<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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 No. 001-12907
KNOLL, INC.
A Delaware Corporation I.R.S. Employer No. 13-3873847
1235 Water Street
East Greenville, PA 18041
Telephone Number (215)679-7991
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 November 12, 1999, there were 23,287,598 shares of the Registrant's
common stock, par value $0.01 per share, outstanding.
<PAGE>
KNOLL, INC.
TABLE OF CONTENTS FOR FORM 10-Q
Item Page
- ---- ----
PART I -- FINANCIAL INFORMATION
1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets at September 30, 1999
and December 31, 1998..................................... 3
Condensed Consolidated Statements of Operations for the
three months ended September 30, 1999 and 1998 and the
nine months ended September 30, 1999 and 1998............. 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1999 and 1998............. 5
Notes to the Condensed Consolidated Financial Statements.... 6
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 9
3. Quantitative and Qualitative Disclosures about Market Risk...... 12
PART II -- OTHER INFORMATION
1. Legal Proceedings............................................... 13
2. Changes in Securities and Use of Proceeds....................... 13
6. Exhibits and Reports on Form 8-K................................ 14
Signatures.......................................................... 15
Exhibit Index....................................................... 16
2
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PART I -- FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
- ----------------------------------------------------------------
KNOLL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 11,538 $ 17,465
Customer receivables, net.......... 143,831 137,956
Inventories........................ 80,771 77,113
Deferred income taxes.............. 21,005 21,067
Prepaid and other current assets... 15,435 9,842
-------- --------
Total current assets........... 272,580 263,443
Property, plant and equipment.......... 272,269 257,970
Accumulated depreciation............... (92,462) (71,803)
-------- --------
Property, plant and
equipment, net............... 179,807 186,167
Intangible assets...................... 282,489 282,197
Accumulated amortization............... (28,061) (22,154)
-------- --------
Intangible assets, net......... 254,428 260,043
Other noncurrent assets................ 4,286 4,374
-------- --------
Total Assets................... $711,101 $714,027
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt............................. $ - $ 10,000
Accounts payable................... 57,435 59,551
Income taxes payable............... 846 7,096
Other current liabilities.......... 80,145 91,756
-------- --------
Total current liabilities...... 138,426 168,403
Long-term debt......................... 139,169 159,255
Postretirement benefits other than
pension.............................. 19,149 18,450
Other noncurrent liabilities........... 27,974 24,069
-------- --------
Total liabilities.............. 324,718 370,177
-------- --------
Stockholders' equity:
Common stock, $0.01 par value;
100,000,000 shares authorized;
40,832,712 shares issued and
outstanding (net of 2,894,700
treasury shares) in 1999 and
41,799,499 shares issued and
outstanding (net of 1,707,700
treasury shares) in 1998......... 408 418
Additional paid-in-capital......... 157,419 181,792
Unearned stock grant compensation.. (503) (712)
Retained earnings.................. 236,197 170,986
Accumulated other comprehensive
income........................... (7,138) (8,634)
-------- --------
Total stockholders' equity..... 386,383 343,850
-------- --------
Total Liabilities and
Stockholders' Equity......... $711,101 $714,027
======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
KNOLL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales...................... $247,543 $235,028 $710,479 $702,760
Cost of sales.............. 150,958 142,006 430,149 424,577
-------- -------- -------- --------
Gross profit............... 96,585 93,022 280,330 278,183
Selling, general and
administrative
expenses................. 50,154 49,065 151,469 150,894
-------- -------- -------- --------
Operating income........... 46,431 43,957 128,861 127,289
Interest expense........... 3,796 3,910 12,175 12,882
Recapitalization
expense.................. 541 -- 3,541 --
Other income (expense),
net...................... 168 1,837 (769) 2,931
-------- -------- -------- --------
Income before income
tax expense.............. 42,262 41,884 112,376 117,338
Income tax expense......... 17,249 16,947 47,165 47,528
-------- -------- -------- --------
Net income................. $ 25,013 $ 24,937 $ 65,211 $ 69,810
======== ======== ======== ========
Earnings per share of
common stock:
Basic................ $ 0.63 $ 0.60 $ 1.65 $ 1.68
Diluted.............. $ 0.61 $ 0.57 $ 1.59 $ 1.59
Weighted average shares
of common stock
outstanding:
Basic................ 39,694 41,762 39,607 41,555
Diluted.............. 41,082 43,864 41,081 43,887
</TABLE>
See accompanying notes.
4
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KNOLL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................... $ 65,211 $ 69,810
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization............ 26,705 28,648
Other noncash items...................... 1,419 (2,211)
Recapitalization expense................. 3,541 --
Changes in assets and liabilities:
Customer receivables................. (6,647) (4,478)
Inventories.......................... (4,106) (6,993)
Accounts payable..................... (3,584) (8,245)
Current and deferred income taxes.... (1,084) 1,002
Other current assets and
liabilities........................ (13,771) 347
Other noncurrent assets and
liabilities........................ (1,157) 1,413
-------- --------
Cash provided by operating activities.......... 66,527 79,293
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment..... (14,376) (20,206)
Proceeds from sale of assets................... 106 22
-------- --------
Cash used in investing activities.............. (14,270) (20,184)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of revolving credit facility, net.... (30,000) (61,000)
Net proceeds from issuance of stock............ 3,674 4,399
Purchase of common stock....................... (28,675) (3,127)
Payment of recapitalization costs.............. (2,738) --
-------- --------
Cash used in financing activities.............. (57,739) (59,728)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents......................... (445) (84)
-------- --------
Decrease in cash and cash equivalents.......... (5,927) (703)
Cash and cash equivalents at beginning of
period....................................... 17,465 10,790
-------- --------
Cash and cash equivalents at end of period..... $ 11,538 $ 10,087
======== ========
</TABLE>
See accompanying notes.
