEIGHTED- AVERAGE REMAINING WEIGHTED- NUMBER CONTRACTUAL WEIGHTED-AVERAGE NUMBER AVERAGE RANGE OF EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE - ------------------------ ----------- ----------- ---------------- ----------- -------------- $ 1-$ 5....................... 491,700 7.49 $ 4.25 115,700 $ 4.57 $ 6-$ 8....................... 125,500 5.84 $ 7.44 93,000 $ 7.39 $ 9-$11....................... 100,500 6.47 $10.48 83,625 $10.46 $12-$18....................... 123,250 7.39 $14.24 62,662 $14.23 $19-$22....................... 99,500 8.03 $19.98 35,000 $20.02
Stock option activity during 1998-2000 is summarized below:
NUMBER OF WEIGHTED- NUMBER OF SHARES AVERAGE SHARES WEIGHTED-AVERAGE OUTSTANDING EXERCISE PRICE EXERCISABLE EXERCISE PRICE ----------- -------------- ----------- ---------------- July 1, 1997............................... 740,148 $ 7.09 392,583 $6.08 Granted.................................... 484,250 17.02 Exercised.................................. (193,194) 6.03 Canceled or expired........................ (60,949) 17.86 -------- ------ ------- ----- June 30, 1998.............................. 970,255 11.58 352,821 6.62 Granted.................................... 25,500 5.47 Exercised.................................. (5,400) 5.11 Canceled or expired........................ (17,000) 19.75 -------- ------ ------- ----- March 31, 1999............................. 973,355 11.31 455,638 8.16 Granted.................................... 488,000 4.31 Exercised.................................. (9,769) 4.39 Canceled or expired........................ (511,136) 10.27 -------- ------ ------- ----- March 31, 2000............................. 940,450 $ 8.31 389,987 $9.44 ======== ====== ======= =====
The Company accounts for stock option awards as prescribed by Accounting Principles Board Opinion No. 25. Accordingly, no compensation cost has been recognized in the Consolidated Statements of Operations. Had the Company recorded compensation expense for the fair value of the options granted, 29 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 5. SHAREHOLDERS' EQUITY (CONTINUED) as provided by SFAS No. 123, the Company's net loss and net loss per common share would have been as follows:
NINE MONTHS YEAR ENDED ENDED YEAR ENDED MARCH 31, MARCH 31, JUNE 30, 2000 1999 1998 ---------- ----------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Loss from continuing operations: As reported............................................... $(4,098) $(2,149) $(18,078) Pro forma................................................. (4,172) (2,927) (18,777) Loss from continuing operations per share--diluted: As reported............................................... $ (0.50) $ (0.26) $ (2.21) Pro forma................................................. (0.51) (0.36) (2.29)
The fair values of the options were determined by using a Black-Scholes option-pricing model with the following assumptions:
NINE MONTHS YEAR ENDED ENDED YEAR ENDED MARCH 31, 2000 MARCH 31, 1999 JUNE 30, 1998 --------------- --------------- -------------- Dividend yield....................... 0% 0% 0% Volatility........................... 71% 61% 46% Risk-free interest rate.............. 6% 6% 6% Expected life........................ 6 years 6 years 6 years
The weighted average fair value of options granted at the market price for 2000, 1999 and 1998 was $2.88, $3.42, and $8.06, respectively. The weighted average fair value and weighted average exercise price of nonqualified options granted below the market price for 1998 was $11.98 and $19.75, respectively. RESTRICTED STOCK GRANT PLAN: On February 27, 1989, the shareholders of the Company approved a restricted stock grant plan whereby officers and key employees may be granted restricted shares of the Company's Common Stock. The restrictions lapse over various vesting periods not to exceed ten years. A total of 450,000 authorized but unissued or treasury shares of the Company's Common Stock were reserved for grant under the plan. These restricted shares may be granted at a price equal to par value. In 2000, 1999, and 1998 the Company made grants of 21,500, 3,000, and 4,000 shares, respectively. The market value of restricted shares granted is being amortized as compensation expense over the vesting period. Total expense of $153,816, $15,000, and $0 was recognized in 2000, 1999, and 1998 in connection with the restricted stock grant plan respectively. The shares reserved for future grants are 102,541 as of March 31, 2000. SHAREHOLDER RIGHTS PLAN: The Board of Directors of the Company amended its Shareholder Rights Plan on January 21, 1999, whereby common stock purchase rights (the Rights) were distributed as a dividend at the rate of one Right for each share of the Company's Common Stock held as of the close of business on January 25, 1999. The Rights will expire on January 20, 2009. Each Right entitles shareholders to buy one share of common stock of the Company at an exercise price of $65 per share. The Rights are exercisable only if a person or group acquires beneficial ownership of 20% or more of the Company's 30 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 5. SHAREHOLDERS' EQUITY (CONTINUED) Common Stock or announces a tender or exchange offer upon consummation of which such person or group would beneficially own 20% or more of the Common Stock. Following the acquisition of 20% or more, but less than 50%, of the Company's Common Stock by a person or group, the Board of Directors may authorize the exchange of the Rights (except those owned by the acquirer), in whole or in part, for shares of the Company's Common Stock at an exchange ratio of one share for each Right. The Board of Directors of IFR will generally be able to redeem the Rights at $.01 per Right at any time prior to the time that a 20% position in the Company has been acquired. If a bidder who owns less than 5% of the Common Stock offers to buy all of the Common Stock at a price which a nationally recognized investment banker states in writing is fair and if the bidder has full financing for the bid, the shareholders of the Company may cause the Rights to be automatically redeemed immediately prior to the consummation of the offer, provided that such offer or another offer is consummated within 60 days at a price per share that is not less than the price approved by the shareholders. 6. EARNINGS PER SHARE The following is a reconciliation of the numerator and denominators used in computing basic and diluted earnings per share from continuing operations:
YEAR NINE MONTHS YEAR ENDED ENDED ENDED MARCH 31, MARCH 31, JUNE 30, 2000 1999 1998 ----------- ------------ ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) NUMERATOR Loss from continuing operations available to common shareholders............................................ $(4,098) $(2,149) $(18,078) ======= ======= ======== DENOMINATORS Basic loss per share: Weighted-average common shares Outstanding.............. 8,233 8,207 8,191 ======= ======= ======== Basic loss per share from continuing operations......... $ (0.50) $ (0.26) $ (2.21) ======= ======= ======== Diluted loss per share: Weighted-average common shares Outstanding.............. 8,233 8,207 8,191 Effect of stock options................................. 57 47 570 ------- ------- -------- Weighted-average common shares outstanding--diluted..... 8,290 8,254 8,761 ======= ======= ======== Diluted loss per share from continuing operations....... $ (0.49) $ (0.26) $ (2.06) ======= ======= ========
Note--Since the effect of stock options for 2000, 1999, and 1998 is antidilutive, the statements of operations reflect diluted per share amounts equal to the basic per share amounts. 31 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 7. SEGMENTS DESCRIPTION OF THE TYPES OF PRODUCTS AND SERVICES On July 7, 1999, the Company sold its Optical Test and Measurement Division (SEE NOTE 10). The Company now has one segment: Electronic Test and Measurement Equipment (ETM). The Company manufactures and markets a broad array of test equipment as well as offers service and repair for these products.
NINE MONTHS YEAR ENDED ENDED YEAR ENDED MARCH 31, MARCH 31, JUNE 30, 2000 1999 1998 ---------- ----------- ---------- (IN THOUSANDS) GEOGRAPHIC AREA SALES United States............................. $ 62,024 $ 38,383 $ 56,261 South America and Canada.................. 5,829 7,325 4,127 -------- -------- -------- Total Americas.......................... 67,853 45,708 60,388 -------- -------- -------- United Kingdom............................ 23,481 23,361 17,891 France.................................... 10,437 8,582 5,721 Germany................................... 5,655 5,045 3,664 Other..................................... 13,963 9,190 7,234 -------- -------- -------- Total Europe............................ 53,536 46,178 34,510 -------- -------- -------- Pacific Rim............................... 16,137 10,090 9,359 Rest Of World............................. 4,365 4,183 4,634 -------- -------- -------- Total................................... $141,891 $106,159 $108,891 ======== ======== ========
32 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 7. SEGMENTS (CONTINUED) Sales are attributed to geographic areas based on the location of the customers. GEOGRAPHIC AREA LONG-LIVED ASSETS United States--Total Americas............... $ 9,882 $ 10,382 $ 10,282 -------- -------- -------- United Kingdom.............................. 65,511 69,145 70,634 France...................................... 154 210 399 Germany..................................... 51 71 129 Other....................................... 2 57 115 -------- -------- -------- Total Europe............................ 65,718 69,483 71,277 -------- -------- -------- Pacific Rim................................. 48 73 80 -------- -------- -------- Total..................................... $ 75,648 $ 79,938 $ 81,639 ======== ======== ======== SALES BY MARKET SECTOR Communications.............................. $ 39,727 $ 31,654 $ 46,616 Test & Measurement.......................... 37,905 26,441 20,836 Avionics.................................... 13,209 11,387 9,520 ATE & Solutions............................. 14,148 10,869 8,545 Service..................................... 26,233 17,497 15,083 Other....................................... 10,669 8,311 8,291 -------- -------- -------- Total..................................... $141,891 $106,159 $108,891 ======== ======== ========
8. BENEFIT PLANS RETIREMENT PLAN: The Company has a trusteed, defined contribution retirement plan for all U.S. employees. Company contributions are discretionary with respect to the plan. Employee benefits are based on amounts accumulated from contributions and investment gains or losses. The Company has established a defined contribution plan for substantially all U.K. employees. Total retirement plan expenses for 2000, 1999 and 1998 were approximately $2,375,000, $1,736,000, and $1,229,000, respectively. DIRECTORS RETIREMENT PLAN: The Company maintains an unfunded retirement plan for nonemployee directors of the Company. Benefits will not accrue for periods in excess of 10 years of service and are payable when the Plan's requirements are satisfied. In August 1999, an Amended Outside Director Compensation, Stock Option and Retirement Plan (Outside Director Plan) was approved by the shareholders. No additional benefits will be earned under the Plan after fiscal year 2000. The estimated liability at March 31, 2000 and March 31, 1999 was $454,000 and $345,000, respectively, and is included in the balance sheet caption Other Liabilities and Accrued Expenses. SAVINGS AND INVESTMENT PLAN: The Company has a savings and investment plan for substantially all U.S. employees under Section 401(k) of the Internal Revenue Code. Employees may contribute to the plan up to 12% of their salary. Matching Company contributions are discretionary with respect to the plan. During 2000, 1999 and 1998, the Company matched 50% of each employee's contribution up to 4% of their salary. 33 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 8. BENEFIT PLANS (CONTINUED) Company contributions charged to expense in 2000, 1999 and 1998, were approximately $300,000, $218,000, and $260,000, respectively. INCENTIVE BONUS PLAN: The Company has established a bonus plan payable to selected employees based on pre-established operating income goals approved by the Board of Directors. Total bonus plan expenses for 2000, 1999 and 1998 were approximately $0, $0, and $116,000, respectively. VEBA TRUST: The Company has a voluntary employees' beneficiary association (VEBA), which funds certain employee welfare plan benefits. The Company is obligated to fund a trust as needed to provide for actual claims and trust expenses incurred. Total VEBA expenses for 2000, 1999 and 1998 were approximately $1,710,000, $1,034,000, and $1,163,000, respectively. 9. SPECIFIED FINANCIAL INFORMATION As a result of the change in the Company's year end in 1999, the following comparative information is presented for the years ending March 31, 2000 and March 31, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA):
