-----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, Gz00DwshXAujFSnbVxDDMDz1ePoCCadioGxSDXqcE2hoGcYSIRLNzci5FZmxgn1n XRVz3DrNVUQUsJfWaYNSRw== 0000912057-01-539184.txt : 20020410 0000912057-01-539184.hdr.sgml : 20020410 ACCESSION NUMBER: 0000912057-01-539184 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARDINGE INC CENTRAL INDEX KEY: 0000313716 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] IRS NUMBER: 160470200 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15760 FILM NUMBER: 1784676 BUSINESS ADDRESS: STREET 1: ONE HARDING DRIVE CITY: ELMIRA STATE: NY ZIP: 14902 BUSINESS PHONE: 6077342281 MAIL ADDRESS: STREET 1: ONE HARDINGE DRIVE CITY: ELMIRA STATE: NY ZIP: 14902 FORMER COMPANY: FORMER CONFORMED NAME: HARDINGE BROTHERS INC DATE OF NAME CHANGE: 19920703 10-Q 1 a2063276z10-q.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission file number: 000-15760 HARDINGE INC. (Exact name of Registrant as specified in its charter) New York 16-0470200 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Hardinge Inc. One Hardinge Drive Elmira, NY 14902 (Address of principal executive offices) (Zip code) (607) 734-2281 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ As of September 30, 2001 there were 8,858,333 shares of Common Stock of the Registrant outstanding. HARDINGE INC. AND SUBSIDIARIES INDEX
Part I Financial Information Page Item 1. Financial Statements Consolidated Balance Sheets at September 30, 2001 and December 31, 2000. 3 Consolidated Statements of Income and Retained Earnings for the three months ended September 30, 2001 and 2000 and the nine months ended September 30, 2001 and 2000. 5 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and 2000. 6 Notes to Consolidated Financial Statements. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 11 Item 3. Quantitative and Qualitative Disclosures About Market Risks 16 Part II Other Information Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Default upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18
2 PART I. ITEM 1 HARDINGE INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
Sept. 30, Dec. 31, 2001 2000 --------------------------- (Unaudited) Assets Current assets: Cash $2,963 $2,740 Accounts receivable 45,920 45,276 Notes receivable 7,809 7,185 Inventories 80,484 102,780 Deferred income taxes 4,536 5,065 Income tax receivable 5,424 Prepaid expenses 4,891 5,825 --------------------------- Total current assets 152,027 168,871 Property, plant and equipment: Property, plant and equipment 156,018 153,431 Less accumulated depreciation 80,327 77,561 --------------------------- 75,691 75,870 Other assets: Notes receivable 12,194 17,354 Deferred income taxes 8,619 66 Goodwill 14,434 18,238 Other 2,530 2,717 --------------------------- 37,777 38,375 --------------------------- Total assets $265,495 $283,116 ===========================
See accompanying notes. 3 HARDINGE INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS--Continued (IN THOUSANDS)
Sept. 30, Dec. 31, 2001 2000 --------------------------- (Unaudited) Liabilities and shareholders' equity Current liabilities: Accounts payable $15,213 $17,477 Notes payable to bank 5,627 7,037 Accrued expenses 18,321 17,672 Accrued income taxes 375 2,386 Deferred income taxes 4,908 2,152 Current portion long-term debt 4,106 4,105 --------------------------- Total current liabilities 48,550 50,829 Other liabilities: Long-term debt 57,761 47,417 Accrued pension plan expense 6,418 6,092 Deferred income taxes 3,130 2,342 Accrued postretirement benefits 5,774 5,747 --------------------------- 73,083 61,598 Equity of minority interest 1,636 1,226 Shareholders' equity: Preferred stock, Series A, par value $.01: Authorized--2,000,000; issued--none Common stock, $.01 par value: Authorized shares--20,000,000 Issued shares--9,919,992 at Sept. 30, 2001 and December 31, 2000 99 99 Additional paid-in capital 61,193 61,542 Retained earnings 104,841 130,955 Treasury shares (14,216) (14,243) Accumulated other comprehensive income (6,922) (6,239) Deferred employee benefits (2,769) (2,651) --------------------------- Total shareholders' equity 142,226 169,463 --------------------------- Total liabilities and shareholders' equity $265,495 $283,116 ===========================
See accompanying notes. 4 CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA)
Three months ended Nine months ended Sept. 30, Sept. 30, 2001 2000 2001 2000 -------------------------- -------------------------- Net Sales $ 47,703 $45,335 $162,008 $140,944 Cost of sales 34,227 30,903 112,299 95,014 Cost of sales - nonrecurring 2 27,237 27,237 -------------------------- -------------------------- Gross (loss) profit (13,761) 14,432 22,472 45,930 Selling, general and administrative expenses 12,488 11,808 41,193 35,369 Provision for doubtful accounts 1,2 5,820 200 6,210 670 Impairment charge - nonrecurring 2 5,519 5,519 -------------------------- -------------------------- (Loss) income from operations (37,588) 2,424 (30,450) 9,891 Interest expense 879 369 2,587 1,348 Interest (income) (125) (106) (392) (325) -------------------------- -------------------------- (Loss) income before income taxes and minority interest in consolidated subsidiary and investment of equity company (38,342) 2,161 (32,645) 8,868 Income taxes (benefits) (11,986) 639 (10,390) 3,188 Minority interest in (profit) of consolidated subsidiary (134) (153) (410) (166) Profit in investment of equity company 100 250 -------------------------- -------------------------- Net (loss) income 2 (26,390) 1,369 (22,415) 5,514 Retained earnings at beginning of period 132,469 129,964 130,955 128,325 Less dividends declared 1,238 1,247 3,699 3,753 -------------------------- -------------------------- Retained earnings at end of period $104,841 $130,086 $104,841 $130,086 ========================== ========================== Per share data: Basic (loss) earnings per share 2 $ (3.04) $ .16 $ (2.58) $ .63 ========================== ========================== Weighted average number of common shares outstanding 8,682 8,715 8,701 8,766 ========================== ========================== Diluted (loss) earnings per share 2 $ (3.04) $ .16 $ (2.58) $ .63 ========================== ========================== Weighted average number of common shares outstanding 8,690 8,715 8,701 8,797 ========================== ========================== Cash Dividends Declared $ .14 $ .14 $ .42 $ .42 ========================== ==========================