5
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KNOLL, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Knoll, Inc. (the "Company" or "Knoll") 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 and
therefore 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 are reflected in the
condensed consolidated financial statements. The condensed consolidated
balance sheet as of December 31, 1998 is derived from the Company's 1998
audited balance sheet. The unaudited condensed consolidated financial
statements and notes thereto should be read in conjunction with the
consolidated financial statements and notes thereto contained in the Company's
annual report on Form 10-K for the year ended December 31, 1998. The results
of operations for the three and nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the full year ending
December 31, 1999.
2. Acquisition of Shares Owned by Public Stockholders and New Credit Agreement
On March 23, 1999, the Company received a proposal from Warburg, Pincus
Ventures, L.P. ("Warburg") and certain members of Knoll management
(collectively, the "Continuing Stockholders") regarding a recapitalization
(merger) transaction whereby the Company would acquire all of the outstanding
shares of its common stock not owned by the Continuing Stockholders for
$25.00 per share. The Board of Directors appointed a special committee,
consisting of independent members of the Board of Directors, to consider the
proposed merger. The special committee retained legal counsel and an
investment banker to assist in evaluating the proposed merger. The Continuing
Stockholders subsequently increased the proposed merger consideration to $28.00
per share. On June 21, 1999, the Board of Directors, at the recommendation of
the special committee, approved the proposed merger at a price of $28.00 per
share. On that same day, Warburg and the Company entered into an agreement
and plan of merger, which was subsequently amended on July 29, 1999. On
October 20, 1999, the merger was approved by the holders of a majority of the
outstanding shares of Knoll common stock at the Company's 1999 annual meeting
of stockholders.
On August 13, 1999, the Company entered into an agreement with the holder of
a majority of its 10.875% Senior Subordinated Notes due 2006 (the "Senior
Subordinated Notes"). Under the agreement, the majority holder consented to
the merger and the related transactions, and the Company agreed to pay such
holder (and other holders of the Senior Subordinated Notes who also consent),
promptly after completion of the merger, $120 per $1,000 principal amount of
the Senior Subordinated Notes owned by the holder. All other holders have
provided their consent. As a result, the Company will recognize the total
consent payment of $12.9 million as a component of the extraordinary loss to
be recognized by the Company in the fourth quarter of 1999.
Eight class action complaints relating to the initial announcement of the
proposed merger were filed in March 1999. One complaint was voluntarily
dismissed and the seven remaining complaints were consolidated into a single
action. On June 21, 1999, the Company entered into a Memorandum of
Understanding with counsel to the plaintiffs in the lawsuits. The Memorandum
of Understanding provided for the settlement of such lawsuits based on the
payment of a per share merger consideration of $28.00. On November 3, 1999,
the proposed settlement of the litigation, as provided for in the Memorandum
of Understanding, was approved by the Delaware Court of Chancery.
The merger of a newly formed entity, which was organized by Warburg, with and
into Knoll, with Knoll continuing as the surviving corporation, was consummated
on November 4, 1999. As a result of the merger, the approximately 17.7 million
shares of common stock held by the public stockholders of Knoll immediately
prior to the merger have
6
<PAGE>
been converted into the right to receive $28.00 per share in cash and have
been canceled. Furthermore, the Company's common stock ceased to be listed
on the New York Stock Exchange, and the registration of the Company's common
stock under the Securities Exchange Act was terminated.
During the three months and nine months ended September 30, 1999, the
Company incurred $0.5 million and $3.5 million of expense relating to the
planned recapitalization of the Company that occurred upon consummation of
the merger. This expense is not expected to be deductible for income tax
purposes.
On October 20, 1999, the Company entered into a credit agreement that provides
up to $650.0 million to (a) fund the merger and related fees and expenses
(including consent fees related to the Company's Senior Subordinated Notes),
(b) refinance all amounts owing under the Company's senior credit agreement
that existed immediately prior to the merger and (c) provide for working
capital and ongoing general corporate purposes. The agreement consists of a
$325.0 million six-year term loan facility and a $325.0 million six-year
revolving credit facility. Borrowings under the agreement bear interest at a
floating rate based, at the Company's option, upon (a) the Eurodollar rate (as
defined therein) plus an applicable percentage that is subject to change based
upon the Company's ratio of funded debt to EBITDA or (b) the greater of the
federal funds rate plus 0.5% or the prime rate, plus an applicable percentage
that is subject to change based upon the Company's ratio of funded debt to
EBITDA. The Company is required to make quarterly principal payments under
the term loan facility commencing on December 31, 1999 and continuing through
September 2005. The agreement is secured by substantially all of the Company's
present and future domestic assets, 100% of the capital stock of the Company's
present and future domestic subsidiaries and 65% of the capital stock of the
Company's present and future foreign subsidiaries. Additionally, all
borrowings are jointly and severally, unconditionally guaranteed by the
Company's existing and future domestic subsidiaries. However, if the Company
is unable to satisfy all or any portion of its obligation with respect to the
credit agreement, it is unlikely that the guarantors will be able to pay all
or any portion of such unsatisfied obligations. In connection with the
consummation of the merger on November 4, 1999, the Company repaid all of its
then-outstanding senior indebtedness, which amounted to $14.0 million, and
incurred debt totaling $533.0 million under the new credit agreement.