2000 1999 -------- ----------- (UNAUDITED) Sales.................................................. $141,891 $145,974 Gross profit........................................... 58,541 59,538 Income tax benefit..................................... (2,316) (3,907) Continuing operations: Net Loss............................................. (4,098) (5,188) Basic and Diluted loss per share..................... (0.50) (0.63)
Since the per share amounts for 2000 and 1999 are antidilutive, the diluted per share amounts equal the basic per share amounts. 10. DISCONTINUED OPERATIONS On June 25, 1999, the Board of Directors approved a formal plan to sell the Company's Optical Test and Measurement (OTM) Division. The sale was completed on July 7, 1999 to GN Nettest, a company in the GN Great Nordic Group, Copenhagen, Denmark for $43,988,000 in cash. A net of tax gain of approximately $11,031,000 (approximately $1.34 per share) was recorded. The proceeds from the sale were used to reduce the Company's outstanding debt obligation in July 1999, with $31,740,000 applied to long-term debt and $11,260,000 used to reduce short-term debt (SEE NOTE 2). The results of operations for the OTM Division have been classified as discontinued operations in the consolidated statements of operations and prior periods have been restated. The consolidated balance sheet at March 31, 1999 has been segregated to reflect the OTM Division as discontinued operations. The consolidated statements of cash flows and consolidated statements of shareholders' equity include the 34 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 10. DISCONTINUED OPERATIONS (CONTINUED) OTM Division through the date of divestiture. Selected results of operations for the OTM Division follows (IN THOUSANDS):
YEAR NINE MONTHS YEAR ENDED ENDED ENDED MARCH 31, MARCH 31, JUNE 30, 2000 1999 1998 --------- ----------- -------- Sales......................................... $8,335 $23,358 $39,178 Income tax expense (benefit).................. 7,184 (6) 1,744 Income (loss) from discontinued operations.... 326 (446) 2,141 Net gain on sale of OTM Division.............. 11,031 -- --
11. ACQUISITIONS MARCONI INSTRUMENTS On February 6, 1998, IFR acquired for cash all of the issued and outstanding capital stock of Marconi Instruments Limited, Hertfordshire, U.K. (Marconi). The purchase price for Marconi was approximately $109,000,000, paid in cash funded primarily by debt (SEE NOTE 2). The acquired business is engaged in the design, manufacture, distribution and sale of test and measurement equipment for the telecommunications and electronics industries. The acquisition has been accounted for as a purchase and, accordingly, the net assets and results of operations are included in the consolidated financial statements from the effective date of acquisition. The purchase price, as adjusted during fiscal 1999, has been allocated to the assets and liabilities based on their estimated fair values at the date of acquisition as follows (IN THOUSANDS): Purchase price per agreement................................ $106,939 Direct acquisition costs.................................... 2,459 -------- Total purchase price........................................ $109,398 ======== Total current assets........................................ $ 61,737 Property and equipment--net................................. 20,850 Developed technology (amortized over 20 years).............. 18,800 Goodwill (amortized over 30 years).......................... 22,297 Other intangible assets (amortized over 1-20 years)......... 14,766 Acquired research and development........................... 15,700 -------- Total assets.............................................. 154,150 Total current liabilities assumed........................... (32,181) Deferred income taxes....................................... (12,571) -------- Total net assets............................................ $109,398 ========
35 IFR SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2000 11. ACQUISITIONS (CONTINUED) The amounts allocated to acquired research and development were determined through established valuation techniques. Since technological feasibility had not been established and no future alternative uses existed, these amounts were expensed upon acquisition. Restructuring liabilities related to the Marconi acquisition of approximately $7,700,000 were recorded in connection with the acquisition for severance and related costs associated with the shutdown of certain acquired facilities. Payments of $6,830,000 have been charged against the liability through March 31, 2000. In addition, the original estimate of the liability was reduced in fiscal 2000 by $796,000 primarily due to the execution of a long-term sublease of the Fort Worth Texas facility to a third party. The impact of the reversal resulted in a reduction of goodwill of $616,000, net of tax of $180,000. The remaining balance of $121,000 covers remaining costs under the lease and miscellaneous severance payments. YORK SENSORS On December 22, 1997, the Company acquired York Sensors Ltd. in Hampshire, U.K. The acquired business was involved in the design and manufacture of distributed temperature sensing (DTS) equipment based on optical time domain reflectometer (OTDR) technology for the electric utility, oil exploration and other industries. The Company acquired assets of approximately $930,000 and assumed liabilities of approximately $1,902,000 for a nominal purchase price. This resulted in goodwill of approximately $972,000 which was being amortized over 10 years. The acquisition was accounted for as a purchase. The purchase price was allocated to the assets and liabilities based on their estimated fair values at the date of acquisition. York Sensors is part of the Optical Test and Measurement (OTM) Division which has been segregated and classified as discontinued operations. PRO FORMA INFORMATION The following pro forma data presents the consolidated results of operations as if the Marconi acquisition had occurred on July 1, 1996, after giving effect to certain adjustments including amortization of intangibles, increased interest expense and related income tax effects. The pro forma data for both years does not include non-recurring charges related to acquired research and development ($15,700,000) and inventory valuations ($11,844,000). The pro forma results have been prepared for comparative purposes only and do not purport to indicate the results of operations which would actually have occurred had the acquisitions been in effect on the date indicated or which may occur in the future.
YEAR ENDED JUNE 30, 1998 -------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Sales....................................................... $174,688 Income from continuing operations........................... $ 4,916 Income from continuing operations per common share.......... $ 0.60 Income from continuing operations per share assuming dilution.................................................. $ 0.56
36 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
QUARTERS ENDED --------------------------------------------- JUN. 30, SEP. 30, DEC. 31, MAR. 31, FISCAL 2000 1999 1999 2000 2000 - ----------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Sales from continuing operations........................ $33,991 $34,705 $35,265 $37,930 Sales from discontinued operations...................... 8,335 -- -- -- Gross profit from continuing operations................. 14,930 13,751 13,393 16,467 Income (loss) from: Continuing operations................................. (1,101) (993) (2,632) 628 Discontinued operations............................... 326 10,134 -- 897 Net income (loss)....................................... (775) 9,141 (2,632) 1,525 Earnings (loss) per share--basic: Continuing operations................................. $ (0.13) $ (0.12) $ (0.32) $ 0.08 Discontinued operations............................... 0.04 1.23 -- 0.11 Net income............................................ (0.09) 1.11 (0.32) 0.19 Earnings (loss) per share--diluted: Continuing operations................................. $ (0.13) $ (0.12) $ (0.32) $ 0.07 Discontinued operations............................... 0.04 1.23 -- 0.11 Net income............................................ (0.09) 1.11 (0.32) 0.18 Average common shares outstanding....................... 8,223 8,231 8,236 8,240 Dilutive common shares outstanding...................... 8,223 8,231 8,236 8,481
Amounts differ from previously reported amounts since the results of the OTM Division have been reflected as discontinued operations (see NOTE 10). The effect of stock options for the first, second, and third quarters in fiscal year 2000 is antidilutive because of the net loss. In these cases, the diluted per share amounts equal the basic per share amounts. 37 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
QUARTERS ENDED ---------------------------------------------- SEPT. 30, DEC. 31, MAR. 31, JUN. 30, FISCAL 1999 1998 1998 1999 1999 - ----------- ---------- --------- --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Sales from continuing operations......................... $33,157 $36,072 $36,930 N/A Sales from discontinued operations....................... 7,743 8,046 7,569 N/A Gross profit from continuing operations.................. 15,005 15,773 16,523 N/A Income (loss) from: Continuing operations.................................. (1,549) (534) (66) N/A Discontinued operations................................ (91) 133 (488) N/A Net income (loss)........................................ (1,640) (401) (554) N/A Earnings (loss) per share--basic: Continuing operations.................................. $ (0.19) $ (0.07) $ (0.01) N/A Discontinued operations................................ (0.01) 0.02 (0.06) N/A Net income............................................. (0.20) (0.05) (0.07) N/A Earnings (loss) per share--diluted: Continuing operations.................................. $ (0.19) $ (0.07) $ (0.01) N/A Discontinued operations................................ (0.01) 0.02 (0.06) N/A Net income............................................. (0.20) (0.05) (0.07) N/A Average common shares outstanding........................ 8,205 8,208 8,208 N/A Dilutive common shares outstanding....................... 8,205 8,208 8,208 N/A
Amounts differ from previously reported amounts since the results of the OTM Division have been reflected as discontinued operations (see NOTE 10). The effect of stock options for fiscal year 1999 is antidilutive because of the net loss. In these cases, the diluted per share amounts equal the basic per share amounts. 38 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
QUARTERS ENDED ---------------------------------------------- SEPT. 30, DEC. 31, MAR. 31, JUN. 30, FISCAL 1998 1997 1997 1998 1998 - ----------- ---------- --------- --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Sales from continuing operations........................ $15,692 $17,230 $36,154 $39,815 Sales from discontinued operations...................... 9,829 10,309 9,624 9,416 Gross profit from continuing operations................. 6,178 7,275 9,944 12,237 Income (loss) from: Continuing operations................................. 1,013 1,386 (17,438) (3,039) Discontinued operations............................... 862 905 454 (80) Net income (loss)....................................... 1,875 2,291 (16,984) (3,119) Earnings (loss) per share--basic: Continuing operations................................. $ 0.12 $ 0.17 $ (2.13) $ (0.37) Discontinued operations............................... 0.11 0.11 0.05 (0.01) Net income............................................ 0.23 0.28 (2.08) (0.38) Earnings (loss) per share--diluted: Continuing operations................................. $ 0.12 $ 0.16 $ (2.13) $ (0.37) Discontinued operations............................... 0.10 0.10 0.05 (0.01) Net income............................................ 0.22 0.26 (2.08) (0.38) Average common shares outstanding....................... 8,168 8,228 8,173 8,196 Dilutive common shares outstanding...................... 8,562 8,711 8,173 8,196