1 In 2001, includes $5,200 of nonrecurring provision for doubtful accounts. 2 2001 third quarter results include a nonrecurring charge of $37,956 (after-tax $26,455) related to the realignment as explained in the notes to the financial statements. Excluding this charge, third quarter earnings and basic and diluted earnings per share would have been $65, $0.01 and $0.01, respectively. Year to date September 30, 2001 earnings and basic and diluted earnings per share would have been $4,040, $0.46 and $0.46, respectively, excluding this nonrecurring charge. See accompanying notes. 5 HARDINGE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In Thousands)
Nine Months Ended September 30, 2001 2000 ------------------------------- Net cash provided by operating activities $ 3,090 $ 14,756 Investing activities: Capital expenditures (7,492) (1,828) Investment in Hardinge EMAG (250) (1,425) ------------------------------- Net cash (used in) investing activities (7,742) (3,253) Financing activities: (Decrease) increase in short-term notes payable to bank (1,277) 3,129 Increase (decrease) in long-term debt 10,694 (7,050) (Purchase) of treasury stock (1,109) (4,315) Dividends paid (3,699) (3,753) Funds provided by minority interest 410 166 ------------------------------- Net cash provided by (used in) financing activities 5,019 (11,823) Effect of exchange rate changes on cash (144) (61) ------------------------------- Net increase (decrease) in cash $ 223 $ (381) ===============================
See accompanying notes 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 2001 NOTE A--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2001, are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report for the year ended December 31, 2000. The Company operates in only one business segment - industrial machine tools. The Company has adopted Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES as of January 1, 2001. See Note E below. NOTE B--NONRECURRING REALIGNMENT CHARGE 2001's third quarter included a one-time charge of $37,956,000 ($26,455,000 after tax, or $3.05 per basic and diluted share). This nonrecurring charge is in response to the current recession impacting the machine tool industry and market changes requiring the Company to realign its U.S. based manufacturing operations in Elmira, New York. This realignment is designed to improve the Company's profitability, strengthen its financial position and enhance its competitive advantages. The nonrecurring charge includes (dollars in thousands):
Nonrecurring realignment charge: Pre-Tax Tax benefit Net of Taxes --------- ----------- ------------ Inventory write-off related to under-performing product lines which will be discontinued. $27,237 $ 9,156 $18,081 Goodwill write-off. 3,542 3,542 Reserve for uncollectible accounts and notes receivable. 5,200 1,820 3,380 A write-down of underutilized assets that will be offered for sale, and other charges. 1,977 525 1,452 ----------------------------------------- $37,956 $11,501 $26,455 =========================================
NOTE C--INVENTORIES Inventories are summarized as follows (dollars in thousands):
Sept. 30, December 31, 2001 2000 --------- ------------ Finished products $ 25,029 $ 36,766 Work-in-process 30,052 32,727 Raw materials and purchased components 25,403 33,287 -------- -------- $ 80,484 $102,780 ======== =========
7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2001 NOTE D--COMPANY STOCK REPURCHASE PROGRAM On April 9, 1999 Hardinge announced a stock repurchase program. The Board of Directors authorized the repurchase of up to 1.0 million shares of the Company's common stock, or approximately 10% of the total shares outstanding. The Company purchased 900,351 shares under the program through July 25, 2000. On July 26, 2000, the Board of Directors expanded the Company's stock buyback program by authorizing a plan to repurchase up to an additional 1.0 million shares of stock. No shares have been purchased under the new plan. NOTE E--EARNINGS PER SHARE AND WEIGHTED AVERAGE SHARES OUTSTANDING Earnings per share are computed in accordance with Statement of Financial Accounting Standards No. 128 EARNINGS PER Share. Basic earnings per share are computed using the weighted average number of shares of common stock outstanding during the period. For diluted earnings per share, the weighted average number of shares includes common stock equivalents related primarily to restricted stock. The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations required by Statement No. 128:
Three months ended Nine months ended September 30, September 30, --------------------------- ---------------------------- 2001 2000 2001 2000 --------------------------- ---------------------------- Numerator: (dollars in thousands) Net (loss) income $(26,390) $ 1,369 $(22,415) $ 5,514 Numerator for basic earnings per share (26,390) 1,369 (22,415) 5,514 Numerator for diluted earnings per share (26,390) 1,369 (22,415) 5,514 Denominator: (shares in thousands) Denominator for basic earnings per share --weighted average shares 8,682 8,715 8,701 8,766 Effect of diluted securities: Restricted stock and stock options 8 31 --------------------------- ---------------------------- Denominator for diluted earnings per share --adjusted weighted average shares 8,690 8,715 8,701 8,797 Basic (loss) earnings per share $ (3.04) $ .16 $ (2.58) $ .63 =========================== ============================ Diluted (loss) earnings per share $ (3.04) $ .16 $ (2.58) $ .63 =========================== ============================
Earnings per share amounts are based on the weighted average shares outstanding for each period presented. As a result of the changes in outstanding shares from quarter to quarter, the total of the quarters for 2001 does not equal the year to date earnings per share for 2001. 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2001 NOTE F-- DERIVATIVES AND HEDGING ACTIVITIES The Company adopted Financial Accounting Standards Board Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, on January 1, 2001. The statement requires companies to recognize all of its derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as either a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation. The adoption of Statement 133 on January 1, 2001, resulted in a cumulative effect of an accounting change recognized as a credit of $25,000 in other comprehensive income in the first quarter of 2001. NOTE G--REPORTING COMPREHENSIVE INCOME During the three and nine month periods ended September 30, 2001 and 2000, the components of total comprehensive income consisted of the following (dollars in thousands):