3. Inventories
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
(In Thousands)
<S> <C> <C>
Raw materials.............. $43,903 $42,625
Work in process............ 12,678 11,827
Finished goods............. 24,190 22,661
------- -------
Inventories................ $80,771 $77,113
======= =======
</TABLE>
7
<PAGE>
4. Earnings Per Share
The following table sets forth a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Weighted
Net Income Average Shares Per Share
(Numerator) (Denominator) Amount
----------- --------------- ---------
<S> <C> <C> <C>
Three Months Ended September 30, 1999:
Basic earnings per share.............. $25,013 39,694 $0.63
=====
Effect of dilutive potential
common shares:
Stock options.................. -- 360
Nonvested restricted
stock grants................. -- 1,028
------- ------
Diluted earnings per share............ $25,013 41,082 $0.61
======= ====== =====
Three Months Ended September 30, 1998:
Basic earnings per share.............. $24,937 41,762 $0.60
=====
Effect of dilutive potential
common shares:
Stock options................... -- 439
Nonvested restricted
stock grants.................. -- 1,663
------- ------
Diluted earnings per share............ $24,937 43,864 $0.57
======= ====== =====
Nine Months Ended September 30, 1999:
Basic earnings per share.............. $65,211 39,607 $1.65
=====
Effect of dilutive potential
common shares:
Stock options................... -- 306
Nonvested restricted
stock grants.................. -- 1,168
------- ------
Diluted earnings per share............ $65,211 41,081 $1.59
======= ====== =====
Nine Months Ended September 30, 1998:
Basic earnings per share.............. $69,810 41,555 $1.68
=====
Effect of dilutive potential
common shares:
Stock options................... -- 525
Nonvested restricted
stock grants.................. -- 1,807
------- ------
Diluted earnings per share............ $69,810 43,887 $1.59
======= ====== =====
</TABLE>
Options to purchase 793,000; 823,000; and 1,093,000 shares of common stock that
were outstanding as of September 30, 1999, June 30, 1999 and March 31, 1999,
respectively, were not included in the calculations of diluted earnings per
share for 1999. Such options were excluded from the calculations because
their exercise prices exceeded the average market price of the common stock
for the appropriate period and, therefore, their effect on earnings per share
would have been antidilutive.
5. Share Repurchase Program
During the nine months ended September 30, 1999, the Company purchased
1,187,000 shares of its common stock for $28.7 million, or an average price
of $24.16 per share. Since the inception of the share repurchase program in
September 1998, the Company has purchased 2,894,700 shares of its common stock
for $67.5 million, or an average price of $23.33 per share.
6. Comprehensive Income
For the three months ended September 30, 1999 and 1998, total comprehensive
income amounted to $25.5 million and $21.9 million, respectively. Total
comprehensive income for the nine months ended September 30, 1999 and 1998 was
$66.7 million and $64.5 million, respectively.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
---------------------
The following discussion should be read in conjunction with the accompanying
unaudited condensed consolidated financial statements and notes thereto and
in conjunction with the Company's annual report on Form 10-K for the year
ended December 31, 1998.
Results of Operations
Comparison of Third Quarter and Nine Months Ended September 30, 1999 to Third
Quarter and Nine Months Ended September 30, 1998
Sales. Sales for the third quarter of 1999 were $247.5 million, an increase
of 5.3%, or $12.5 million, from third quarter 1998 sales of $235.0 million.
Sales for the nine months ended September 30, 1999 were $710.5 million, an
increase of 1.1%, or $7.7 million, from sales of $702.8 million for the same
period of 1998. Growth for the third quarter and nine months resulted from
increased volume in North America, which was attributable primarily to
increased sales of office systems and storage products, offset in part by a
reduction of volume in Europe.
Gross Profit and Operating Income. As a percentage of sales, gross profit was
39.0% for the third quarter of 1999 compared to 39.6% for the third quarter of
1998 and was 39.5% for the nine months ended September 30, 1999 compared to
39.6% for the same period of 1998. The decrease in gross margin for the third
quarter was due primarily to manufacturing inefficiencies that resulted from
implementation issues associated with the transition to a new manufacturing
system. Operating income as a percentage of sales was 18.7% for the third
quarter of 1999 and 18.1% for the nine months ended September 30, 1999, both
unchanged from the same periods of the prior year.
Selling, general and administrative expenses were $50.2 million for the third
quarter of 1999 compared to $49.1 million for the third quarter of 1998. This
increase was due primarily to increased expenses related to sales and
technology initiatives in the third quarter of 1999. Selling, general and
administrative expenses for the nine months ended September 30, 1999 were
$151.5 million compared to $150.9 million for the same period of 1998. As a
percentage of sales, the Company's selling, general and administrative
expenses decreased to 20.3% for the third quarter of 1999 from 20.9% for the
third quarter of 1998 and decreased to 21.3% for the nine months ended
September 30, 1999 from 21.5% for the same period of 1998.
Interest Expense. The Company's interest expense was $3.8 million for the
third quarter of 1999 and $12.2 million for the nine months ended September 30,
1999 compared to $3.9 million for the third quarter of 1998 and $12.9 million
for the nine months ended September 30, 1998. The decreases in interest
expense were due principally to lower outstanding debt balances during the
third quarter and nine months of 1999 compared to the third quarter and nine
months of 1998.
Recapitalization Expense. Pursuant to an Agreement and Plan of Merger dated
as of June 21, 1999 (as amended on July 29, 1999), between Warburg and Knoll,
a newly formed entity was organized by Warburg and merged with and into Knoll
on November 4, 1999, with Knoll continuing as the surviving corporation. As
a result of the merger, all shares of common stock held by the public
stockholders of Knoll immediately prior to the merger have been converted
into the right to receive $28.00 per share in cash and have been canceled.
During the three months and nine months ended September 30, 1999, the Company
incurred $0.5 million and $3.5 million of expense relating to the planned
recapitalization of the Company that occurred upon consummation of the merger.
See Note 2 to the unaudited condensed consolidated financial statements for
further discussion of the merger.