Amounts differ from previously reported amounts since the results of the OTM Division have been reflected as discontinued operations (see NOTE 10). The quarter ending March 31, 1998 reflects acquisition-related charges of $15,700,000 for the write-off of in-process research and development and $4,738,000 before taxes for inventory related charges included in cost of goods sold. The quarter ending June 30, 1998 includes an additional write-off of $7,106,000 before taxes for acquisition-related inventory. The effect of stock options for the third and fourth quarter of fiscal year 1998 is antidilutive because of the net loss. In these cases, the diluted per share amounts equal the basic per share amounts. 39 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 concerning directors of IFR is incorporated herein by reference from "Election of Directors" contained in IFR's Proxy Statement for its August 25, 2000 annual meeting of shareholders (the "2000 Proxy Statement"). ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is incorporated herein by reference from "Election of Directors" and "Compensation of Directors", "Executive Compensation", and "Compensation Committee Report on Executive Compensation" contained in the 2000 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 is incorporated herein by reference from "Outstanding Shares" and "Election of Directors" contained in the 2000 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 is incorporated herein by reference from "Certain Relationships" contained in the 2000 Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K (a)(1) Financial Statements--See Index to Financial Statements at Item 8 of this report. (a)(2) Financial Statement Schedule The following financial statement schedule of IFR is included in this report in response to Item 14(d): Schedule II--Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations of the Commission are not required under the instructions or are inapplicable, and therefore have been omitted. (a)(3) See Exhibit Index (b) No reports on Form 8-K were filed during the fourth quarter of the fiscal year ended March 31, 2000: 40 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT - --------------------- ---------------------- 2.1 Share Sale and Purchase Agreement, dated February 6, 1998, among IFR Systems, Inc., IFR Systems Limited, and The General Electric Company p.l.c. (Exhibit 2.01 to Form 8-K, dated February 6, 1998, previously filed by Registrant).* 2.2 Deed of Tax Covenant, dated February 6, 1998, between The General Electric Company p.l.c., as Covenantor, and IFR Systems Limited, as Purchaser (Exhibit 2.02 to Form 8-K, dated February 6, 1998, previously filed by Registrant).* 2.3 Agreement and Plan of Merger of IFR Systems, Inc., with IFR Merger Corporation, dated as of January 20, 1998 (Exhibit 2 to Form 8-K, dated January 30, 1998, previously filed by Registrant).* 3.1 Amended and Restated Certificate of Incorporation of IFR Systems, Inc. (the "Company"), dated January 30, 1998 (Exhibit 3.01 to Form 8-K, dated January 30, 1998, previously filed by Registrant).* 3.2 Bylaws of the Company (Exhibit 3.2 to the Company's Amendment No. 1 to Form 8-K, dated February 18, 1999, File No. 0-14224, previously filed by Registrant).* 4.1 Specimen certificate representing common stock of the Company (Exhibit 4.1 to Amendment No. 2 to the Company's Registration Statement on Form S-1 filed January 17, 1986, Reg. No. 33-2122, as previously filed by Registrant).* 4.2 Article II of the Amended and Restated Certificate of Incorporation of the Company, (Included in Exhibit 3.1).* 4.3 Articles I, III, and VII of the Amended and Restated Certificate of Incorporation of the Company, (Included in Exhibit 3.1).* 4.4 Articles 2, 3, and 5 of the By-laws of the Company. (Included in Exhibit 3.2).* 4.5 Rights Agreement between the Company and Harris Trust & Savings Bank dated as of February 28, 1999 (Exhibit 4 to the Company's registration statement on Form 8-A dated February 19, 1999, previously filed by Registrant).* 4.6 Form of Rights Certificate of the Company. (Included in Exhibit 4.5).* 4.7 IFR Systems, Inc., 1992 Nonqualified Stock Option Plan (Exhibit 4(a) to the Company's Registration Statement on Form S-8 filed January 8, 1993, Reg. No. 33-56862, previously filed by Registrant).* 4.8 Form of Option Agreement for IFR Systems, Inc., 1992 Nonqualified Stock Option Plan (Exhibit 4(b) to the Company's Registration Statement on Form S-8 filed January 8, 1993, Reg. No. 33-56862, previously filed by Registrant).* 10.1 Description of Incentive Bonus Plan for Management of the Company. (Incorporated by reference from page 8 of the 1996 Proxy Statement as filed on September 23, 1996, File No. 0-14224).* 10.2 Stock Purchase Agreement, dated as of June 28, 1999, between GN Nettest A/S, GN Nettest (New York)Inc, and GN Great Britain Limited and IFR Systems, Inc. (Exhibit 1 to Form 8-K, dated July 8, 1999, previously filed by Registrant).* 10.4 Termination Agreement between the Company and Jeffrey A. Bloomer (Exhibit 10.0 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, previously filed by Registrant).* 10.5 Termination Agreement between the Company and Dennis H. Coley
41
EXHIBIT NO. DESCRIPTION OF EXHIBIT - --------------------- ---------------------- 10.6 IFR Systems, Inc. Employees' Profit Sharing Plan (Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended June 30, 1990, File No. 0-14224, previously filed by Registrant).* 10.7 Restricted Stock Grant Plan of the Company (Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended June 30, 1989, File No. 0-14224, previously filed by Registrant).* 10.9 1996 Incentive Stock Option Plan of the Company (Exhibit A of the 1996 Proxy Statement as filed on September 23, 1996, File No. 0-14224, previously filed by Registrant).* 10.10 Form of Indemnity Agreement entered into between the Company and its directors and certain of its officers as of February 27, 1989 (Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended June 30, 1989, File No. 0-14224, previously filed by Registrant).* 10.11 IFR Systems, Inc., Outside Director Compensation, Stock Option, and Retirement Plan (Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000, File No. 0-14224, previously filed by Registrant).* 10.12 Lease between the Company and the City of Goddard, Kansas, dated as of March 15, 1997 (Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, previously filed by Registrant)* 10.13 Credit Agreement, dated as of February 5, 1998, among IFR Systems, Inc., The First National Bank of Chicago, and various lenders (Exhibit 10.01 to the Form 8-K, dated February 6, 1998, previously filed by Registrant).* 10.14 Form of Security Agreement executed by Registrants and its United States subsidiaries (Exhibit 10.02 to Form 8-K, dated February 6, 1998, previously filed by Registrant).* 10.15 Form of Guaranty executed by each of Registrants United States subsidiaries (Exhibit 10.03 to Form 8-K, dated February 6, 1998, previously filed by Registrant).* 10.16 Pledge Agreement between Registrant and First National Bank of Chicago (Exhibit 10.04 to Form 8-K, dated February 6, 1998, previously filed by Registrant).* 10.17 Equitable Share Change by Registrant to First National Bank of Chicago (Exhibit 10.05 to Form 8-K, dated February 6, 1998, previously filed by Registrant).* 10.18 Form of Copyright Security Agreement executed by Registrant and each of its United States subsidiaries (Exhibit 10.06 to Form 8-K, dated February 6, 1998, previously filed by Registrant).* 10.19 Form of Patent Security Agreement executed by Registrant and each of its United States subsidiaries (Exhibit 10.07 to Form 8-K, dated February 6, 1998, previously filed by Registrant).* 10.20 Form of Trademark Security Agreement Security Agreement executed by Registrant and each of its United States subsidiaries (Exhibit 10.08 to Form 8-K, dated February 6, 1998, previously filed by Registrant).* 10.21 Amendment No. 1 to Credit Agreement, dated as of November 3, 1998, among IFR Systems, Inc., The First National Bank of Chicago, and various lenders. (Exhibit 10.0 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, previously filed by Registrant).*
42
EXHIBIT NO. DESCRIPTION OF EXHIBIT - --------------------- ---------------------- 10.22 Amendment No. 2 to Credit Agreement, dated as of March 31, 1999, among IFR Systems, Inc., The First National Bank of Chicago, and various lenders. (Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, previously filed by Registrant).* 10.23 Amendment No. 3 to Credit Agreement, dated as of June 28, 1999, among IFR Systems, Inc., The First National Bank of Chicago, and various lenders. (Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1999, previously filed by Registrant).* 10.24 Amendment No. 4 to Credit Agreement, dated as of October 15, 1999, among IFR Systems, Inc., The First National Bank of Chicago, and various lenders. 10.25 Amendment No. 5 to Credit Agreement, dated as of June 15, 2000, among IFR Systems, Inc., The First National Bank of Chicago, and various lenders. 21.0 Subsidiaries of the Registrant 23.0 Consent of Ernst & Young LLP 27.0 Financial Data Schedule
- ------------------------ * Document has been previously filed with the Securities and Exchange Commission and is incorporated by reference and made a part hereof. 43 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the under signed, thereunto duly authorized. IFR SYSTEMS, INC. June 28, 2000 By /s/ JEFFREY A. BLOOMER ------------------------------------------ Jeffrey A. Bloomer PRESIDENT AND CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
DATE TITLE SIGNATURE ---- ----- --------- June 28, 2000 Chairman of the Board of Directors /s/ ALFRED H. HUNT, III And Chief Technology Officer -------------------------------------- Alfred H. Hunt, III June 28, 2000 President and Chief Executive Officer /s/ JEFFREY A. BLOOMER (Principal Executive Officer) -------------------------------------- Director Jeffrey A. Bloomer June 28, 2000 Director /s/ WILTON W. COGSWELL, III -------------------------------------- Wilton W. Cogswell, III June 28, 2000 Director /s/ DONALD L. GRAF -------------------------------------- Donald L. Graf June 28, 2000 Director /s/ JOHN V. GROSE -------------------------------------- John V. Grose June 28, 2000 Director /s/ OSCAR L. TANG -------------------------------------- Oscar L. Tang June 28, 2000 Director /s/ RALPH R. WHITNEY, JR. -------------------------------------- Ralph R. Whitney, Jr. June 28, 2000 Treasurer And Chief Financial Officer /s/ DENNIS H. COLEY (Principal Accounting Officer) -------------------------------------- Dennis H. Coley
44 IFR SYSTEMS, INC SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
COL. A COL. B COL C. COL. D COL. E - ---------------------------- ------------------- ------------------------------------- ------------ ----------- ADDITIONS ------------------------------------- BALANCE AT CHARGED TO COSTS CHARGED TO OTHER DEDUCTIONS-- BALANCE AT DESCRIPTION BEGINNING OF PERIOD AND EXPENSES ACCOUNTS--DESCRIBE DESCRIBE(1) END OF YEAR - ---------------------------- ------------------- ---------------- ------------------ ------------ ----------- Year ended March 31,2000: Allowance for doubtful accounts (deducted in balance sheet from accounts receivable).... 730,767 91,000 -- 222,123 599,644 Year ended March 31,1999: Allowance for doubtful accounts (deducted in balance sheet from accounts receivable).... 773,173 122,000 -- 164,406 730,767 Year ended June 30,1998: Allowance for doubtful accounts (deducted in balance sheet from accounts receivable).... 368,773 180,000 303,000 78,600 773,173