Three months ended Nine months ended September 30, September 30, ---------------------------- ------------------------------- 2001 2000 2001 2000 ------------ ------------ ------------- ------------- Net (Loss) Income $(26,390) $ 1,369 $(22,415) $ 5,514 Other Comprehensive (Loss) Income: Foreign currency translation adjustments 5,212 (1,681) 172 (2,658) Cumulative effect of accounting change 25 Unrealized gain (loss) on derivatives: Cash flow hedges (705) (1,125) Net investment hedges (1,359) 384 245 611 ---------------------------- ------------------------------- Other comprehensive income (loss) 3,148 (1,297) (683) (2,047) ---------------------------- ------------------------------- Total Comprehensive (Loss) Income $(23,242) $ 72 $(23,098) $ 3,467 ============================ ===============================
Components of other comprehensive income consisted of the following (dollars in thousands):
Accumulated balances at September 30, 2001 December 31, 2000 ------------------ ----------------- Other Comprehensive (Loss) Income: Foreign currency translation adjustments $ (8,664) $ (8,861) Unrealized gain (loss) on derivatives: Cash flow hedges (1,124) 1 Net investment hedges 2,866 2,621 ------------------- ----------------- Other Comprehensive (Loss) $ (6,922) $ (6,239) =================== =================
9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2001 NOTE H--NEW ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002. During 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002 and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following are management's comments relating to significant changes in the results of operations for the three month and nine month periods ended September 30, 2001 and 2000 and in the Company's financial condition at September 30, 2001. RESULTS OF OPERATIONS NET SALES. Net sales for the quarter ended September 30, 2001 were $47,703,000, an increase of $2,368,000, or 5.2%, compared to net sales of $45,335,000 for the third quarter of 2000. Year to date net sales for the first nine months of 2001 were $162,008,000, an increase of $21,064,000, or 14.9%, compared to net sales of $140,944,000 for the first nine months of 2000. These increases were due to the acquisition of HTT (Hauser Tripet Tschudin) on December 22, 2000, which added $7,788,000 to third quarter net sales and $26,169,000 to September 30, 2001 year to date net sales. Excluding HTT, net sales decreased by $5,420,000, or 12.0%, and $5,105,000, or 3.6%, for the respective three and nine month periods. The geographic distribution of sales reflected a decline in sales to the U.S. market and increased sales in Europe and Asia. Sales in the U.S. market were $18,752,000 in the quarter ended September 30, 2001, down 30.8% from $27,096,000 in the third quarter of 2000. For the nine months ended September 30, 2001, U.S. market sales have declined 20.7% to $72,167,000 from $91,054,000 during the same nine months of 2000. This reflects the continuing, and increasing, reductions in North American manufacturing sector activity levels and the resulting industry-wide reduction in machine tool sales to North American manufacturers. Sales to European customers increased 62.9% to $19,682,000 in the quarter ended September 30, 2001 from $12,084,000 in the third quarter of 2000. For the nine months ended September 30, 2001, sales into Europe increased 77.7%, or $25,000,000, to $57,169,000 from $32,169,000 in the same period in 2000. These increases were largely due to HTT sales in Europe of $5,424,000 in the third quarter of 2001 and $18,008,000 year to date. Excluding HTT, sales to European customers increased $2,174,000, or 18.0%, in the third quarter of 2001 as compared to the same quarter in 2000. For the September 30, 2001 year to date period, these sales excluding HTT increased $6,992,000, or 21.7%. Other international sales, primarily to customers in Asia, rose 50.6%, or $3,114,000, to $9,269,000 in the third quarter of 2001, compared to $6,155,000 in the same three months of 2000. For the nine months ended September 30, 2001, other international sales rose 84.4%, or $14,951,000, to $32,672,000 from $17,721,000 during the same nine months of 2000. These increases were primarily due to higher exports of U.S. turning machines to customers in China. Machine sales represented 67.7% of revenues for the quarter ended September 30, 2001, compared to 65.0% for the same period last year. For the nine month period ended September 30, 2001, machine sales represented 68.3% of the total, compared to 63.9% in the same nine month period in 2000. Sales of non-machine products and services make up the balance. The Company's backlog at September 30, 2001 was $59,957,000, compared to the $48,675,000 backlog at September 30, 2000. Excluding HTT, the backlog was $39,876,000, a decrease of $8,799,000, or 18.1%, since September 30, 2000. 11 NONRECURRING REALIGNMENT CHARGE. Nonrecurring realignment charges of $26,455,000, or $3.05 per basic and diluted share, net of tax benefits ($37,956,000 excluding tax benefits), were recorded in the third quarter of 2001. The realignment reflects a management review of each of the Company's product lines in order to better focus its U.S. manufacturing operations, as well as the Company's worldwide engineering and financial resources, on those product lines which will provide the strongest long-term shareholder returns. In particular, domestic manufacturing and engineering resources will focus on cost-effective, high end products, leveraging the Company's experience in developing technologically advanced, high performance machines. The realignment will also reduce debt as underperforming inventory is converted into cash through sales at discounted prices as well as tax benefits. The nonrecurring realignment included an inventory write-down of $27,237,000, or $18,081,000 net of tax benefits, for