Income Tax Expense. The Company's effective tax rate for the third quarter
and nine months ended September 30, 1999 was 40.8% and 42.0%, respectively,
compared to 40.5% for the third quarter and nine months ended September 30,
1998, respectively. The increases in the Company's effective tax rate for
the third quarter and nine months were due primarily to the recapitalization
expense, which is not expected to be deductible for income tax purposes. The
changes in the effective tax rate for the third quarter and nine months were
also impacted by the mix of the Company's pretax income and the varying tax
rates attributable to the countries in which it operates.
9
<PAGE>
Earnings Per Share. The Company's diluted earnings per share for the third
quarter of 1999 were $0.61, an increase of 7.0% from diluted earnings per
share of $0.57 for the third quarter of 1998. Diluted earnings per share of
$1.59 for the nine months ended September 30, 1999 was unchanged from the same
period of 1998. The recapitalization expense discussed above negatively
impacted 1999 diluted earnings per share by $0.01 for the third quarter of
1999 and $0.08 for the nine months ended September 30, 1999. Excluding the
impact of the recapitalization expense, earnings per share were $0.62 for the
third quarter of 1999, an increase of 8.8% over the third quarter of 1998, and
$1.67 for the nine months ended September 30, 1999, an increase of 5.0% over
the same period of 1998. Earnings per share for the third quarter and nine
months ended September 30, 1999 benefited from the reduced number of common
shares outstanding that resulted from the repurchase of shares of common stock
by the Company under its share repurchase program that was implemented in
September 1998.
Liquidity and Capital Resources
During the nine months ended September 30, 1999, the Company generated cash
flow from operations of $66.5 million. Cash provided by operations resulted
primarily from earnings before depreciation, amortization and recapitalization
expense offset by cash used for working capital purposes. This cash flow, in
addition to proceeds of $3.7 million received from the issuance of stock under
the company's employee stock plans, was applied to the funding of $14.4 million
in capital expenditures, the repayment of $30.0 million under the Company's
revolving credit facility and the repurchase, during the first two months of
1999, of 1,187,000 shares of the Company's common stock for $28.7 million.
As of September 30, 1999, the Company's ratio of debt to total capitalization
was 26.5%, and the Company had an aggregate of $250.9 million available for
borrowing under its U.S. and European revolving credit facilities. In
connection with the consummation of the merger on November 4, 1999, which is
discussed above, the Company repaid all of its then-outstanding senior
indebtedness, which amounted to $14.0 million, and incurred debt totaling
$533.0 million under a new senior credit agreement. The new credit agreement
provides up to $650.0 million to (a) fund the merger and related fees and
expenses, (b) refinance all amounts owing under the Company's senior credit
agreement that existed immediately prior to the merger and (c) provide for
working capital and ongoing general corporate purposes. The agreement consists
of a $325.0 million six-year term loan facility and a $325.0 million six-year
revolving credit facility. Borrowings bear interest at a floating rate based,
at the Company's option, upon (a) the Eurodollar rate (as defined therein)
plus an applicable percentage that is subject to change based upon the
Company's ratio of funded debt to EBITDA or (b) the greater of the federal
funds rate plus 0.5% or the prime rate, plus an applicable percentage that is
subject to change based upon the Company's ratio of funded debt to EBITDA.
The Company is required to make quarterly principal payments under the term
loan facility commencing on December 31, 1999, in an aggregate annual amount
of $3.75 million in 1999, $17.5 million in 2000, $31.25 million in 2001,
$52.5 million in 2002, $63.75 million in 2003, $81.25 million in 2004 and
$75.0 million in 2005. Loans made pursuant to the revolving credit facility
may be borrowed, repaid and reborrowed from time to time until November 4,
2005. The agreement is secured by substantially all of the Company's present
and future domestic assets, 100% of the capital stock of the Company's present
and future domestic subsidiaries and 65% of the capital stock of the Company's
present and future foreign subsidiaries. Additionally, all borrowings are
jointly and severally, unconditionally guaranteed by the Company's existing
and future domestic subsidiaries. However, if the Company is unable to
satisfy all or any portion of its obligation with respect to the credit
agreement, it is unlikely that the guarantors will be able to pay all or any
portion of such unsatisfied obligations.
The Company believes that existing cash balances and internally generated cash
flows, together with borrowings available under the revolving credit facility
of the new credit agreement entered into in connection with the merger, will be
sufficient to fund normal working capital needs, capital spending requirements
and debt service requirements for at least the next twelve months. The
Company's debt instruments contain certain covenants that, among other things,
limit the Company's ability to incur additional indebtedness, pay dividends
and purchase Company stock as well as require the Company to maintain certain
financial ratios.
Backlog
The Company's backlog of unfilled orders was $204.4 million at September 30,
1999 and $141.5 million at September 30, 1998. The Company manufactures
substantially all of its products to order and expects to fill substantially
all outstanding unfilled orders within the next twelve months. As such,
backlog is not a significant factor used to predict the Company's long-term
business prospects.
10
<PAGE>
Year 2000 Readiness Disclosure
The Company has completed the implementation of its strategic project to
replace and enhance its existing manufacturing and business information
systems (software and hardware) in North America with a new fully integrated
system, which the Company believes to be year 2000 compliant. Additionally,
the Company has completed an evaluation of the information systems currently
being used by its European operations and other potential European year 2000
issues and is taking actions to address the year 2000 issues that have been
identified. Based upon information presently known, the Company does not
expect its European year 2000 issues to have a material adverse effect upon
its results of operations.