Note 1: Uncollectible accounts receivable charged off, less recoveries and Discontinued Operations of OTM Division. EX-10.5 2 ex-10_5.txt EXHIBIT 10.5 EXHIBIT 10.5 TERMINATION AGREEMENT THIS AGREEMENT, dated and effective as of the ______ day of _________________, 2000, is made and entered into by and between IFR SYSTEMS, INC., a Delaware corporation ("IFR"), and DENNIS COLEY ("Executive"). WHEREAS, Executive has made and is expected to make a major contribution to the profitability, growth and financial strength of IFR; and WHEREAS, IFR considers the continued services of Executive to be in the best interests of IFR and its shareholders and desires to assure the continued services of Executive on behalf of IFR on an objective and impartial basis and without distraction or conflict of interest in the event of an attempt to change control of IFR; and WHEREAS, Executive is willing to remain in the employ of IFR upon the understanding that IFR will provide him with income security upon the terms and subject to the conditions reflected herein. NOW THEREFORE, in consideration of the promises and the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows: SECTION 1. PAYMENT OF AMOUNTS TO EXECUTIVE. IFR will pay to Executive the benefits described in Section 2 hereof in the event that: (a) a Change of Control (as defined in Section 3 hereof) of IFR occurs; and (b) Executive's employment with IFR is terminated within two years after the Change of Control occurs either (i) by IFR for any reason other than Serious Executive Misconduct (as defined in Section 4 hereof), death, normal retirement, or permanent and total disability (defined as the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months), or (ii) by Executive for Good Reason (as defined in Section 5 hereof). SECTION 2. BENEFITS TO BE PAID TO EXECUTIVE. If required by the terms of Section 1 of this Agreement, IFR will pay to Executive the following benefits, in the time and manner described: SECTION 2.01. SALARY AND BONUS. IFR will pay to Executive within ten (10) days of the termination of his employment: (1) any amount of salary and bonus or incentive compensation due; and (2) any portions thereof earned or accrued but not yet due to Executive at the time of the termination of his employment. In addition, with respect to any bonus or 1 incentive compensation based upon performance goals for a fiscal year or other period of time which has not then expired, IFR shall, within sixty (60) days following the expiration of such fiscal year or other period of time, pay to Executive the pro rata portion of any such bonus or 2 incentive compensation applicable to the portion of such fiscal year or other period of time prior to the termination of employment. IFR will also pay to Executive as severance compensation in a lump-sum payment within ten (10) days of the termination of his employment an amount equal to 2.95 times Executive's Average Annual Compensation. For purposes of this Agreement, the term "Average Annual Compensation" shall mean the average of Executive's salary, bonuses, and incentive compensation (exclusive of compensation under any stock option, stock appreciation right or other similar equity based compensation arrangement maintained by IFR or any of its subsidiaries or affiliates which was includible in the gross income of Executive for federal income tax purposes) for the five (5) most recent taxable years (or such shorter period as Executive has been employed) of Executive ending before the date on which the Change of Control occurred. Average Annual Compensation shall not include reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, and welfare benefits. Average Annual Compensation shall, however, include Elective Contributions made by IFR on Executive's behalf. "Elective Contributions" are amounts excludable from Executive's gross income under Code Sections 125, 402(a)(8), 402(h), or any nonqualified deferred compensation plan. SECTION 2.02. RETIREMENT PLANS. For the purposes of any employee pension plan maintained by IFR or any of its subsidiaries or affiliates in which Executive is a participant, Executive shall be deemed to be fully vested as of the date of the termination of his employment. IFR will pay to Executive within ten (10) days of the immediately following plan valuation date the difference between such deemed amount and Executive's actual account balance(s) in such plan(s) (valued as of the immediately following plan valuation date). IFR will also pay to Executive, at the same time and as an additional benefit under this Agreement, an amount equal to fifty percent (50%) of any payment made under this Section 2.02. SECTION 2.03. DISABILITY AND MEDICAL INSURANCE BENEFITS. Until the sooner of (1) the date which is three years after the termination of Executive's employment, or (2) the date of death of Executive, IFR will maintain in full force and effect all disability and medical insurance policy, plan or program coverage benefits for Executive to which Executive was entitled immediately prior to the termination of Executive's employment. If the terms of any disability or medical insurance policy, plan or program maintained by IFR do not permit the continued coverage of, and participation, by Executive, then IFR will arrange to provide to Executive a benefit substantially similar to, and at least as favorable as, the incremental benefit which Executive would have been entitled to receive under any such IFR policy, plan or program had the coverage and participation by Executive in such policy, plan or program continued from the date of Executive's termination of employment until a date three years thereafter. If the provision of the above benefits results in additional income being imputed to Executive for purposes of income or other taxes, within ten (10) days of Executive giving notice of the imputation of such income, IFR will pay to Executive, as an additional benefit under this Agreement, an amount equal to fifty percent (50%) of the amount of additional income being imputed to Executive as a result of the benefits provided under this Section 2.03. 3 Executive shall also have the option, in lieu of the continuation of benefits for the three year period described above, to have assigned to him at no cost, and with no apportionment of prepaid premiums, any assignable disability or medical insurance policy specifically relating to Executive which is owned by IFR. SECTION 2.04 LIFE INSURANCE. Notwithstanding the terms of any other agreement to which IFR and Executive may be parties, Executive shall have the option to have assigned to him, or to a trust established by him, in a manner that will cause him not to incur any loss, cost or expense, and with no apportionment of prepaid premiums, any assignable life insurance policy specifically relating to Executive which is owned by IFR. For this purpose, the phrase "loss, cost or expense" shall include, without limitation, indebtedness to the insurer, IFR or any other party, federal or state income tax liability, or any other indebtedness. If the assignment would, in the opinion of legal counsel selected by Executive in the manner provided in the following sentence, result in such a loss, cost or expense, IFR shall pay Executive, when it makes the assignment, an amount of cash equal to the amount of any such loss, cost or expense. In the event that Executive directs IFR to make such an assignment, IFR shall not cause any such assignment to occur without having first received from legal counsel selected by Executive an opinion that the manner of assignment proposed by IFR satisfies the terms and conditions of this Section 2.04 and the remainder of this Agreement. IFR shall pay all legal fees and expenses incurred by Executive in securing such opinion. SECTION 2.05. TAXES. In addition to the above payments and benefits, within ten (10) days of the termination of Executive's employment, IFR will pay to Executive, as an additional benefit under this Agreement, the amount of any tax imposed on Executive by Section 4999 of the Internal Revenue Code of 1986, as amended, and any similar provision of any state tax code as a result of receiving payments and benefits under this Agreement. Because such payment will itself constitute compensation includible in Executive's gross income for income tax purposes, IFR will also pay to Executive, as an additional benefit under this Agreement, an amount equal to the incremental federal and state income taxes incurred by Executive as a result of receiving any payments under this Section 2.05 including the payment called for in this sentence. For purposes of this section 2.05 it shall at all times be presumed that Executive is subject to federal and state income taxes at the highest marginal rates then in effect, including surcharge rates. SECTION 3. DEFINITION OF CHANGE OF CONTROL. For purposes of this Agreement, a "Change of Control" shall occur upon any Person (meaning any individual, firm, corporation, partnership or other entity including any successor of any such Person) together with all Affiliates and Associates (having the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 (the "Exchange Act")) of such Person becoming the beneficial Owner (as defined below) of twenty percent (20%) or more of the Common Stock then outstanding; excluding IFR, any subsidiary of IFR (meaning with reference to IFR, any corporation or other entity of which a majority of the voting power of the voting securities or equity interest is beneficially owned, directly or indirectly, by IFR, or 4 otherwise controlled by IFR), any employee benefit plan of IFR or of any Subsidiary of IFR, or any Person or entity organized, appointed or established by IFR for or pursuant to the terms of any such plan. Notwithstanding the foregoing, a Change of Control will not occur as the result of an acquisition of shares of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by a Person to twenty percent (20%) or more of the shares of the Common Stock then outstanding; PROVIDED, HOWEVER, that if a Person shall become the Beneficial Owner of twenty percent (20%) or more of the shares of the Common Stock then outstanding by reason of share purchases by IFR, and shall, after such share purchases by IFR, become the Beneficial Owner of any additional shares of the Common Stock, then a Change in Control shall be deemed to have occurred. For purposes of this Agreement a Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own" any securities (i) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), whether or not in writing; or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own" securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding, whether or not in writing; PROVIDED, HOWEVER, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own" any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy or consent given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person's Affiliates or Associates) has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with 5 respect to a bona fide public offering of securities), whether or not in writing, for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph) or disposing of any voting securities of IFR. Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding," when used with reference to a Person's Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder. SECTION 4. DEFINITION OF SERIOUS EXECUTIVE MISCONDUCT. For purposes of this Agreement, the term "Serious Executive Misconduct" shall mean an act or acts by Executive which: (a) would constitute a felony under Delaware law; or (b) were dishonest and which resulted in, or were intended by Executive to directly or indirectly result in, the personal enrichment of Executive at IFR's expense. SECTION 5. DEFINITION OF GOOD REASON. For purposes of this Agreement, Executive shall have "Good Reason" to terminate his employment with IFR if: (a) Executive is assigned any duties or responsibilities which are inconsistent with his position, duties, responsibilities or status on the date of this Agreement, or his reporting responsibilities or titles in effect on the date of this Agreement are changed; (b) Executive's base compensation is reduced or he experiences in any year a reduction in the ratio of his incentive and bonus compensation to his base compensation in excess of the reduction which would have occurred under the incentive and bonus formula in effect immediately prior to the Change of Control; (c) Executive is transferred to a principal work location which would reasonably require a change in Executive's residence; or (d) any provision of this Agreement is breached by IFR. SECTION 6. TERM. The term of this Agreement (the "Term") shall begin on the date of this Agreement and shall continue until December 31, 2000, and thereafter, this Agreement shall be automatically renewed for successive one-year terms unless terminated by either party giving the other written notice of termination at least ninety (90) days prior to the expiration of such original term or any such renewal term; PROVIDED, HOWEVER, THAT if a Change of Control occurs on or before December 31, 2000 or on or before the expiration of any renewal term, the Term of this Agreement shall continue at least until the date which is three years after the 6 anniversary date of this Agreement which first follows the date on which a Change of Control occurs. SECTION 7. ENFORCEMENT OF AGREEMENT. IFR is aware that upon the occurrence of a Change of Control the Board of Directors or a shareholder of IFR may then cause, or attempt to cause, IFR to refuse to comply with its obligations under this Agreement, or make, cause, or attempt to cause IFR to institute, or may institute litigation seeking to have this Agreement declared unenforceable, or may take or attempt to take, other action to deny Executive the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of IFR that Executive not be required to incur the expenses associated with the enforcement of his rights under this Agreement by litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Executive hereunder. It is also the intent of IFR that Executive not be bound to negotiate any settlement of his rights hereunder under threat of incurring such expenses. Accordingly, if following a Change of Control, it should appear to Executive that IFR has failed to comply with any of its obligations under this Agreement, or in the event that IFR or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from Executive the benefits entitled to be provided to Executive hereunder, and if Executive has complied with all of his obligations under this Agreement, then: (a) IFR irrevocably authorizes Executive from time to time to retain counsel of his choice at the expense of IFR as provided in this Section 7 to represent Executive in connection with the initiation or defense of any litigation or other legal action whether by or against IFR or any director, officer, shareholder, or other person affiliated with IFR, in any jurisdiction notwithstanding any existing or prior attorney-client relationship between IFR and such counsel; and (b) IFR irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and IFR and Executive agree that a confidential relationship shall exist between Executive and such counsel. The reasonable fees and expenses of counsel selected from time to time by Executive as hereinabove provided, and all other costs and expenses (including court costs) incurred by Executive as a result of any claim, action or proceeding arising out of, or challenging the validity, admissibility or enforceability of this Agreement or any provision hereof, shall be paid (or reimbursed to Executive) by IFR on a regular basis upon presentation by Executive of a statement or statements prepared by his counsel in accordance with its customary practices, up to a maximum aggregate amount of $750,000. SECTION 8. SEVERANCE PAY; NO DUTY TO MITIGATE. All amounts payable to Executive under this Agreement shall not be treated as damages but as severance compensation to which Executive is entitled by reason of the termination of his employment in the circumstances contemplated by this Agreement. Executive shall not be required to mitigate the amount of a 7 payment or benefit provided for in this Agreement by seeking other employment or otherwise. IFR shall not be entitled to set off against the amounts payable to Executive any amounts earned by Executive in other employment after termination of his employment with IFR, or any amounts which might or could have been earned by Executive in other employment had he sought such other employment. SECTION 9. CONTINUED EMPLOYMENT OF EXECUTIVE AFTER POTENTIAL CHANGE OF CONTROL. Subject to the provisions of this Agreement, Executive agrees to remain in the employ of IFR for a period of at least one (1) year following the occurrence of a Potential Change of Control. For purposes of this Agreement, a "Potential Change of Control" shall be deemed to have occurred if: (a) IFR enters into an agreement the consummation of which would result in the occurrence of a Change of Control within the meaning of Section 3 of this Agreement; (b) if any person, including IFR, publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change of Control within the meaning of Section 3 of this Agreement; (c) if any person becomes the beneficial owner, directly or indirectly, of securities representing ten percent (10%) or more of the voting power of IFR's then outstanding voting shares; or (d) the Board of Directors of IFR adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change of Control has occurred. SECTION 10. OTHER PROVISIONS. SECTION 10.01. ASSIGNMENT. No right, benefit or interest hereunder shall be subject to assignment, anticipation, alienation, sale, encumbrance, charge, pledge, hypothecation or set off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process; provided, however, that Executive may assign any right, benefit or interest hereunder if such assignment is permitted under the terms of any plan or policy of insurance or annuity contract governing such right, benefit or interest. SECTION 10.02. MODIFICATION. This Agreement may not be amended, modified, supplemented or cancelled except by written agreement of the parties. SECTION 10.03. WAIVER. No provision of this Agreement may be waived except by a writing signed by the party to be bound thereby. SECTION 10.04. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. SECTION 10.05. BINDING ON SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of Executive (and his personal representatives, heirs and assigns). This Agreement shall also be binding upon and inure to the benefit of IFR and any successor organization or organizations which shall succeed to substantially all of the business and 8 property of IFR, whether by means of merger, consolidation, acquisition of substantially all of the assets of IFR or otherwise, including by operation of law. SECTION 10.06. NOTICES. Except as specifically set forth in this Agreement, all notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered in person or sent by registered or certified mail, postage prepaid, addressed as set forth below, or to such other address as shall be furnished in writing by the party which is the addressee to the other party: If to IFR: IFR Systems, Inc. 10200 West York Street Wichita, Kansas 67215 If to Executive: Dennis H. Coley 2322 High Point Court Wichita, KS 67205 SECTION 10.07. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. All representations, promises and prior or contemporaneous understandings between the parties are merged into and expressed in this Agreement. SECTION 10.08. GOVERNING LAW. This Agreement has been made pursuant to, and shall be governed and construed in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above. IFR SYSTEMS, INC. By______________________________________ Jeffrey A. Bloomer, President & Chief Executive Officer EXECUTIVE ------------------------------------------- DENNIS H. COLEY 9 EX-10.24 3 ex-10_24.txt EXHIBIT 10.24 Exhibit 10.24 AMENDMENT NO. 4 Dated as of October 15, 1999 to AMENDED AND RESTATED CREDIT AGREEMENT Dated as of March 19, 1998 THIS AMENDMENT NO. 4 ("Amendment") is made as of October 15, 1999 by and among IFR SYSTEMS, INC. (the "Borrower"), the financial institutions parties hereto as Lenders, and BANK ONE, NA, formerly known as THE FIRST NATIONAL BANK OF CHICAGO, in its capacity as contractual representative (the "Agent") under that certain Amended and Restated Credit Agreement dated as of March 19, 1998 by and among the Borrower, the Lenders and the Agent, as amended by an Amendment No. 1 and Waiver dated as of November 3, 1998, an Amendment No. 2 dated as of March 31, 1999, and an Amendment No. 3 dated as of June 25, 1999 (as amended and as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrower, the Lenders and the Agent are parties to the Credit Agreement; and WHEREAS, the Borrower has requested that the Agent and the Required Lenders amend the Credit Agreement in certain respects, and the Required Lenders and the Agent are willing to amend the Credit Agreement on the terms and conditions set forth herein, it being expressly understood that the modifications set forth herein shall in no event constitute a waiver by the Lenders or the Agent of any breach of the Credit Agreement or any of the Lenders' or Agent's rights or remedies with respect thereto; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the Agent have agreed to the following amendments to the Credit Agreement: 1. AMENDMENT TO CREDIT AGREEMENT. Effective as of the Effective Date (as defined below) and subject to the satisfaction of the conditions precedent set forth in SECTION 2 below, the Credit Agreement is hereby amended as follows: 1.1 SECTION 1.1 of the Credit Agreement is amended to insert the following immediately prior to the period (".") now appearing at the end of the definition of "EBITDA": ", PLUS (xi) any non-recurring restructuring charges incurred in fiscal year 1999 related to payment of severance to employees of the Borrower up to $2,000,000 in the aggregate to the extent deducted in computing Net Income". 2. CONDITIONS OF EFFECTIVENESS. The effectiveness of this Amendment is subject to the condition precedent that the Agent shall have received the following documents: (i) duly executed originals of this Amendment from the Borrower, the Required Lenders and the Agent; (ii) duly executed originals of the Reaffirmation attached hereto from each Domestic Incorporated Subsidiary of the Borrower; and (iii) such other documents, instruments and agreements as the Agent may reasonably request. Upon the satisfaction of the foregoing conditions precedent, this Amendment shall be deemed effective as of October 15, 1999 (the "Effective Date"). 3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as previously executed and as amended hereby, constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms. (b) Upon the effectiveness of this Amendment, the Borrower hereby reaffirms all covenants, representations and warranties made in the Credit Agreement, as amended hereby, and agrees that all such covenants, representations and warranties shall be deemed to have been remade as of the Effective Date of this Amendment. 4. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT. (a) Upon the effectiveness of SECTION 1 hereof, each reference to the Credit Agreement in the Credit Agreement and each other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS 105/5-1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS. 2 6. HEADINGS. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 7. COUNTERPARTS. This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 3 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. IFR SYSTEMS, INC. By: ____________________________ Name: Title: BANK ONE, NA, FORMERLY KNOWN AS THE FIRST NATIONAL BANK OF CHICAGO, as Agent and as Lender By: ____________________________ Name: Title: INTRUST BANK, as a Lender By: ____________________________ Name: Title: THE BANK OF NOVA SCOTIA, as a Lender By: ____________________________ Name: Title: HARRIS TRUST AND SAVINGS BANK, as a Lender By: ____________________________ Name: Title: 4 NATIONAL WESTMINSTER BANK PLC, as a Lender By: ____________________________ Name: Title: UNION BANK OF CALIFORNIA, N.A., as a Lender By: ____________________________ Name: Title: LLOYDS TSB BANK PLC, as a Lender By: ____________________________ Name: Title: 5 REAFFIRMATION Each of the undersigned hereby acknowledges receipt of a copy of the foregoing Amendment No. 4 to the Amended and Restated Credit Agreement dated as of March 19, 1998 by and among IFR Systems, Inc., a Delaware corporation (the "Borrower"), the lenders from time to time parties thereto (collectively, the "Lenders") and Bank One, NA, formerly known as The First National Bank of Chicago, as one of the Lenders and in its capacity as contractual representative (the "Agent") on behalf of itself and the other Lenders, as amended by an Amendment No. 1 and Waiver and an Amendment No. 2 dated as of November 3, 1998 and March 31, 1999, respectively (as amended and as the same may be amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT") which Amendment No. 4 is dated as of October 15, 1999 (the "AMENDMENT"). Capitalized terms used in this Reaffirmation and not defined herein shall have the meanings given to them in the Credit Agreement. Without in any way establishing a course of dealing by the Agent or any Lender, each of the undersigned reaffirms the terms and conditions of the Guaranty, Security Agreement and any other Loan Document executed by it and acknowledges and agrees that such agreement and each and every such Loan Document executed by the undersigned in connection with the Credit Agreement remains in full force and effect and are hereby reaffirmed, ratified and confirmed. All references to the Credit Agreement contained in the above-referenced documents shall be a reference to the Credit Agreement as so modified by the Amendment and as the same may from time to time hereafter be amended, modified or restated. Dated: October 15, 1999 IFR AMERICAS, INC., formerly known as IFR Instruments, Inc. PK TECHNOLOGY, INC. IFR INSTRUMENTS OF TEXAS, INC., formerly known as Marconi Instruments, Inc. IFR FINANCE, INC. By __________________________ Name: Title: 6 EX-10.25 4 ex-10_25.txt EXHIBIT 10.25 EXHIBIT 10.25 AMENDMENT NO. 5 Dated as of June 15, 2000 to AMENDED AND RESTATED CREDIT AGREEMENT Dated as of March 19, 1998 THIS AMENDMENT NO. 5 ("Amendment") is made as of June 15, 2000 by and among IFR SYSTEMS, INC. (the "Borrower"), the financial institutions parties hereto as Lenders, and BANK ONE, NA, formerly known as THE FIRST NATIONAL BANK OF CHICAGO, in its capacity as contractual representative (the "Agent") under that certain Amended and Restated Credit Agreement dated as of March 19, 1998 by and among the Borrower, the Lenders and the Agent, as amended by an Amendment No. 1 and Waiver dated as of November 3, 1998, an Amendment No. 2 dated as of March 31, 1999, an Amendment No. 3 dated as of June 25, 1999 and an Amendment No. 4 dated as of October 15, 1999 (as amended and as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrower, the Lenders and the Agent are parties to the Credit Agreement; and WHEREAS, the Borrower has informed the Agent and the Lenders that certain Defaults have occurred as result of the Borrower's noncompliance with (i) the Minimum Fixed Charge Coverage Ratio financial covenant set forth in SECTION 7.4(A) of the Existing Credit Agreement, and (ii) the Maximum Leverage Ratio financial covenant set forth in SECTION 7.4(B) of the Existing Credit Agreement, in each case for the fiscal period ending on December 31, 1999 (collectively, the "Specified Defaults"); and WHEREAS, the Borrower has requested that the Agent and the Required Lenders (i) waive the Specified Defaults, and (ii) amend the Credit Agreement in certain respects, and the Required Lenders and the Agent are willing to waive the Specified Defaults and amend the Credit Agreement on the terms and conditions set forth herein, it being expressly understood that the modifications set forth herein shall in no event constitute a waiver by the Lenders or the Agent of any breach of the Credit Agreement (other than the Specified Defaults) or any of the Lenders' or Agent's rights or remedies with respect thereto; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the Agent have agreed to the following modifications to the Credit Agreement: 1. WAIVER OF SPECIFIED DEFAULTS. Effective as of the Effective Date and subject to the satisfaction of the conditions precedent set forth in SECTION 3 hereof, the Agent and the Required Lenders hereby agree to waive the Specified Defaults, and the Lender's and the Agent's rights and remedies arising therefrom. 2. AMENDMENT TO CREDIT AGREEMENT. Effective as of the Effective Date (as defined below) and subject to the satisfaction of the conditions precedent set forth in SECTION 3 below, the Credit Agreement is hereby amended as follows: 2.1. SECTION 1.1 of the Credit Agreement is amended to delete the phrase "Twenty-Five Million and 00/100 Dollars ($25,000,000)" now appearing in the definition of "AGGREGATE REVOLVING LOAN COMMITMENT", and to substitute the following therefor: "Twenty-Three Million and 00/100 Dollars ($23,000,000)". 2.2. SECTION 1.1 of the Credit Agreement is amended to delete the phrase "Corporate Base Rate" now appearing in the definition of "ALTERNATE BASE RATE", and to substitute the following therefor: "Prime Rate". 2.3. SECTION 1.1 of the Credit Agreement is amended to delete the phrase "SECTION 2.15(D)(ii)" now appearing in the definition of "APPLICABLE COMMITMENT FEE PERCENTAGE", "APPLICABLE EUROCURRENCY RATE MARGINS" and "APPLICABLE FLOATING RATE MARGINS", and to substitute the following therefor: "SECTION 2.15(D)". 2.4. SECTION 1.1 of the Credit Agreement is amended to delete the definition of "CORPORATE BASE RATE" now appearing therein. 2.5. SECTION 1.1 of the Credit Agreement is amended to insert the following immediately prior to the period (".") now appearing at the end of the definition of "EBITDA": ", PLUS (xii) any non-recurring restructuring charges incurred during the period commencing on October 1, 1999 through March 31, 2000 up to $1,600,000 in the aggregate to the extent deducted in computing Net Income, PLUS (xiii) all fees and costs paid to KPMG LLC, PriceWaterhouseCoopers and the Borrower's attorneys related to their review of the Borrower's and its Subsidiaries' financial operations and conditions and the preparation of Amendment No. 5 to this Agreement, to the extent such costs are not capitalized and to the extent deducted in computing Net Income, PLUS (xiv) any net gain on the sale of the Borrower's machine shop located in Wichita, Kansas to the extent deducted in computing Net Income, PLUS (xv) up to $1,000,000 in cost reductions accrued during fiscal year ended March 31, 2001 to the extent deducted in computing Net Income". 2.6. SECTION 1.1 of the Credit Agreement is hereby amended to delete the definition of "Floating Rate" in its entirety, and to substitute the following therefor: "FLOATING RATE" means, for any day for any Loan, a rate per annum equal to the Alternate Base Rate for such day, changing and as the Alternate Base Rate changes, PLUS the then Applicable Floating Rate Margin. 2 2.7. SECTION 1.1 of the Credit Agreement is hereby amended to delete the phrase "Aggregate Revolving Loan Commitment" now appearing in the definition of "REVOLVING CREDIT AVAILABILITY" and to substitute the following therefor: "Maximum Revolving Credit Amount". 2.8. SECTION 1.1 of the Credit Agreement is hereby amended to delete the phrase "February 5, 2004" now appearing in the definition of "REVOLVING LOAN TERMINATION DATE", and to substitute the following therefor: "June 30, 2002; PROVIDED, that such date shall be automatically extended to June 30, 2003 if (i) no Default or Unmatured Default shall have occurred and is continuing as of June 30, 2002, (ii) the Borrower shall have permanently reduced the aggregate outstanding amount of the Term Loans and Revolving Credit Obligations (and shall have permanently reduced the Aggregate Revolving Loan Commitment on a dollar-for-dollar basis) to an amount less than or equal to $50,000,000 on or before June 30, 2002, and (iii) not less than 30 days prior to June 30, 2002, the Borrower, the Agent and the Lenders shall have entered into an amendment reflecting amendments and other modifications to the financial covenants set forth in SECTION 7.4 after giving effect to such reductions on terms satisfactory to the Agent and the Required Lenders". 2.9. SECTION 1.1 of the Credit Agreement is hereby amended to delete the phrase "February 5, 2004" now appearing in the definition of "TRANCHE A TERM LOAN TERMINATION DATE", and to substitute the following therefor: "June 30, 2002; PROVIDED, that such date shall be automatically extended to June 30, 2003 if (i) no Default or Unmatured Default shall have occurred and is continuing as of June 30, 2002, (ii) the Borrower shall have permanently reduced the aggregate outstanding amount of the Term Loans and Revolving Credit Obligations (and shall have permanently reduced the Aggregate Revolving Loan Commitment on a dollar-for-dollar basis) to an amount less than or equal to $50,000,000 on or before June 30, 2002, and (iii) not less than 30 days prior to June 30, 2002, the Borrower, the Agent and the Lenders shall have entered into an amendment reflecting amendments and other modifications to the financial covenants set forth in SECTION 7.4 after giving effect to such reductions on terms satisfactory to the Agent and the Required Lenders". 2.10. SECTION 1.1 of the Credit Agreement is hereby amended to delete the phrase "February 5, 2005" now appearing in the definition of "TRANCHE B TERM LOAN TERMINATION DATE", and to substitute the following therefor: "June 30, 2002; PROVIDED, that such date shall be automatically extended to June 30, 2003 if (i) no Default or Unmatured Default shall have occurred and is continuing as of June 30, 2002, (ii) the Borrower shall have permanently reduced the aggregate outstanding amount of the Term Loans and Revolving Credit Obligations (and shall have permanently reduced the Aggregate Revolving Loan Commitment on a dollar-for-dollar basis) to an amount less than or equal to $50,000,000 on or before June 30, 2002, and (iii) not less than 30 days prior to June 30, 2002, the Borrower, the Agent and the Lenders shall have entered into an amendment reflecting amendments and other modifications to the financial covenants set forth in 3 SECTION 7.4 after giving effect to such reductions on terms satisfactory to the Agent and the Required Lenders". 2.11. SECTION 1.1 of the Credit Agreement is amended to insert the following new definitions alphabetically therein: "ACCOUNT DEBTOR" means the account debtor or obligor with respect to any of the Receivables and/or the prospective purchaser with respect to any contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with the Borrower or any of its Subsidiaries. "BORROWING BASE" means, as of any date of calculation, an amount, as set forth on the most current Borrowing Base Certificate delivered to the Agent, equal to (i) seventy percent (70%) of Eligible Receivables PLUS (ii) forty percent (40%) of Eligible Inventory. "BORROWING BASE CERTIFICATE" means a certificate, in substantially the form of EXHIBIT K attached hereto and made a part hereof, setting forth the Borrowing Base and the component calculations thereof. "ELIGIBLE INVENTORY" means (i) all Inventory which is held for sale or lease in the ordinary course of business by the Borrower or any of its Subsidiaries or furnished under any contract of service by the Borrower or any of its Subsidiaries in the ordinary course of business, valued at the lower of cost determined on a first-in-first-out basis (determined in accordance with Agreement Accounting Principles, consistently applied) or market value, MINUS (ii) all such Inventory which is work-in-progress, MINUS (iii) all such Inventory which is obsolete, not in good condition, not either currently usable or currently saleable in the ordinary course of the Borrower's or any of its Subsidiaries' business. "ELIGIBLE RECEIVABLES" means (i) the outstanding face amount of all Receivables created by the Borrower or any of its Subsidiaries in the ordinary course of its business arising out of the sale of goods or rendition of services by the Borrower or any of its Subsidiaries, determined in accordance with Agreement Accounting Principles, consistently applied, MINUS (ii) all such Receivables which remain unpaid sixty (60) days after the date due under the original applicable invoice, MINUS (iii) all such Receivables owing by a single Account Debtor (including a Receivable which remains unpaid fewer than sixty (60) days after the date due under the original applicable invoice) if twenty-five percent (25%) of the balance owing by such Account Debtor, calculated without taking into account any credit balances of such Account Debtor, remains unpaid sixty (60) days after the date due under the original applicable invoice, MINUS (iv) all such Receivables with respect to which the Account Debtor is the Borrower or a director, officer, employee, Subsidiary or Affiliate of the Borrower. "MAXIMUM REVOLVING CREDIT AMOUNT" means, at any particular time, the lesser of (A) the Aggregate Revolving Loan Commitment at such time, and (B) the Borrowing Base at such time. 4 "PRIME RATE" means the prime rate of interest announced by the Agent or its parent from time to time (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. 