under-performing product lines which will be discontinued, a goodwill write-down of $3,542,000 million, for which no tax benefit is available, a reserve for uncollectible accounts and notes receivable of $5,200,000, or $3,380,000 net of tax benefits, and $1,977,000, or $1,452,000 net of tax benefits, for write-down of underutilized assets, which have now been offered for sale, and other charges. The above amounts include cash charges of $977,000, excluding tax benefits. GROSS PROFIT. Excluding the nonrecurring realignment charge described above, gross margin for the three months ended September 30, 2001 was 28.2% of net sales compared to 31.8% of net sales for the third quarter of 2000. Competitive discounting of turning machines and machining centers, especially in the depressed North American market, continued to reduce gross margins. Gross margins were also negatively impacted by lower recovery of fixed manufacturing overhead because of decreased U.S. machine production, reflecting both reduced North American orders and the August 16, 2001 workforce reduction. For the nine months ended September 30, 2001, gross margin was 30.7%, compared to 32.6% for the first nine months of 2000. Including the nonrecurring realignment charge described above, which added $27,237,000 to cost of sales, gross margin was (28.8)% of net sales for the third quarter of 2001 and 13.9% of net sales for the nine months ended September 30, 2001. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general and administrative ("SG&A") expenses were $12,488,000, or 26.2% of net sales, during the third quarter of 2001, compared to $11,808,000, or 26.1% of net sales one year earlier. SG&A expenses for the nine months ended September 30, 2001 and 2000 were $41,193,000 and $35,369,000, or 25.4% and 25.1% of net sales, respectively. This $5,824,000 increase was primarily due to the SG&A incurred at HTT. PROVISION FOR DOUBTFUL ACCOUNTS. Excluding the nonrecurring charge described above, bad debt expense was $620,000 and $200,000 for the third quarters of 2001 and 2000, respectively, and $1,010,000 and $670,000, for the first nine months of 2001 and 2000, respectively. The nonrecurring realignment charge described above included $5,200,000 for additional bad debt allowances related to domestic and foreign trade and notes receivables. Including that charge, bad debt expense was $5,820,000 for the quarter ended September 30, 2001 and $6,210,000 for the first nine months of 2001. IMPAIRMENT CHARGES. The nonrecurring realignment charge described above included $3,542,000 for the impairment of purchased goodwill. An additional $1,977,000 represented impairment of other assets, which have since been offered for sale, and other, lesser charges. INCOME FROM OPERATIONS. Excluding the nonrecurring realignment charge described above, income from operations was $368,000, or $2,056,000 less than the $2,424,000 of operating income in the third quarter of 2000. Income from operations for the first nine months of 2001 declined $2,385,000, or 24.1%, to $7,506,000 compared to $9,891,000 for the same period in 2000. This reduced operating income was due to the reduced North American sales, and other factors, discussed above. Including the nonrecurring realignment charge, loss from operation was ($37,588,000) and ($30,450,000) for the third quarter, and the first nine months, respectively, of 2001. 12 INTEREST EXPENSE AND INCOME. Interest expense for the quarter ended September 30, 2001 was $879,000 compared to $369,000 a year earlier. This 138.2% increase was caused by higher debt levels as debt rose $44,615,000, or 195%, from September 30, 2000 to September 30, 2001. Increased borrowings included $31,511,000 of additional debt incurred and assumed due to the acquisition of HTT. Partially offsetting increased debt were decreases in interest rates on borrowings. Interest expense for the nine month periods ended September 30, 2001 and 2000 was $2,587,000 and $1,348,000, respectively. This 91.9% increase was due to the same factors as mentioned above. INCOME TAXES. The nonrecurring realignment charge described above included $11,501,000 of tax benefits, of which $5,424,000 is expected to be received as a 2002 tax refund from a NOL carryback, and the remaining $6,077,000 will provide deferred tax benefits for use in 2002 and thereafter. Excluding the nonrecurring realignment charge described above, the provision for income taxes was ($485,000), or 125.6% of taxable loss, for the quarter ended September 30, 2001 and $1,111,000, or 20.9% of taxable income, for the first nine months of 2001. This compares to tax rates of 29.6% for the third quarter of 2000 and 35.9% for the first nine months of 2000. The unusual 2001 tax rates were due to increased taxable profits earned in countries with comparatively lower tax rates partially offset by taxable losses incurred in jurisdictions with higher tax rates. Including the nonrecurring charge, the provision for income taxes was ($11,986,000) and $639,000 for the three month periods ending September 30, 2001 and 2000, respectively. The provision for income taxes for the nine month periods ended September 30, 2001 and 2000 was ($10,390,000) and $3,188,000, respectively. NET INCOME. Excluding the nonrecurring realignment charge described above, net income for the third quarter of 2001 was $65,000, or $.01 per basic and diluted share, compared to $1,369,000, or $.16 per basic and diluted share, for the third quarter of 2000. Year to date 2001 net income was $4,040,000, or $.46 per basic and diluted share, compared to $5,514,000, or $.63 per basic and diluted share for the same 2000 period. These reductions in earnings were the result of the reduced North American sales, and other factors, discussed above. Including the nonrecurring realignment charge described above, net income was ($26,390,000), or ($3.04) per basic and diluted share, for the third quarter of 2001 and ($22,415,000), or ($2.58) per basic and diluted share, for the three quarters ended September 30, 2001. EARNINGS PER SHARE. All earnings per share and weighted average share amounts are computed in accordance with Financial Accounting Standards Board Statement No. 128, EARNINGS PER SHARE. 13 QUARTERLY INFORMATION The following table sets forth certain quarterly financial data for each of the periods indicated.