In North America, the Company has installed and is utilizing the new system at
all of its sites. In addition, the Company has completed an inventory of its
manufacturing equipment to identify equipment that contains embedded chips and
is taking actions to address issues related to embedded chips that the Company
has determined may not be year 2000 compliant. The Company anticipates that
problems related to embedded chips that are not year 2000 compliant will be
remedied, through replacement or other satisfactory measures, during the
remainder of 1999. The Company has experienced adverse operational issues
related to the project implementation. The Company has been developing and
will continue to develop and implement plans to address these issues as they
arise, and the Company expects to resolve any significant issues before
year-end. If the Company successfully addresses and resolves issues
associated with the system implementation and noncompliant embedded chips in
a timely manner, the year 2000 issues associated with its information systems
and manufacturing equipment would not be expected to have a material adverse
effect on the Company's operations.
In the event the Company is unable to resolve issues, which have arisen or
may develop from the implementation, on a timely basis, the Company's ability
to take customer orders, manufacture and deliver product on a timely basis,
invoice customers and collect payments may be impaired. The Company can not
reasonably estimate at this time the amount of lost revenue or additional
expenses that might be expected in this scenario. Failure to implement the
project on a timely basis could have a material adverse effect on the Company.
The Company currently does not have a contingency plan in place. However, the
Company continually evaluates the status of completion and whether or not a
contingency plan is or may be necessary. The Company would tailor any
contingency plan to address the issue in question and attempt to minimize the
impact upon the Company's operations and customers.
The Company estimates that the total project cost will be approximately
$35.0 million, of which approximately 70% will be expensed and 30% will be
capitalized. Through September 30, 1999, the Company incurred expenditures of
approximately $31.8 million ($22.5 million expense and $9.3 million capital)
related to the project. The project is being funded with cash flows from
operations. The estimated cost of the project has not constrained the
Company's information systems budget or materially affected other necessary
information systems activities.
The costs and completion date of the project are based on the best estimates
of management, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain technical and
consulting resources. There can be no guarantee that these estimates are
accurate. Actual results could differ materially from those anticipated and,
therefore, could have a material adverse effect on the Company's operations.
As the year 2000 issue is a global concern, the Company's operations could be
materially adversely affected by circumstances beyond its control. Disruptions
in the economy generally resulting from year 2000 issues could materially
adversely affect the Company. Additionally, the year 2000 readiness of the
Company's vendors, dealers and other third parties (such as utility companies,
the U.S. government and customers) on which it relies could impact the
Company's operations. Although the Company's systems do not interface directly
with those of third parties, the inability of these other parties to complete
their year 2000 initiatives in a timely manner could have a material adverse
effect on the Company.
The Company has no means of ensuring that its vendors, dealers and other third
parties will be year 2000 compliant in a timely manner. However, the Company
has been actively working to determine the year 2000 readiness of these
parties and to determine the actions, if any, that would be necessary to help
minimize any potential adverse impact on the Company. The Company has been
formally communicating with vendors, dealers and certain other
11
<PAGE>
third parties through questionnaires and on-site visits. For any vendors that
the Company deems to be at risk of not being adequately prepared for the year
2000, the Company has or will attempt to seek alternate sources for procuring
product or supplies, build inventories or develop an appropriate contingency
plan. To date, the Company is not aware of any third-party year 2000 issue
that is expected to materially adversely impact the Company's operations.
Statement Regarding Forward-Looking Disclosure
Certain portions of this Form 10-Q, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations," contain various
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, which represent the Company's expectations or beliefs
concerning future events. Forward-looking statements relate to future
operations, strategies, financial results or other developments and are not
based on historical information. In particular, statements using verbs such
as "anticipates," "believes," "estimates," "expects" or words of similar
meaning generally involve forward-looking statements.
The Company cautions that its forward-looking statements are further qualified
by important factors that could cause actual results to differ materially from
those in the forward-looking statements. Such factors include, without
limitation, the highly competitive nature of the market in which the Company
competes, including the introduction of new products, pricing changes by the
Company's competitors and growth rates of the office systems category; risks
associated with the Company's growth strategy, including the risk that the
Company's introduction of new products will not achieve the same degree of
success achieved historically by the Company's products; the Company's
indebtedness, which requires a substantial portion of the Company's cash flow
from operations to be dedicated to debt service, making such cash flow
unavailable for other purposes, and which could limit the Company's flexibility
in reacting to changes in its industry or economic conditions generally;
the ability to resolve issues arising from the implementation of the Company's
information systems project, which could impair the Company's operations if
not resolved successfully or on time; possible risks relating to year 2000
issues; the Company's dependence on key personnel; the ability of the Company
to maintain its relationships with its dealers; the Company's reliance on its
patents and other intellectual property; environmental laws and regulations,
including those that may be enacted in the future, that affect the ownership
and operation of the Company's manufacturing plants; risks relating to
potential labor disruptions; fluctuations in foreign currency exchange rates;
and fluctuations in industry revenues driven by a variety of macroeconomic
factors, including white-collar employment levels and corporate cash flows,
as well as by a variety of industry factors such as corporate reengineering
and restructuring, technology demands, ergonomic, health and safety concerns
and corporate relocations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- -------------------------------------------------------------------
During the normal course of business, the Company is routinely subjected to
market risk associated with interest rate movements and foreign currency
exchange rate movements. Interest rate risk arises from the Company's debt
obligations and, prior to April 1999, from interest rate collar agreements.
Foreign currency exchange rate risk arises from the Company's foreign
operations and purchases of inventory from foreign suppliers.
At December 31, 1998, the Company had outstanding interest rate collar
agreements with an aggregate notional principal amount of $115.0 million.
Such agreements expired in April 1999. As such, as of September 30, 1999,
the Company is no longer subjected to interest rate risk from interest rate
collar agreements. There have been no other changes in the types of market
risk to which the Company is exposed as disclosed in the Company's annual
report on Form 10-K for the year ended December 31, 1998.