2.12. SECTION 2.2 of the Credit Agreement is amended to delete each occurrence of the phrase "Aggregate Revolving Loan Commitment" now appearing therein, and to substitute the following therefor: "Maximum Revolving Credit Amount". 2.13. SECTION 2.5(A) of the Credit Agreement is amended to insert the following new sentence immediately at the end thereof: "Unless the aggregate outstanding principal balance of the Revolving Loans or Swing Line Loans is to be prepaid in full, voluntary prepayments of the Revolving Loans and Swing Line Loans shall be in an aggregate minimum amount of $100,000 and integral multiples of $100,000 in excess of that amount." 2.14. SECTION 2.5(B)(ii) of the Credit Agreement is amended to delete each occurrence of the phrase "Aggregate Revolving Loan Commitment" now appearing therein, and to substitute the following therefor: "Maximum Revolving Credit Amount". 2.15. SECTION 2.9 of the Credit Agreement is amended to delete the phrase "Aggregate Revolving Loan Commitment" now appearing therein, and to substitute the following therefor: "Maximum Revolving Credit Amount". 2.16. SECTION 2.15(C) of the Credit Agreement is amended to insert the following new CLAUSE (iii) at the end thereof: "(iii) The Borrower shall pay to the Agent for the account of each Lender, on the date the Obligations are paid in full and all of the Lenders' Commitments shall have been terminated, a success fee (the "Success Fee") in an amount calculated pursuant to the following criteria: (a) If all of the Obligations shall have been paid in full in cash and all of the Lenders' Commitments shall have been terminated on or before September 30, 2001, the Success Fee shall be equal to 0.50% of each Lender's Commitment as in effect immediately prior to such termination; (b) If all of the Obligations shall have been paid in full in cash and all of the Lenders' Commitments shall have been terminated after September 30, 2001 but on or before December 31, 2001, the Success Fee shall be equal to 0.75% of each Lender's Commitment as in effect immediately prior to such termination; (c) If all of the Obligations shall have been paid in full in cash and all of the Lenders' Commitments shall have been terminated after December 31, 2001 but on or before March 31, 2002, the Success Fee shall be equal to 1.00% of each Lender's Commitment as in effect immediately prior to such termination; 5 (d) If all of the Obligations shall have been paid in full in cash and all of the Lenders' Commitments shall have been terminated after March 31, 2002, the success fee shall be equal to 1.25% of each Lender's Commitment immediately prior to such termination; PROVIDED, that if (x) the Leverage Ratio of the Borrower shall be less than 4.25 to 1.0 for any fiscal quarter ending on or before September 30, 2001 (and each successive fiscal quarter thereafter), and (y) no Default or Unmatured Default shall have occurred and is continuing, such Success Fee shall be reduced by an amount equal to 0.25%; PROVIDED, FURTHER, that such Success Fee shall be automatically increased on September 30, 2001 by an amount equal to 0.25% unless, in addition to payments of the scheduled installments of principal in respect of the Term Loans, the aggregate outstanding amount of the Obligations and the Lenders' Commitments shall have been permanently reduced by an amount greater than or equal to $12,000,000 on or before September 30, 2001." 2.17. SECTION 2.15(D)(ii) of the Credit Agreement (including the pricing grid now appearing therein) is hereby deleted, and the following is substituted therefor: " (ii) The Applicable Floating Rate Margin for Swing Line Loans shall be 2.00% per annum. The Applicable Floating Rate Margin for Tranche A Term Loans and Revolving Loans (other than Swing Line Loans) shall be 2.25% per annum. The Applicable Floating Rate Margin for Tranche B Term Loans shall be 2.75% per annum. The Applicable Eurocurrency Margin for Tranche A Term Loans and Revolving Loans shall be 3.25% per annum. The Applicable Eurocurrency Margin for Tranche B Term Loans shall be 3.75% per annum. The Applicable Commitment Fee Percentage shall be 0.50% per annum." 2.18. Section 2.15(D) of the Credit Agreement is amended to insert the following new CLAUSE (v) at the end thereof: "(v) Notwithstanding anything herein to the contrary, for each fiscal quarter commencing with the fiscal quarter ending on December 31, 2000, the Applicable Commitment Fee Percentage, the Applicable Eurocurrency Margins, the Applicable Floating Rate Margins and the Applicable L/C Fee Percentage shall be (x) increased by an amount equal to 0.25% if the Leverage Ratio is greater than or equal to the Leverage Ratio set forth opposite such period below, or (y) decreased by an amount equal to 0.25% if the Leverage Ratio is less than the Leverage Ratio set forth opposite such period below: Fiscal Quarter End Leverage Ratio ------------------ -------------- December 31, 2000 5.20 to 1.0 March 31, 2001 5.20 to 1.0 June 30, 2001 5.10 to 1.0 September 30, 2001 4.90 to 1.0 December 31, 2001 4.40 to 1.0 6 March 31, 2002 4.10 to 1.0 ; PROVIDED, that in no event shall the Applicable Commitment Fee Percentage, the Applicable Eurocurrency Margins, the Applicable Floating Rate Margins or the Applicable L/C Fee Percentage be reduced to a percentage less than the percentages as in effect immediately prior to the effectiveness of Amendment 5 to this Agreement." 2.19. SECTION 3.3 of the Credit Agreement is hereby amended to delete the phrase "Aggregate Revolving Loan Commitment" now appearing in CLAUSE (i) thereof, and to substitute the following therefor: "Maximum Revolving Credit Amount". 2.20. SECTION 5.2 of the Credit Agreement is hereby amended to delete the phrase "Aggregate Revolving Loan Commitment" now appearing in CLAUSE (iii) thereof, and to substitute the following therefor: "Maximum Revolving Credit Amount". 2.21. SECTION 7.1(A) of the Credit Agreement is hereby amended to insert the following new CLAUSES (v), (vi) and (vii) at the end thereof: "(v) BORROWING BASE CERTIFICATE. As soon as practicable, and in any event within ten (10) Business Days after the close of each calendar month (and more often if reasonably requested by the Agent or the Required Lenders following the occurrence and during the continuation of a Default or Event of Default), the Borrower shall provide the Agent and the Lenders with a Borrowing Base Certificate, together with such supporting documents as the Agent reasonably deems desirable, all certified as being true and correct by an Authorized Officer. The Borrower may update the Borrowing Base Certificate and supporting documents more frequently than monthly and the most recently delivered Borrowing Base Certificate shall be the applicable Borrowing Base Certificate for purposes of determining the Borrowing Base at any time. (vi) REPORTS ON CASH FLOWS. On or before the seventh (7th) Business Day of each calendar month, the Borrower shall deliver to the Agent projected weekly cash flows on a consolidated and consolidating basis for the Borrower and its Subsidiaries for such calendar month and the next succeeding two calendar months. The Borrower shall also deliver to the Agent weekly reports of actual cash flows on a consolidated and consolidating basis for the Borrower and its Subsidiaries for the immediately preceding calendar week. (vii) ADDITIONAL FINANCIAL REPORTS. The Borrower shall deliver (x) its internal management unreviewed monthly financial reporting certificates not more than fifteen (15) Business Days after the end of each fiscal month, (y) its internal management unreviewed quarterly financial reporting certificates not more than thirty (30) days after the end of each fiscal quarter and (z) its reviewed quarterly financial statements not more than forty-five (45) days after the end of each fiscal quarter and otherwise on the terms set forth in this SECTION 7.1(A). The unaudited internal management annual financial reports will be delivered not more than sixty (60) days following the end of each fiscal 7 year and audited financial statements shall be delivered not more than ninety (90) days after the end of each fiscal year." 2.22. SECTION 7.2 of the Credit Agreement is hereby amended to insert the following new CLAUSES (L) and (M) at the end thereof: "(L) MANAGEMENT AVAILABILITY. The senior financial officer of the Borrower shall be available to attend meetings and participate in conference calls with the Agent and the Lenders on a monthly basis. (M) REPORTS ON INVENTORY AND ACCOUNTS. The Borrower shall make weekly reports to the Agent describing existing accounts in addition to monthly agings of accounts and inventory." 2.23. SECTION 7.4(A) of the Credit Agreement is hereby deleted in its entirety, and the following is substituted therefor: "(A) MINIMUM FIXED CHARGE COVERAGE RATIO. The Borrower and its consolidated Subsidiaries shall maintain a ratio ("Fixed Charge Coverage Ratio") of (i) EBITDA during such period to (ii) the sum of the amounts of (a) cash Interest Expense during such period plus (b) cash taxes paid by the Borrower and its consolidated Subsidiaries during such period plus (c) scheduled amortization of the principal portion of the Term Loans and scheduled amortization of the principal portion of all other Indebtedness for borrowed money of the Borrower plus (d) Restricted Payments paid during such period of at least (x) 1.15 to 1.00 for each fiscal quarter for the period commencing with the fiscal quarter ending on December 31, 1998 through the fiscal quarter ending on December 31, 1999, and (y) 1.00 to 1.00 for each fiscal quarter for the period commencing with the fiscal quarter ending on March 31, 2000 through the Termination Date. In each case, the Fixed Charge Coverage Ratio shall be determined as of the last day of each fiscal quarter for the four fiscal quarter period ending on such day." 2.24. SECTION 7.4(B) of the Credit Agreement is hereby deleted in its entirety, and the following is substituted therefor: "(B) Maximum Leverage Ratio. The Borrower shall not permit the ratio (the "Leverage Ratio") of (i) the sum of (a) Indebtedness for borrowed money and (b) Capitalized Lease Obligations to (ii) EBITDA to be greater than: (i) 6.50 to 1.00 for the fiscal quarter ending March 31, 2000; and (ii) 6.80 to 1.00 for the fiscal quarter ending June 30, 2000; and (iii) 6.00 to 1.00 for the fiscal quarter ending September 30, 2000; and (iv) 5.75 to 1.00 for the fiscal quarter ending December 31, 2000; and (v) 5.50 to 1.00 for each fiscal quarter for the period commencing with the fiscal quarter ending March 31, 2001 through the fiscal quarter ending June 30, 2001; and 8 (vi) 5.25 to 1.00 for the fiscal quarter ending September 30, 2001; and (vii) 4.75 to 1.00 for the fiscal quarter thereafter until the Termination Date. The Leverage Ratio shall be calculated, in each case, determined as of the last day of each fiscal quarter based upon (a) for Indebtedness for borrowed money and Capitalized Lease Obligations, Indebtedness for borrowed money and Capitalized Lease Obligations as of the last day of each such fiscal quarter; and (b) for EBITDA, the actual amount for the four-quarter period ending on such day; provided, however, that for purposes of calculating Indebtedness for each fiscal quarter through and including the fiscal quarter ending December 31, 1997, Indebtedness shall exclude all liabilities in connection with the overdraft facilities maintained by the Borrower and its Subsidiaries in the United Kingdom." 2.25. SECTION 7.4(C) of the Credit Agreement is hereby amended (i) to delete the phrase "$40,000,000" now appearing therein and to substitute "$50,000,000" therefor, and (ii) to delete the phrase "June 30, 1998" now appearing therein and to substitute "June 30, 2000" therefor. 2.26. The table setting forth the Revolving Loan Commitments of the Lenders on EXHIBIT A to the Credit Agreement is hereby amended and restated in the form of Attachment A to this Amendment, and the Credit Agreement is hereby amended to include a new EXHIBIT K in the form of Attachment B to this Amendment. 