Three Months Ended Mar. 31, June 30, Sept. 30, Dec. 31, 2001 2001 2001 2001 ---------------------------------------------------------- (in thousands, except per share data) ---------------------------------------------------------- Net Sales $ 58,433 $ 55,872 $ 47,703 Gross Profit (Loss) 19,212 17,021 (13,761) Income (loss) from operations 3,899 3,239 (37,588) Net income (loss) 2,193 1,782 (26,390) Diluted earnings (loss) per share .25 .20 (3.04) Weighted average shares outstanding 8,711 8,724 8,690 Three Months Ended Mar. 31, June 30, Sept. 30, Dec. 31, 2000 2000 2000 2000 ---------------------------------------------------------- (in thousands, except per share data) ---------------------------------------------------------- Net Sales $ 47,836 $ 47,773 $ 45,335 $ 48,535 Gross Profit 15,702 15,796 14,432 15,018 Income from operations 3,781 3,686 2,424 2,778 Net income 2,162 1,983 1,369 2,018 Diluted earnings per share .24 .23 .16 .23 Weighted average shares outstanding 8,934 8,680 8,715 8,718
LIQUIDITY AND CAPITAL RESOURCES Operating activities for the nine months ended September 30, 2001 generated cash of $3,090,000, compared to $14,756,000 generated during the same nine months of 2000, for a $11,666,000 net reduction in cash generation. Trade receivables contributed $5,494,000 of reduced cash generation as receivables increased $2,543,000 in the first nine months of 2001, compared to a $2,951,000 decline during the first nine months of 2000. Accrued liabilities contributed another $4,276,000 of reduced cash generation as a $2,486,000 decrease in the first nine months of 2001 followed a $1,790,000 increase in accrued liabilities in the corresponding nine months of 2000. Trade payables declined by $2,467,000 in the first nine months of 2001, compared to a $439,000 decline in the same nine months of 2000, contributing an additional $2,028,000 to reduced cash generation. Inventories caused $1,722,000 of reduced cash generation as the $4,193,000 increase in the first nine months of 2001, excluding noncash changes for the nonrecurring realignment charge described above, exceeded the $2,471,000 increase during the first nine months of 2000. Partially offsetting these reductions were increases in cash generation of $1,104,000 for notes receivable and $1,097,000 for other assets. Investing activities for the first nine months of 2001 used $7,742,000 compared to $3,253,000 for the same period of 2000. Capital expenditures were $7,492,000 in the first three quarters of 2001 as compared to $1,828,000 during the first nine months of 2000. The 2001 capital spending included $3,268,000 of demonstration machines for the new products and $3,210,000 for plant expansion and related capacity additions at Kellenberger AG. 14 Financing activities provided $5,019,000 of cash in the first three quarters of 2001, compared to $11,823,000 used in the same nine months of 2000, for a change of $16,842,000. Increased long-term debt provided $17,744,000 of cash generation with $10,694,000 added in the first nine months of 2001 as compared to a $7,050,000 decrease in debt during the first three quarters of 2000. Purchases of Treasury Stock used $1,109,000 of cash in the first nine months of 2001 and $4,315,000 of cash in the same three quarters of 2000, causing $3,206,000 of the change. Partially offsetting the above changes was $4,406,000 of reduced cash generation from a $1,277,000 decrease in short-term notes payable to Banks in the first nine months of 2001 compared to a $3,129,000 increase in the first three quarters of 2000. Hardinge's current ratio at September 30, 2001 was 3.13:1 compared to 3.32:1 at December 31, 2000. Changes included increases, excluding impacts of the nonrecurring realignment charge described above, of $4,193,000 and $2,543,000 in inventory and trade receivables, respectively, and a decrease of $2,467,000 in trade payables. The nonrecurring realignment charges described above did not impact liquidity in the third quarter of 2001. Projected future impacts include $5,424,000 of 2002 NOL tax carryback benefits and $6,077,000 of NOL carryforward benefits for 2002 and later years. Excluding these tax benefits, cash outlays to implement these actions are expected to be less than $1,000,000 and are included in the charges. Hardinge provides long-term financing for the purchase of its equipment by qualified customers. The Company periodically sells portfolios of customer notes to financial institutions in order to reduce debt and finance current operations. Our customer financing program has an impact on our month-to-month borrowings, but it has had little long-term impact on our working capital because of the ability to sell the underlying notes. Hardinge sold $11,379,000 of customer notes in the first nine months of 2001, compared to $19,743,000 during the same period of 2000. At September 30, 2001 Hardinge maintained revolving loan agreements with several U.S. banks providing for unsecured borrowing up to $50,000,000 on a revolving basis through August 1, 2002. These facilities, along with other short term credit agreements, provide for immediate access of up to $69,670,000. At September 30, 2001, outstanding borrowings under these arrangements totaled $33,164,000. We believe that the currently available funds and credit facilities, along with internally generated funds, will provide sufficient financial resources for ongoing operations. NEW ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002. During 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets as of January 1, 2002 and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company. 