With the exception of the Company's variable rate debt obligation, there has
been no material change in the carrying amounts or fair values of the Company's
financial instruments that were disclosed in the Company's annual report on
Form 10-K for the year ended December 31, 1998. Regarding the variable rate
debt, the Company had $31.0 million of such debt outstanding at September 30,
1999, which is a decrease of $30.0 million from December 31, 1998. The fair
value of this debt continues to approximate its carrying amount.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
In March 1999, eight class action complaints (Stark v. Knoll, Inc., et al.,
No. 17049NC; Guido v. Warburg, Pincus & Co., et al., No. 17052NC; Marotta v.
Knoll, Inc., et al., No. 17053NC; Finkelstein v. Knoll, Inc., et al., No.
17055NC; Rausch v. Knoll, Inc., et al., No 17059NC; Hatfield v. Knoll, Inc.,
et al., No. 17068NC; Shervy v. Knoll, Inc., et al., No. 17073NC; Simms v.
Knoll, Inc., et al., No. 17076NC) were filed in the Court of Chancery for the
State of Delaware, New Castle County, relating to the initial merger proposal
of the Continuing Stockholders contemplating the acquisition of all of the
outstanding shares of common stock not owned by them at a price of $25.00 per
share, which was previously discussed in Note 2 to the unaudited condensed
consolidated financial statements. The Stark complaint was voluntarily
dismissed, and the remaining seven complaints were consolidated into a single
class action. The defendants named in the complaints were the Company,
Burton B. Staniar, John W. Amerman, Robert J. Dolan, Jeffrey A. Harris, Sidney
Lapidus, Kewsong Lee, John L. Vogelstein, John H. Lynch, Warburg, Pincus & Co.,
Warburg and E.M. Warburg, Pincus & Co., LLC. The complaints alleged breach of
fiduciary duty on the part of the individual defendants in connection with the
proposed purchase of such shares of common stock and sought a preliminary
injunction, damages and rescission.
Generally, the lawsuits purported to be brought on behalf of the holders of
common stock and alleged substantially similar claims of breach of fiduciary
duty. In general, the plaintiffs alleged that the merger consideration was
unjust and inadequate in that the intrinsic value of the shares of common
stock was allegedly greater than the proposed merger consideration, in view
of the Company's prospects; the proposed merger consideration included an
inadequate premium; and the proposed merger consideration was designed to cap
the market price of the shares of common stock before the trading price for
the shares of common stock could recover from an alleged temporary downturn
in the market. The lawsuits also generally sought injunctive relief, an
injunction of the proposed merger (or, if consummated, rescission thereof),
compensatory and other damages and an award of attorney's fees and expenses.
On June 21, 1999, the Company entered into a Memorandum of Understanding with
counsel to the plaintiffs in such stockholder lawsuits. The Memorandum of
Understanding provided for the settlement of such lawsuits based on the payment
of a per share merger consideration of $28.00 and provided that the plaintiffs
petition the court for certification of a class on a "non-opt-out" basis. On
November 3, 1999, the proposed settlement of the litigation, as provided for
in the Memorandum of Understanding, was approved by the Delaware Court of
Chancery.
Item 2. Changes in Securities and Use of Proceeds
- --------------------------------------------------
Restrictions on Dividends
The indenture relating to the Company's Senior Subordinated Notes and the
credit agreement governing the Company's term and revolving credit facilities
entered into in connection with the merger limit the Company's ability to pay
dividends to its stockholders. The Company has not paid any dividends on its
common stock, and any future determination to pay dividends will depend on the
Company's results of operations, financial condition, capital requirements,
contractual restrictions and other factors deemed relevant by the Board of
Directors.
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Exhibits:
2* Amended and Restated Agreement and Plan of Merger by and between
Warburg, Pincus Ventures, L.P. and Knoll, Inc., dated as of
July 29, 1999.
10.1** Letter Agreement between Oak Hill Securities Fund, L.P. and the
Company, dated August 13, 1999.
10.2*** Credit Agreement, dated as of October 20, 1999, by and among the
Company, the Guarantors (as defined therein), the Lenders (as
defined therein), Bank of America, N.A., as Administrative Agent,
the Chase Manhattan Bank, as Syndication Agent, and Merrill Lynch
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
Documentation Agent.
10.3 Supplemental Indenture No. 3, dated as of November 4, 1999, by
and among the Company, the Guarantors (as defined therein), and
The Bank of New York, as trustee, relating to the Company's
10.875% Senior Subordinated Notes due 2006.
27 Financial Data Schedule.
b. Current Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the three months
ended September 30, 1999.
- ------------------------------------------------------------------------------
* Incorporated by reference to the Company's Definitive Proxy Statement on
Schedule 14A, which was filed with the Securities and Exchange Commission
on September 30, 1999.
** Incorporated by reference to the Company's Amendment No. 1 to Schedule
13E-3, which was filed with the Securities and Exchange Commission on
September 10, 1999.
*** Incorporated by reference to the Company's Form 8-K dated November 4,
1999, which was filed with the Securities and Exchange Commission on
November 5, 1999.
14
<PAGE>
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.
KNOLL, INC.
Date: November 15, 1999 By: /s/ Burton B. Staniar
--------------------------
Burton B. Staniar
Chairman of the Board
Date: November 15, 1999 By: /s/ Douglas J. Purdom
--------------------------
Douglas J. Purdom
Senior Vice President and
Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description
- ------- -----------
2* Amended and Restated Agreement and Plan of Merger by and between
Warburg, Pincus Ventures, L.P. and Knoll, Inc., dated as of
July 29, 1999.
10.1** Letter Agreement between Oak Hill Securities Fund, L.P. and the
Company, dated August 13, 1999.
10.2*** Credit Agreement, dated as of October 20, 1999, by and among the
Company, the Guarantors (as defined therein), the Lenders (as defined
therein), Bank of America, N.A., as Administrative Agent, the Chase
Manhattan Bank, as Syndication Agent, and Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as Documentation Agent.
