<PAGE>
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 quarter ended July 31, 1999
___ Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 333-24699
COLLINS & AIKMAN FLOORCOVERINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-2151061
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
311 Smith Industrial Boulevard, Dalton, Georgia 30721
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 259-9711
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 .
----- _____
The Registrant has 1,000 shares of Common Stock, par value $.01 per share,
issued and outstanding as of September 14, 1999.
<PAGE>
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations - For The
Thirteen Weeks and Twenty-Six Weeks Ended August 1, 1998
and July 31, 1999 3
Condensed Consolidated Statements of Comprehensive Income -
For The Thirteen Weeks and Twenty-Six Weeks Ended
and August 1, 1998 July 31, 1999 4
Condensed Consolidated Balance Sheets - As of January 30,
1999 and July 31, 1999 5
Condensed Consolidated Statements of Cash Flows - For The
Thirteen Weeks and Twenty-Six Weeks Ended August 1, 1998
and July 31, 1999 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
FOR THE THIRTEEN WEEKS AND TWENTY-SIX WEEKS
ENDED AUGUST 1, 1998 AND JULY 31, 1999
(In Thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Twenty-Six Weeks
-------------------------------- ---------------------------------
August 1, July 31, August 1, July 31,
1998 1999 1998 1999
-------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES.............................. $ 55,161 $ 67,341 $ 94,104 $ 106,520
COST OF GOODS SOLD..................... 31,981 39,336 54,521 62,415
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................ 11,738 14,331 23,703 25,998
-------------- ----------- ------------- -------------
43,719 53,667 78,224 88,413
-------------- ----------- ------------- -------------
OPERATING INCOME....................... 11,442 13,674 15,880 18,107
EQUITY IN EARNINGS OF CHROMA
SYSTEMS PARTNERS.................... -- 134 -- 134
NET INTEREST EXPENSE................... 3,765 3,821 7,377 7,218
-------------- ----------- ------------- -------------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST................... 7,677 9,987 8,503 11,023
INCOME TAX EXPENSE..................... 2,979 3,949 3,333 4,338
MINORITY INTEREST IN INCOME OF
SUBSIDIARY.......................... -- 7 -- 12
-------------- ----------- ------------- -------------
NET INCOME............................. $ 4,698 $ 6,031 $ 5,170 $ 6,673
============== =========== ============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
FOR THE THIRTEEN WEEKS AND TWENTY-SIX WEEKS
ENDED AUGUST 1, 1998 AND JULY 31, 1999
(In Thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
--------------------------- -----------------------------
August 1, July 31, August 1, July 31,
1998 1999 1998 1999
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
NET INCOME............................... $ 4,698 $ 6,031 $ 5,170 $ 6,673
OTHER COMPREHENSIVE INCOME
(EXPENSE) NET OF TAX:
Foreign Currency Translation 54 33 3 (150)
Adjustments..........................
--------- -------- -------- --------
COMPREHENSIVE INCOME..................... $ 4,752 $ 6,064 $ 5,173 $ 6,523
========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 30, 1999 AND JULY 31, 1999
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
January 30, July 31,
1999 1999
----------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash And Cash Equivalents........................................... $ 2,211 $ 2,137
Due From Factor..................................................... -- 6,867
Accounts Receivable, Net............................................ 23,465 40,002
Inventories......................................................... 17,343 35,980
Deferred Tax Assets................................................. 1,098 2,068
Prepaid Expenses And Other.......................................... 752 1,535
--------------- --------------
Total Current Assets............................................. 44,869 88,589
PROPERTY, PLANT AND EQUIPMENT, NET..................................... 40,085 45,979
GOODWILL AND OTHER INTANGIBLE ASSETS................................... 123,365 163,118
OTHER ASSETS........................................................... 7,095 8,312
--------------- --------------
$ 215,414 $ 305,998
=============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts Payable.................................................... $ 8,442 $ 13,062
Accrued Expenses.................................................... 8,704 17,277
Revolving Line of Credit............................................ -- 6,865
Current Portion of Long Term Debt................................... 162 260
--------------- --------------
Total Current Liabilities........................................ 17,308 37,464
OTHER, INCLUDING POST-RETIREMENT BENEFIT
OBLIGATION.......................................................... 4,041 4,041
DEFERRED TAX LIABILITIES............................................... 1,163 1,344
LONG-TERM DEBT......................................................... 132,220 195,932
MINORITY INTEREST...................................................... 153 165
COMMITMENTS AND CONTINGENCIES..........................................