15 THIS REPORT CONTAINS STATEMENTS OF A FORWARD-LOOKING NATURE RELATING TO THE FINANCIAL PERFORMANCE OF HARDINGE INC. SUCH STATEMENTS ARE BASED UPON INFORMATION KNOWN TO MANAGEMENT AT THIS TIME. THE COMPANY CAUTIONS THAT SUCH STATEMENTS NECESSARILY INVOLVE UNCERTAINTIES AND RISK AND DEAL WITH MATTERS BEYOND THE COMPANY'S ABILITY TO CONTROL, AND IN MANY CASES THE COMPANY CANNOT PREDICT WHAT FACTORS WOULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED. AMONG THE MANY FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS ARE FLUCTUATIONS IN THE MACHINE TOOL BUSINESS CYCLES, CHANGES IN GENERAL ECONOMIC CONDITIONS IN THE U.S. OR INTERNATIONALLY, THE MIX OF PRODUCTS SOLD AND THE PROFIT MARGINS THEREON, THE RELATIVE SUCCESS OF THE COMPANY'S ENTRY INTO NEW PRODUCT AND GEOGRAPHIC MARKET, THE COMPANY'S ABILITY TO MANAGE ITS OPERATING COSTS, ACTIONS TAKEN BY CUSTOMERS SUCH AS ORDER CANCELLATIONS OR REDUCED BOOKINGS BY CUSTOMERS OR DISTRIBUTORS, COMPETITORS' ACTIONS SUCH AS PRICE DISCOUNTING OR NEW PRODUCT INTRODUCTIONS, GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS, CHANGES IN THE AVAILABILITY AND COST OF MATERIALS AND SUPPLIES, THE IMPLEMENTATION OF NEW TECHNOLOGIES AND CURRENCY FLUCTUATIONS. ANY FORWARD-LOOKING STATEMENT SHOULD BE CONSIDERED IN LIGHT OF THESE FACTORS. THE COMPANY UNDERTAKES NO OBLIGATION TO REVISE ITS FORWARD-LOOKING STATEMENTS IF UNANTICIPATED EVENTS ALTER THEIR ACCURACY. PART I. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK None PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULT UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None 16 PART II. OTHER INFORMATION (CONTINUED) ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits 10.1 Amendment Number One dated October 1, 2001 to the Term Loan Agreement dated March 20, 2001 among Hardinge Inc. and KeyBank National Association. 10.2 Amendment Number Three dated September 20, 2001 to the Credit Agreement dated as of August 1, 1997, and amended December 11, 2000 and February 5, 2001 among the Bank's signatory thereto and the Chase Manhattan Bank as Agent. 10.3 Amendment Number Four dated September 20, 2001 to the Credit Agreement dated as of February 28, 1996 and amended August 1, 1997, December 11, 2000 and February 5, 2001 among the Bank's signatory thereto and the Chase Manhattan Bank as Agent. B. Reports on Form 8-K 1. Current Report on Form 8-K, filed August 20, 2001 in connection with an August 16, 2001 press release announcing a further reduction in Hardinge's North American workforce. 2. Current Report on Form 8-K, filed September 21, 2001 in connection with a September 20, 2001 press release announcing a third quarter nonrecurring charge and an intention to reduce dividends by 20%. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HARDINGE INC. NOVEMBER 13, 2001 By: /s/ J. PATRICK ERVIN - ---------------------- ------------------------------------- Date J. Patrick Ervin President/CEO NOVEMBER 13, 2001 By: /s/ RICHARD L. SIMONS - ---------------------- ------------------------------------ Date Richard L. Simons Executive Vice President/CFO (Principal Financial Officer) NOVEMBER 13, 2001 By: /s/ RICHARD B. HENDRICK - ---------------------- ------------------------------------- Date Richard B. Hendrick Vice President and Controller (Principal Accounting Officer) 18 EX-10.1 3 a2063276zex-10_1.txt EXHIBIT 10.1 EXHIBIT 10.1 FIRST AMENDMENT TO THE TERM LOAN AGREEMENT THIS FIRST AMENDMENT ("Amendment") dated as of October 1, 2001 by and between KeyBank National Association ("Lender") and Hardinge, Inc. ("Borrower") to the $24,000,000 Term Loan Agreement executed March 20, 2001. WHEREAS, certain changes are to be made to the Term Loan Agreement including certain modifications to SECTION VI: NEGATIVE COVENANTS contained therein. THEREFORE, the parties hereby acknowledge and agree to the following: 1. 6.01. FINANCIAL COVENANTS has been amended as follows: During the term hereof, the Borrower on a consolidated basis shall not: (a) PERMIT THE RATIO OF (i) TOTAL FUNDED DEBT TO THE EBITDA OF THE BORROWER, CALCULATED AT THE SAME POINT IN TIME, TO BE GREATER THAN 3.25 TO 1.00 AT ANY TIME THROUGH AND INCLUDING MARCH 31, 2002, AND (ii) TOTAL FUNDED DEBT TO THE EBITDA OF THE BORROWER, CALCULATED AT THE SAME POINT IN TIME, TO BE GREATER THAN 3.00 TO 1.00 BY JUNE 30, 2002 AND SEPTEMBER 30, 2002, AND (iii) TOTAL FUNDED DEBT TO THE EBITDA OF THE BORROWER, CALCULATED A THE SAME POINT IN TIME, TO BE GREATER THAN 2.75 TO 1.00 BY DECEMBER 31, 2002, AND 2.50 TO 1.00 AT THE END OF EACH FISCAL QUARTER THEREAFTER, MEASURED QUARTERLY AS OF THE PERIOD OF THE FOUR MOST RECENTLY COMPLETED FISCAL QUARTERS OF THE BORROWER. THIS COVENANT SHALL EXCLUDE THE $39,000,000 PRE-TAX NON-RECURRING CHARGE TAKEN IN THE THIRD QUARTER OF FISCAL YEAR 2001. (b) PERMIT THE FIXED CHARGE COVERAGE RATIO OF THE BORROWER (i) TO BE LESS THANK 1.75 TO 1.00 BY SEPTEMBER 30, 2001, AND (ii) TO BE LESS THAN 1.50 TO 1.00 BY DECEMBER 31, 2001, AND (iii) TO BE LESS THAN 1.25 TO 1.00 BY MARCH 31, 2002, JUNE 30, 2002, AND SEPTEMBER 30, 2002, AND (iv) TO BE LESS THAN 1.50 TO 1.00 BY DECEMBER 31, 2002 AND AT THE END OF EACH FISCAL QUARTER THEREAFTER, MEASURED QUARTERLY AS OF THE PERIOD OF THE FOUR THEN MOST RECENTLY COMPLETED FISCAL QUARTERS OF THE BORROWER. THIS COVENANT SHALL EXCLUDE THE $39,000,000 PRE-TAX NON-RECURRING CHARGE TAKEN IN THE THIRD QUARTER OF FISCAL YEAR 2001. 