10.3 Supplemental Indenture No. 3, dated as of November 4, 1999, by and
among the Company, the Guarantors (as defined therein), and The Bank
of New York, as trustee, relating to the Company's 10.875% Senior
Subordinated Notes due 2006.
27 Financial Data Schedule.
- ------------------------------------------------------------------------------
* Incorporated by reference to the Company's Definitive Proxy Statement on
Schedule 14A, which was filed with the Securities and Exchange Commission
on September 30, 1999.
** Incorporated by reference to the Company's Amendment No. 1 to Schedule
13E-3, which was filed with the Securities and Exchange Commission on
September 10, 1999.
*** Incorporated by reference to the Company's Form 8-K dated November 4,
1999, which was filed with the Securities and Exchange Commission on
November 5, 1999.
16
<PAGE>
EXHIBIT 10.3
THIS SUPPLEMENTAL INDENTURE No. 3 (the "Supplemental Indenture")
dated as of November 4, 1999 among Knoll, Inc., a Delaware corporation
("Knoll"), as the Company, Knoll Overseas, Inc., a Delaware corporation, and
Spinneybeck Enterprises, Inc., a New York corporation, as Guarantors (the
"Guarantors"), and The Bank of New York (as successor to IBJ Whitehall Bank &
Trust Company (successor to IBJ Schroder Bank & Trust Company)), as Trustee.
W I T N E S S E T H:
WHEREAS, there has previously been executed and delivered to the
Trustee an Indenture (the "Indenture") dated as of February 29, 1996 among
T.K.G. Acquisition Sub, Inc., a Delaware corporation ("Sub"), as the Company,
T.K.G. Acquisition Corp., a Delaware corporation ("TKG"), the Guarantors, The
Knoll Group, Inc., a Delaware corporation, and Knoll North America, Inc., a
Delaware corporation, as guarantors, and the Trustee, providing for the
issuance of 10 7/8% Senior Subordinated Notes due 2006 (the "Notes");
WHEREAS, there has previously been executed and delivered to the
Trustee Supplemental Indenture No. 1 dated as of February 29, 1996 among TKG,
Knoll, Inc., a Delaware corporation ("Old Knoll"), the Guarantors and the
Trustee pursuant to which Old Knoll succeeded Sub as the Company;
WHEREAS, there has previously been executed and delivered to the
Trustee Supplemental Indenture No. 2 dated as of March 14, 1997 among Knoll
(formerly TKG), Old Knoll, the Guarantors and the Trustee pursuant to which
Knoll succeeded Old Knoll as the Company;
WHEREAS, Knoll has entered into an Amended and Restated Agreement
and Plan of Merger, dated as of July 29, 1999, pursuant to which Knoll's
controlling stockholders and certain members of management will take Knoll
private in a transaction (the "Merger") in which Knoll will be the surviving
corporation;
WHEREAS, in order to effect the Merger and related transactions,
Knoll has commenced a solicitation of consents from the registered holders
(the "Holders") of the Notes to certain amendments to the Indenture, the
particulars of which are more fully set forth herein (the "Amendments");
WHEREAS, the Holders of a majority in aggregate principal amount of
the outstanding Notes have consented to the Amendments in accordance with the
provisions of Section 902 of the Indenture; and
WHEREAS, The Bank of New York has succeeded IBJ Whitehall Bank &
Trust Company (successor to IBJ Schroder Bank & Trust Company)), as Trustee.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and of the
mutual premises and covenants contained herein and for other good and valuable
consideration, the parties hereto agree, for the equal and proportionate
benefit of the respective Holders from time to time of the Notes, as follows:
ARTICLE ONE
AMENDMENT OF THE INDENTURE
--------------------------
SECTION 1.01. Amendment of Section 1.01.
Section 1.01 of the Indenture is hereby amended as follows:
(a) The following definition is hereby amended and restated:
"Credit Facilities" means (a) prior to consummation of the
-----------------
1999 Merger, the Revolving Credit Facility and the Term Credit
Facility, and (b) from and after consummation of the 1999 Merger,
the credit facilities of the Company pursuant to that certain
Credit Agreement dated as of October 20, 1999 (the "Credit
------
Agreement") among the Company, the other Credit Parties party
---------
thereto, the Lenders party thereto, Bank of America, N.A., as
Administrative Agent, The Chase Manhattan Bank, as Syndication
Agent, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as Documentation Agent, in each case of
clauses (a) and (b) above, including any related notes, guarantees,
collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified,
renewed, refunded, replaced, restated or refinanced from time to
time. A copy of the Credit Agreement as in effect on the 1999
Merger Date is attached to this Supplemental Indenture as
Exhibit A hereto.
---------
(b) The following definitions are hereby added in appropriate
alphabetical order:
"Funded Indebtedness" shall have the meaning ascribed to
-------------------
"Funded Debt" thereto in the Credit Agreement, except that the
-----------
proviso at the end of such definition shall be ignored for the
purposes of the Indenture.
"1999 Merger" means the merger, effective as of the date of
-----------
this Supplemental Indenture, of the Company and Knoll Acquisition
Corp., a Delaware corporation, in which the Company is the
surviving corporation.
"1999 Merger Date" means the date the 1999 Merger is
----------------
consummated.
"Leverage Ratio" shall have the meaning ascribed thereto in
--------------
the Credit Agreement.
-2-
<PAGE>
(c) The following clause (h) is hereby added to the end of
the definition of Exempt Affiliate Transactions:
"and (h) transactions pursuant to or in connection with the
1999 Merger, including any stockholders or registration rights
agreements, and including amendments thereto entered into after the
1999 Merger Date, provided that the terms of any such amendment are
--------
not, in the aggregate, less favorable to the Company than the terms
of such agreement prior to such amendment."