STOCKHOLDER'S EQUITY:
Common Stock ($.01 Par Value Per Share, 1,000 Shares
Authorized, Issued & Outstanding)................................ -- --
Additional Paid-In Capital.......................................... 51,576 51,576
Retained Earnings................................................... 8,840 15,513
Accumulated Other Comprehensive Income.............................. 113 (37)
--------------- --------------
60,529 67,052
--------------- --------------
$ 215,414 $ 305,998
=============== ==============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
5
<PAGE>
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE THIRTEEN WEEKS AND TWENTY-SIX WEEKS
ENDED AUGUST 1, 1998 AND JULY 31, 1999
(In Thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------- -------------------------
August 1, July 31, August 1, July 31,
1998 1999 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED IN):
OPERATIONS:
Net Income For The Period........................... $ 4,698 $ 6,031 $ 5,170 $ 6,673
Items Not Affecting Cash:
Depreciation of capital assets................... 1,347 1,686 2,674 3,225
Amortization of goodwill and other intangible
assets........................................ 1,835 1,662 3,671 3,324
Amortization of deferred financing fees.......... 329 329 658 658
Deferred income tax expense (benefit)............ 433 (15) 299 264
Equity in earnings of Chroma Systems Partners.... -- (134) -- (134)
Minority interest in income of subsidiary........ -- 7 -- 12
Changes In Operating Assets And Liabilities,
Net of Assets Acquired:
Due from factor.................................. -- (675) -- (675)
Accounts receivable.............................. (8,692) (9,971) (11,321) (10,581)
Inventory........................................ 1,354 3,149 (3,872) (4,626)
Accounts payable................................. 1,140 (3,522) 2,977 798
Accrued liabilities.............................. (1,099) 3,137 1,825 4,503
Other operating activities....................... 1,071 (111) 613 (188)
---------- ---------- ---------- ----------
Net cash provided by operating activities..... 2,416 1,573 2,694 3,253
---------- ---------- ---------- ----------
INVESTING:
Acquisition of Businesses, Net of Cash Acquired..... (3,095) (53,999) (3,095) (53,999)
Distribution From Chroma Systems Partners........... -- 152 -- 152
Purchase of Capital Assets.......................... (3,143) (1,006) (4,607) (2,131)
---------- ---------- ---------- ----------
Net cash used in investing activities......... (6,238) (54,853) (7,702) (55,978)
---------- ---------- ---------- ----------
FINANCING:
Net Proceeds (Repayments) From Revolving Credit
Facilities....................................... (1,500) 14,000 2,500 14,000
Proceeds From Long Term Borrowings.................. -- 41,032 -- 41,032
Repayments of Long Term Debt........................ (38) (435) (3,038) (2,381)
---------- ---------- ---------- ----------
Net cash provided by (used in) financing
activities.................................... (1,538) 54,597 (538) 52,651
---------- ---------- ---------- ----------
INCREASE (DECREASE) IN CASH DURING
THE PERIOD....................................... (5,360) 1,317 (5,546) (74)
CASH - BEGINNING OF PERIOD.......................... 5,513 820 5,699 2,211
---------- ---------- ---------- ----------
CASH - END OF PERIOD................................ $ 153 $ 2,137 $ 153 $ 2,137
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
Collins & Aikman Floorcoverings, Inc. (a Delaware corporation) is a leading
manufacturer of floorcoverings for the specified commercial sector of the
floorcoverings market. The Company is a wholly owned subsidiary of CAF
Holdings, Inc. ("Holdings"). Holdings is jointly owned by affiliates of Quad-C,
Inc., Paribas Principal Partners, management of the Company and certain other
investors.
On February 6, 1997, CAF Acquisition Corporation ("CAF"), a wholly owned
subsidiary of Holdings, acquired from a wholly owned subsidiary of Collins &
Aikman Corporation all the outstanding capital stock of the Company (the
"Floorcoverings Acquisition"). Simultaneous with the consummation of the
Floorcoverings Acquisition, CAF was merged with and into the Company.
These condensed consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the
accompanying condensed consolidated financial statements reflect all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the Company's financial position and results of operations.