3. CONDITIONS OF EFFECTIVENESS. The effectiveness of this Amendment is subject to the conditions precedent that this Amendment shall be executed by the Borrower not later than June 15, 2000 and the Agent shall have received the following: (a) duly executed originals of this Amendment from the Borrower, the Required Lenders and the Agent; (b) duly executed originals of the Reaffirmation attached hereto from each Domestic Incorporated Subsidiary of the Borrower; (c) the Amendment Fee (as defined below); and (d) such other documents, instruments and agreements as the Agent may reasonably request. Upon the satisfaction of the foregoing conditions precedent, this Amendment shall be deemed effective as of June 15, 2000 (the "Effective Date"). 4. AMENDMENT FEE. Each Lender shall be entitled to an amendment fee (the "Amendment Fee") of 0.375% of such Lender's Commitment (as defined in the Credit Agreement after giving effect to the reduction of the Aggregate Revolving Loan Commitment contemplated in this Amendment); PROVIDED, that credit shall be given to reduce such Amendment Fee in an amount equal to 0.125% of such Lender's Commitment (as defined in the Credit Agreement without giving effect to the reduction of the Aggregate Revolving Loan Commitment contemplated in this Amendment). The Amendment Fee shall be fully earned and 9 due and payable by the Borrower on the date the Borrower executes this Amendment, if the Amendment is approved by the Required Lenders. 5. SALE OF THE ATE DIVISION OF THE BORROWER. The Borrower has informed the Agent and the Lenders that it may sell the ATE division of the Borrower. It is agreed and understood that no fee will be payable by the Borrower to the Lenders for any consent or waiver required to be obtained from the Agent and the Required Lenders in connection with such sale of the ATE division of the Borrower. 6. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as previously executed and as amended hereby, constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms. (b) Upon the effectiveness of this Amendment, the Borrower hereby reaffirms all covenants, representations and warranties made in the Credit Agreement, as amended hereby, and agrees that all such covenants, representations and warranties shall be deemed to have been remade as of the Effective Date of this Amendment. 7. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT. (a) Upon the effectiveness of SECTION 1 hereof, each reference to the Credit Agreement in the Credit Agreement and each other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement (other than in respect of the Specified Defaults) or any other documents, instruments and agreements executed and/or delivered in connection therewith. 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS 105/5-1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS. 9. HEADINGS. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 10 10. COUNTERPARTS. This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 11 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. IFR SYSTEMS, INC. By: ____________________________ Name: Title: BANK ONE, NA (formerly known as THE FIRST NATIONAL BANK OF CHICAGO), as Agent and as a Lender By: ____________________________ Name: Title: INTRUST BANK, N.A., as a Lender By: ____________________________ Name: Title: THE BANK OF NOVA SCOTIA, as a Lender By: ____________________________ Name: Title: HARRIS TRUST AND SAVINGS BANK, as a Lender By: ____________________________ Name: Title: NATIONAL WESTMINSTER BANK PLC, as a Lender By: ____________________________ Name: Title: UNION BANK OF CALIFORNIA, N.A., as a Lender By: ____________________________ Name: Title: LLOYDS TSB BANK PLC, as a Lender By: ____________________________ Name: Title: By: ____________________________ Name: Title: REAFFIRMATION Each of the undersigned hereby acknowledges receipt of a copy of the foregoing Amendment No. 5 to the Amended and Restated Credit Agreement dated as of March 19, 1998 by and among IFR Systems, Inc., a Delaware corporation (the "Borrower"), the lenders from time to time parties thereto (collectively, the "Lenders") and Bank One, NA, formerly known as The First National Bank of Chicago, as one of the Lenders and in its capacity as contractual representative (the "Agent") on behalf of itself and the other Lenders, as amended by an Amendment No. 1 and Waiver, an Amendment No. 2, an Amendment No. 3 and an Amendment No. 4, dated as of November 3, 1998, March 31, 1999, June 25, 1999 and October 15, 1999, respectively (as amended and as the same may be amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT") which Amendment No. 5 is dated as of June 15, 2000 (the "AMENDMENT"). Capitalized terms used in this Reaffirmation and not defined herein shall have the meanings given to them in the Credit Agreement. Without in any way establishing a course of dealing by the Agent or any Lender, each of the undersigned reaffirms the terms and conditions of the Guaranty, Security Agreement and any other Loan Document executed by it and acknowledges and agrees that such agreement and each and every such Loan Document executed by the undersigned in connection with the Credit Agreement remains in full force and effect and are hereby reaffirmed, ratified and confirmed. All references to the Credit Agreement contained in the above-referenced documents shall be a reference to the Credit Agreement as so modified by the Amendment and as the same may from time to time hereafter be amended, modified or restated. Dated: June 15, 2000 IFR AMERICAS, INC., formerly known as IFR Instruments, Inc. IFR FINANCE, INC. By __________________________ Name: Title: ATTACHMENT A TO AMENDMENT NO. 5 DATED JUNE 15, 2000 REVOLVING LOAN COMMITMENTS
Amount of Revolving Loan % of Aggregate Revolving Lender Commitment Loan Commitment ------ ---------- --------------- BANK ONE, NA $5,307,692.32 23.076923078 INTRUST BANK, N.A. $2,653,846.15 11.538461538 THE BANK OF NOVA SCOTIA $3,538,461.54 15.384615385 HARRIS TRUST AND SAVINGS BANK $3,538,461.54 15.384615385 NATIONAL WESTMINSTER BANK Plc $2,653,846.15 11.538461538 UNION BANK OF CALIFORNIA, N.A. $2,653,846.15 11.538461538 LLOYDS TSB BANK PLC $2,653,846.15 11.538461538 TOTAL $23,000,000.00 100.00%
15 ATTACHMENT B TO AMENDMENT NO. 5 DATED JUNE 15, 2000 FORM OF EXHIBIT K TO CREDIT AGREEMENT [ATTACHED] 16 EXHIBIT K TO AMENDED AND RESTATED CREDIT AGREEMENT Form of Borrowing Base Certificate Attached 17 BORROWING BASE CERTIFICATE TO: BANK ONE, NA, as Agent One Indianapolis Square Indianapolis, IN 26266 Attn: David Fisher Telecopier: (317) 321-3988 Confirmation: (317) 321-8325 I. AMOUNT OF ELIGIBLE INVENTORY 1. Total Amount of Inventory (Lower of FIFO or Market) $__________ 2. Less: All such Inventory which is work-in-progress ($__________) 3. Less: All such Inventory which is obsolete, not in good condition, not either currently usable or currently saleable in the ordinary course of the Borrower's or any of its Subsidiaries' business ($__________) 4. Total amount of Eligible Inventory (Line 1 MINUS Lines 2 and 3) $__________ 5. Inventory Availability: Forty percent (40%) of Eligible Inventory (0.40 x Line 4) $__________ II. AMOUNT OF ELIGIBLE RECEIVABLES 6. Face Amount of All Receivables $__________ 7. Less: All such Receivables which remain unpaid sixty (60) days after the date due under the original applicable invoice ($__________) 8. Less: All such Receivables owing by a single Account Debtor (including a Receivable which remains unpaid fewer than sixty (60) days after the date due under the original applicable invoice) if twenty-five percent (25%) of the balance owing by such Account Debtor, calculated without taking into account any credit balances of such Account Debtor, remains unpaid sixty (60) days after the date due under the original applicable invoice ($__________) 9. Less: All such Receivables with respect to which the Account Debtor is the Borrower or a director, officer, employee, Subsidiary or Affiliate of the Borrower ($__________) 10. Total amount of Eligible Receivables (Line 6 MINUS Lines 7, 8 and 9) $__________ 11. Receivables Availability: Seventy percent (70%) of Eligible Receivables (0.70 x Line 10) $__________ 18 III. CALCULATION OF BORROWING BASE 12. Borrowing Base: Sum of Receivables Availability and Inventory Availability: (Sum of lines 5 and 11) $__________ IV. CALCULATION OF MAXIMUM AVAILABLE AMOUNT 13. Aggregate Revolving Loan Commitments $__________ 14. Less: Letter of Credit Obligations ($__________) 15. Less: Outstanding Revolving Loans ($__________) 16. Maximum Available Amount available by reference to Commitment level: (Line 13 MINUS the sum of Lines 14 and 15) $__________ 17. Borrowing Base (Line 12) $__________ 18. Less: Letter of Credit Obligations ($__________) 19. Less: Outstanding Revolving Loans ($__________) 20. Maximum Available Amount available by reference to Borrowing Base (Line 17 MINUS the sum of Lines 18 and 19) $__________ 21. Maximum Available Amount (Lesser of Lines 16 and 20) $__________ 19 Pursuant to, and in accordance with, the terms and provisions of that certain Amended and Restated Credit Agreement ("Credit Agreement") dated as of March 19, 1998 by and among IFR SYSTEMS, INC. (the "Borrower"), the financial institutions parties hereto as Lenders, and BANK ONE, NA, formerly known as THE FIRST NATIONAL BANK OF CHICAGO, in its capacity as contractual representative (the "Agent"), as amended, restated, supplemented or otherwise modified from time to time, the undersigned, as successor by assignment to the Borrower, is executing and delivering to Agent this Borrowing Base Certificate (collectively referred to as "Certificate"). The undersigned warrants and represents to the Agent and the Lenders that this Certificate is true, correct, and based on information contained in the undersigned's own records. The undersigned, by the execution of this Certificate, hereby ratifies, conforms and affirms all of the terms, conditions and provisions of the Credit Agreement, and further certifies on the date of this certificate, that the undersigned is in compliance with said Credit Agreement. Date: ____________, _____ IFR SYSTEMS, INC. By:________________________ Name: Title: 20 EX-21.0 5 ex-21_0.txt EXHIBIT 21.0 EXHIBIT 21 IFR SYSTEMS, INC. Subsidiaries NAME STATE OR JURISDICTION OF INCORPORATION - ---- -------------------------------------- SUBSIDIARIES OF IFR SYSTEMS, INC. IFR Americas, Inc. Delaware IFR Finance, Inc. Kansas IFR International, Inc. Barbados IFR Systems Ltd. United Kingdom IFR Finance Limited Partnership United Kingdom SUBSIDIARIES OF IFR SYSTEMS LTD. IFR Ltd. United Kingdom IFR International Ltd. United Kingdom IFR International SA France IFR Technologies SA Spain IFR Gmbh Germany IFR Systems, Inc. owns 100% of the capital stock of each of its subsidiaries, except for IFR Finance Limited Partnership in which IFR Finance, Inc. owns an interest. IFR Systems Ltd. owns 100% of the capital stock of each of its subsidiaries. All subsidiaries do business under their own names. EX-23.0 6 ex-23_0.txt EXHIBIT 23.0 Exhibit 23.0 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the IFR Systems, Inc. Registration Statement 33-27329 on Form S-8 of the Restricted Stock Grant Plan dated March 2, 1989, Registration Statement 33-56862 on Form S-8 of the Nonqualified Stock Option Plan dated January 8, 1993, Registration Statement 333-18649 on Form S-3 relating to the registration of common shares dated December 23, 1996, and Registration Statement 333-52911 on Form S-8 pertaining to the 1996 Incentive Stock Option Plan dated May 18, 1998 of our report dated May 5, 2000 (except for Note 2, as to which the date is June 15, 2000), with respect to the consolidated financial statements and schedule of IFR Systems, Inc. included in the Annual Report on Form 10-K for the year ended March 31, 2000. /s/ Ernst & Young LLP Indianapolis, Indiana June 28, 2000 EX-27.0 7 ex-27_0.txt EXHIBIT 27.0
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS IN THE COMPANY'S FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR MAR-31-2000 APR-1-1999 MAR-31-2000 3,169 0 29,267 600 36,989 75,974 23,983 20,390 151,146 46,050 59,383 0 0 93 34,725 151,146 141,891 141,891 83,350 83,350 8,243 0 8,121 (6,414) (2,316) (4,098) 11,357 0 0 7,259 0.88 0.88
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