2. 6.08. CONSOLIDATIONS, MERGERS, ACQUISITIONS AND SALES OF ASSETS, as follows, has been waived until the fiscal quarter ending September 30, 2002. (d) the Borrower of any Subsidiary may sell, lease or otherwise dispose of any of its assets (other than as permitted by clauses (a) to (c) inclusive), PROVIDED that the aggregate net book value of all assets of the Borrower and its Subsidiaries sold, leased or otherwise disposed of during any fiscal year of the Borrower pursuant to this clause (d) shall not exceed 5% of the Consolidated Tangible Net Worth of the Borrower and its Subsidiaries at the end of the preceding fiscal year. All sales, leases or dispositions of assets pursuant to clause (b), (c), or (d) shall be at fair market value. This Amendment is entered into pursuant to and in accordance with Section 9.03 of the Term Loan Agreement. Except as expressly amended herein, the Term Loan Agreement and other loan documents to which the Borrower is a party is hereby restated, ratified and confirmed and shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to the Term Loan Agreement to be duly executed and delivered. HARDINGE, INC. By: /s/ THOMAS T. CONNELLY ------------------------------ Thomas T. Connelly Its: Treasurer KEYBANK NATIONAL ASSOCIATION By: /s/ ALBERT G. WHITE, III ------------------------------ Albert G. White, III Senior Vice President EX-10.2 4 a2063276zex-10_2.txt EXHIBIT 10.2 EXHIBIT 10.2 AMENDMENT NUMBER THREE This Amendment Number Three is dated as of September 20, 2001 and is to the Credit Agreement among Hardinge Inc., the Bank's signatory thereto and The Chase Manhattan Bank as Agent, dated August 1, 1997 and amended by Amendment Number One dated as of December 11, 2000 and Amendment Number Two dated as of February 5, 2001 (as amended the "Agreement"). Terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Agreement. The Borrower has determined to make certain adjustments to its financial statements and to recognize a nonrecurring charge to its earnings for the fiscal year ending December 31, 2001 in an amount not to exceed Thirty-nine Million Dollars ($39,000,000.00) (the "Earnings Charge"). In order to further amend the Agreement, the parties agree as follows: 1. The definition of "Earnings Before Interest, Taxes, Depreciation and Amortization" as set forth in Section 1.01 of the Agreement shall be amended effective as of the date of this Amendment Number Three, 2001 to read as follows: "Earnings Before Interest, Taxes, Depreciation and Amortization" means Consolidated Net Income prior to the deduction of interest expense, prior to the deduction of federal or foreign corporate income and corporate franchise taxes, prior to the deduction of depreciation and amortization and prior to the Earnings Charge. Notwithstanding anything to the contrary set forth herein, for the twelve (12) months following the Acquisition Date, Earnings Before Interest, Taxes, Depreciation and Amortization shall be calculated as if the Acquisition Date was January 1, 2000. 2. The definition of "Margin" as set forth in Section 1.01 of the Agreement shall be amended effective as of the date of this Amendment Number Four to read as follows: "Margin" means for each Variable Rate Loan zero (0) Basis Points and for each Eurodollar Loan one hundred fifty (150) Basis Points. 3. The sale, lease, or other disposition of assets related to the Earnings Charge shall be exempt from the limitations of Section 7.05 of the Agreement. 4. Section 8.02 of the Agreement shall be amended to require that the minimum Consolidated Tangible Net Worth for the fiscal year ending December 31, 2001 and for each fiscal year thereafter, shall at all times be at least One Hundred Thirty Million Dollars ($130,000,000.00). 5. Upon execution of this Amendment Number Three, the Borrower shall pay to the Agent an amendment fee in the amount of Fifty Thousand Dollars ($50,000.00). 6. Section 8.03 of the Agreement shall be amended to the effect that Borrower shall maintain a ratio of Funded Debt to Earnings Before Interest, Taxes, Depreciation and Amortization of not greater than 3.25 to 1 through June 29, 2002 and 3.0 to 1 from June 30, 2002 and thereafter, as measured as of the last day of each fiscal quarter for the immediately preceding twelve (12) months. 7. This Amendment Number Three may be executed in any number of counterparts, all of which taken together shall constitute one and the same the instrument, and any parties hereto may execute this Amendment Number Three by signing any such counterpart. 