These condensed consolidated financial statements should be read in conjunction
with the January 30, 1999 consolidated financial statements of the Company
included in the Company's 1998 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. Results of operations for interim periods
are not necessarily indicative of results for the full year.
2. Acquisitions
On June 28, 1999, pursuant to an Agreement and Plan of Merger, dated June
4, 1999 ("the Merger"), the Company, through its wholly owned subsidiary,
Monterey Merger Company, Inc. ("Merger Sub"), acquired all the outstanding
capital stock of Monterey Carpets, Inc. ("Monterey") for $50.0 million, subject
to a working capital adjustment (the "Monterey Acquisition"). Simultaneous with
the consummation of the Merger, Merger Sub was merged with and into Monterey,
with Monterey as the surviving corporation in the merger. In addition,
approximately $0.4 million of indebtedness of Monterey was extinguished by the
Company commensurate with the acquisition. The consideration paid was financed
through the Company's existing credit facility, as amended (see Note 6).
The Monterey Acquisition has been accounted for by the purchase method,
pursuant to which the purchase price has been allocated among the acquired
assets and liabilities. The excess of the purchase price over the fair value of
the net assets acquired amounted to approximately $37.0 million which is being
accounted for as goodwill and is being amortized over 20 years using the
straight line method. This allocation was based on preliminary estimates and
may be revised at a later date.
The following summary presents unaudited pro forma results of operations as
if the Monterey Acquisition occurred as of February 1, 1998 and January 31, 1999
(in thousands):
August 1, July 31,
1998 1999
----------- -----------
Net Sales............................. $ 116.8 $ 129.2
Net Income............................ $ 2.9 $ 8.0
These pro forma results do not purport to represent what the Company's
results of operations would have been if the Monterey Acquisition had occurred
as of such date, nor what results will be for any future period.
7
<PAGE>
On July 30, 1999, the Company acquired all the outstanding capital stock of
Crossley Carpets Mills Limited (the "Crossley Acquisition"). The Crossley
Acquisition has been accounted for by the purchase method, to which the purchase
price has been allocated among the acquired assets and liabilities. The excess
of the purchase price over the fair value of the net assets acquired is being
accounted for as goodwill and is being amortized over 20 years using the
straight line method. As a result of this acquisition, the Company assumed
approximately $17.6 million in short term and long term debt (see Note 6).
3. Investment in Chroma Systems Partners
In 1993, Monterey entered into a partnership agreement with two other
parties in Chroma Systems Partners ("Chroma") which operates a carpet dyeing and
finishing plant. All partners are carpet manufacturers who supply business
volume to the facility. Upon entering the partnership agreement, Monterey and
the other partners each agreed to purchase carpet dyeing and finishing services
exclusively from Chroma. These service agreements can be canceled with a one-
year notice. Charges for these services are expected to equal prevailing market
prices for comparable services. In addition, Monterey agreed to provide certain
executive management and operational services at cost while Chroma agreed to
provide Monterey with certain maintenance and utility services at cost. Chroma
has received a cancellation notice from one of its partners. Effective March 1,
2000, Monterey and the other remaining partner in Chroma will each hold a one-
half interest in the general partnership.
4. Factoring of Receivables
Monterey is party to a credit and factoring agreement with a commercial
bank. The bank provides ongoing cash advances limited to 90 percent of eligible
accounts receivable sold to the bank on a factoring basis. The agreement may be
terminated by the Company or the bank with a 30 day written notice. Advances
are subject to interest computed at the bank's prime rate (7.8 percent) less 0.5
percent. Monterey pays service charges based on the creditworthiness of the
customer at 0.45 or 0.55 percent of factored receivables.
5. Inventories
Net inventory balances are summarized below (in thousands):
(Unaudited)
January 30, July 31,
1999 1999
------------- -------------
Raw materials................... $ 8,951 $ 16,926
Work in process................. 2,440 4,481
Finished goods.................. 5,952 14,573
-------- --------
$ 17,343 $ 35,980
======== ========
6. Long Term Debt
In connection with the Monterey and Crossley acquisitions, the Company
amended its credit facility to, among other things, (i) expand the term loan
facility to include a second term loan of $40.0 million, payable in quarterly
installments due September 2002 through December 2003; (ii) allow greater
flexibility in making acquisitions including the acquisitions discussed above;
and (iii) adjust certain covenants.