(d) Clause (i) of the definition of Permitted Indebtedness is
hereby amended and restated to read as follows:
"(i) Indebtedness of the Company under the Credit Facilities
(and of the Domestic Subsidiaries under the Guarantees thereof), or
any refinancing thereof, in an aggregate principal amount at any
time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the
Company and its Subsidiaries thereunder) not to exceed $675 million,
less the aggregate amount of all Net Proceeds of Asset Sales
applied, after the 1999 Merger Date, to permanently reduce the
outstanding amount or the commitments with respect to such
Indebtedness pursuant to Section 4.08 hereof;"
SECTION 1.02. Amendment of Section 4.10.
(a) The following is hereby added to the end of clause (i)
of the first paragraph of Section 4.10 of the Indenture: "and other than
payments to stockholders of the Company in connection with the 1999 Merger;"
(b) Clause (c) following the first paragraph of Section 4.10
of the Indenture is hereby amended and restated to read as follows:
"(c) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment were made at the end of the applicable
four-quarter period, have a Leverage Ratio, at the end of the
Company's most recently ended fiscal quarter for which internal
financial statements are available, of less than 2.5 to 1;"
(c) Clause (vi) of the penultimate paragraph of Section 4.10
of the Indenture is hereby amended and restated to read as follows:
"(vi) any payment by the Company or any of its
Subsidiaries directly or through any direct or indirect parent
company (a) in connection with the repurchase of outstanding
shares of Capital Stock of the Company or TKG following the
death, disability, termination of employment or retirement
(even if such employee is retained in a consulting capacity) of
Management Shareholders and (b) of amounts required to be paid
to participants or former
-3-
<PAGE>
participants in employee benefit plans upon any termination of
employment by such participants as provided in the documents
related thereto, in an aggregate amount (for both clauses (a)
and (b)) not to exceed $15 million in any fiscal year (up to a
maximum of $30 million) from and after the 1999 Merger Date;"
(d) The following clauses (xi) and (xii) are hereby added
following clause (x) of the penultimate paragraph of Section 4.10 of the
Indenture:
"and (xi) Restricted Payments made prior to the 1999
Merger Date in compliance with the Indenture as in effect at
the time of any such Restricted Payment;
and (xii) the making of Restricted Payments after
the 1999 Merger Date in an aggregate amount not to exceed
$20 million;"
(e) The following new paragraph is hereby added at the end
of Section 4.10 of the Indenture, as follows:
"The computation of the amount of Restricted Payments
that may be made by the Company after the 1999 Merger Date
shall be conducted in accordance with, and shall be subject to,
the terms and conditions of this Indenture as amended on the
1999 Merger Date, and it is understood and agreed that any
accrued availability to make Restricted Payments under this
Indenture prior to the date hereof is not available to the
Company or its Subsidiaries after the 1999 Merger Date unless
and except to the extent that such Restricted Payments are
allowed and availability exists under this Indenture as amended
on the 1999 Merger Date."
SECTION 1.03. Amendment of Section 5.01.
Section 5.01 of the Indenture is hereby amended by adding the
following sentence at the end of Section 5.01 of the Indenture: "The 1999
Merger need not comply with the provisions of this Section 5.01."
SECTION 1.04. Attachment of Exhibit.
The Indenture is hereby amended by attaching, as Exhibit L
---------
thereto, the text of Exhibit A of this Supplemental Indenture.
---------
ARTICLE TWO
MISCELLANEOUS
-------------
SECTION 2.01. Effect. The provisions set forth in this Supplemental
Indenture shall be deemed to be, and shall be construed as part of, the
Indenture to the same extent as if set forth fully therein. All references
to the Indenture in the Indenture or in any other agreement, document or
instrument delivered in connection therewith or pursuant thereto shall be
deemed
-4-
<PAGE>
to refer to the Indenture as amended by this Supplemental Indenture. Except
as amended hereby, the Indenture shall remain in full force and effect.
SECTION 2.02. Trust Indenture Act Controls. If any provision of this
Supplemental Indenture limits, qualifies or conflicts with another provision
that is required by or deemed to be included in this Supplemental Indenture
by the Trust Indenture Act (as such term is defined in the Indenture), the
required or incorporated provision shall control.
SECTION 2.03. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
SECTION 2.04. Counterparts. This Supplemental Indenture may be
executed in any number of counterparts, each of which shall be original, but
such counterparts shall together constitute but one and the same instrument.
SECTION 2.05. Severability. In case any provision in this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 2.06. Effect of Headings. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.
KNOLL, INC.
By /s/ Douglas J. Purdom
---------------------------------
Name: Douglas J. Purdom
Title: Senior Vice President and
Chief Financial Officer
KNOLL OVERSEAS, INC.
By /s/ Douglas J. Purdom
---------------------------------
Name: Douglas J. Purdom
Title: Senior Vice President and
Chief Financial Officer
SPINNEYBECK ENTERPRISES, INC.
By /s/ Douglas J. Purdom
---------------------------------
Name: Douglas J. Purdom
Title: Senior Vice President and
Chief Financial Officer
THE BANK OF NEW YORK (successor to
IBJ WHITEHALL BANK & TRUST
COMPANY (successor to IBJ SCHRODER
BANK & TRUST COMPANY)), as Trustee
By /s/ Remo J. Reale
---------------------------------
Name: Remo J. Reale
Title: Vice President
<PAGE>
EXHIBIT A
---------
CREDIT AGREEMENT
(See Exhibit 10.2 of this Form 10-Q for the period ended September 30,1999.)
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 11,538
<SECURITIES> 0
<RECEIVABLES> 143,831
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<INVENTORY> 80,771
<CURRENT-ASSETS> 272,580
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0
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