8. Other than as set forth in this Amendment Number Three, the terms and conditions of this Agreement, shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment Number Three to be executed by their duly authorized officers as of the day and year first above written. HARDINGE INC. By: /s/ J. PATRICK ERVIN ------------------------------------- J. Patrick Ervin, President and Chief Executive Officer AGENT: THE CHASE MANHATTAN BANK By: /s/ CHRISTINE M. McLEOD ------------------------------------- Christine M. McLeod, Vice President BANKS: THE CHASE MANHATTAN BANK By: /s/ CHRISTINE M. McLEOD ------------------------------------- Christine M. McLeod, Vice President FLEET NATIONAL BANK Successor to Fleet Bank By: /s/ JOANNE TEASDALE ------------------------------------- Joanne Teasdale, Vice President MANUFACTURERS AND TRADERS TRUST COMPANY By: /s/ SUSAN A. BURTIS ------------------------------------- Susan A. Burtis, Vice President EX-10.3 5 a2063276zex-10_3.txt EXHIBIT 10.3 EXHIBIT 10.3 AMENDMENT NUMBER FOUR This Amendment Number Four is dated as of September 20, 2001 and is to the Credit Agreement among Hardinge Inc., the Bank's signatory thereto and The Chase Manhattan Bank (National Association) (now The Chase Manhattan Bank) as Agent, dated as of February 28, 1996 and amended by Amendment Number One dated as of August 1, 1997, Amendment Number Two dated as of December 11, 2000 and Amendment Number Three dated as of February 5, 2001 (as amended the "Agreement"). Terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Agreement. The Borrower has determined to make certain adjustments to its financial statements and to recognize a nonrecurring charge to its earnings for the fiscal year ending December 31, 2001 in an amount not to exceed Thirty-Nine Million Dollars ($39,000,000.00) (the "Earnings Charge"). In order to further amend the Agreement, the parties agree as follows: 1. The definition of "Earnings Before Interest, Taxes, Depreciation and Amortization as set forth in Section 1.01 of the Agreement shall be amended effective as of the date of this Amendment Number Four to read as follows: "Earnings Before Interest, Taxes, Depreciation and Amortization" means Consolidated Net Income prior to the deduction of interest expense, prior to the deduction of federal or foreign corporate income and corporate franchise taxes, prior to the deduction of depreciation and amortization and prior to the deduction of the Earnings Charge. Notwithstanding anything to the contrary as set forth herein, for the twelve (12) months following the Acquisition Date, earnings before interest, taxes, depreciation and amortization shall be calculated as if the Acquisition Date was January 1, 2000. 2. The definition of "Margin" as set forth in Section 1.01 of the Agreement shall be amended effective as of the date of this Amendment Number Four to read as follows: "Margin" means for each Variable Rate Loan zero (0) Basis Points and for each Eurodollar Loan one hundred fifty (150) Basis Points. 3. The sale, lease or other disposition of assets related to the Earnings Charge shall be exempt from the limitations of Section 7.05 of the Agreement. 4. Section 8.02 of the Agreement shall be amended to require the minimum Consolidated Tangible New Worth for the fiscal year ending December 31, 2001 and for each fiscal year thereafter shall at all times be at least One Hundred Thirty Million Dollars ($130,000,000.00). 5. Section 8.03 of the Agreement shall be amended to the effect that Borrower shall maintain a ratio of Funded Debt to Earnings Before Interest, Taxes, Depreciation and Amortization of not greater than 3.25 to 1 through June 29, 2002 and 3.0 to 1 from June 30, 2002 and thereafter, as measured as of the last day of each fiscal quarter for the immediately preceding twelve (12) months. 6. Upon the execution of this Amendment Number Four, the Borrower shall pay to the Agent an amendment fee in the amount of Five Thousand Three Hundred Twenty-Five Dollars ($5,325.00). 7. This Amendment Number Four may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any parties hereto may execute this Amendment Number Four by signing any such counterpart. 8. Other than as set forth in this Amendment Number Four, the terms and conditions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment Number Four to be executed by their duly authorized officers as of the day and year first above written. HARDINGE INC. By: /s/ J.PATRICK ERVIN ------------------------------------- J. Patrick Ervin, President and Chief Executive Officer AGENT: THE CHASE MANHATTAN BANK Successor by merger to The Chase Manhattan Bank (National Association) By: /s/ CHRISTINE M. McLEOD ------------------------------------- Christine M. McLeod, Vice President BANKS: THE CHASE MANHATTAN BANK, Successor by merger to The Chase Manhattan Bank (National Association) By: /s/ CHRISTINE M. McLEOD ------------------------------------- Christine M. McLeod, Vice President THE CHASE MANHATTAN BANK f/k/a Chemical Bank By: /s/ CHRISTINE M. McLEOD ------------------------------------- Christine M. McLeod, Vice President HSBC BANK USA f/k/a/ Marine Midland Bank By: /s/ RONALD W. LESCH ------------------------------------- Ronald W. Lesch, Vice President -----END PRIVACY-ENHANCED MESSAGE-----