8
<PAGE>
As discussed in Note 2, the Company assumed approximately $17.6 million in
short term and long term debt during the Crossley Acquisition. Of this amount,
term loans associated with financing of equipment purchases and other specific
needs totaled $1.2 million. These term loans are payable monthly according to
set schedules of repayment with the lenders. A revolving line of credit with an
outstanding balance of $6.9 million which is used to finance Crossley's working
capital requirements was assumed as well. Approximately $9.5 million of long-
term debt is sinking fund bonds held and issued by the Novia Scotia Business
Development Corporation (the "Bond Holder"). The Bond Holder agreed to forgive
the principal amount of the bonds at various rates, dependant upon certain
factors, to a maximum of $6.3 million. The remaining balance will become
repayable over five years once the forgiveness has expired.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
- -------
Collins & Aikman Floorcoverings, Inc. (a Delaware corporation) (the
"Company"), is a leading U.S. tufting manufacturer of six-foot roll carpet, a
leading manufacturer of modular carpet tiles, and, through Monterey Carpets, is
the number one U.S. broadloom (twelve-foot) high-end design brand within the
specified commercial carpet market. Additionally, the Company, through Crossley
Carpet Mills, is a leading Canadian tufted and woven broadloom manufacturer with
a well-respected brand name in both the U.S. and Canada serving the residential
and specified commercial carpet markets. The ability to offer a "package of
product offerings" in various forms, coupled with flexible distribution
channels, allows the Company to provide a wide array of floor covering solutions
for its customers. The specified commercial carpet market is a niche market that
is highly competitive and impacted by fluctuations in the commercial new
construction market and, to a lesser degree, the commercial renovation market.
The Company believes the impact of economic downturns is softened because its
sales are to five diverse end markets and it has a balanced sales mix between
commercial new construction and renovation projects.
On June 28, 1999, pursuant to an Agreement and Plan of Merger, dated June
4, 1999 (the "Merger"), the Company, through it wholly owned subsidiary,
Monterey Merger Company, Inc. ("Merger Sub"), acquired all the outstanding
capital stock of Monterey Carpets, Inc. ("Monterey") for $50.0 million, subject
to a working capital adjustment (the "Monterey Acquisition"). Simultaneous with
the consummation of the Merger, Merger Sub was merged with and into Monterey,
with Monterey as the surviving corporation in the merger. In addition,
approximately $0.4 million of indebtedness of Monterey was extinguished by the
Company commensurate with the acquisition. The consideration paid was financing
through the Company's existing credit facility, as amended. The Monterey
Acquisition has been accounted for by the purchase method, to which the purchase
price has been allocated among the acquired assets and liabilities. The excess
of the purchase price over the fair value of the net assets acquired was
approximately $37.0 million which is being accounted for as goodwill and is
being amortized over 20 years using the straight line method.
On July 30, 1999, the Company acquired all the outstanding capital
stock of Crossley Carpets Mills Limited (the "Crossley Acquisition"). The
Crossley Acquisition has been accounted for by the purchase method, to which the
purchase price has been allocated among the acquired assets and liabilities.
The excess of the purchase price over the fair value of the net assets acquired
is being accounted for as goodwill and is being amortized over 20 years using
the straight line method.
RESULTS OF OPERATIONS
- ---------------------
Thirteen Weeks Ended July 31, 1999 ("Second Quarter 1999") As Compared with
- ---------------------------------------------------------------------------
Thirteen Weeks Ended August 1, 1998 ("Second Quarter 1998")
- -----------------------------------------------------------
Net Sales. Net sales for the Second Quarter 1999 were $67.3 million, an
increase of 22.1% from the $55.2 million for the Second Quarter 1998. This sales
increase was attributable to the addition of a full quarter of Advance Carpet
Tiles, Ltd. ("ACT"), acquired in June 1998, sales in 1999, the addition of
Monterey sales for one month, and increased sales in most of the Company's
enduse markets.
Cost of Goods Sold. Cost of goods sold increased to $39.3 million for the
Second Quarter 1999 from $32.0 million in the Second Quarter 1998, an increase
of 23.0%. As a percentage of sales, these costs were 58.4% and 58.0%,
respectively. This cost increase was due to increased sales volume from the
Company's products and the inclusion of sales of ACT and Monterey, partially
offset by improved manufacturing efficiencies on the higher volume.
10
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses, including goodwill and other intangible assets
amortization of $1.7 million, for the Second Quarter 1999 increased to $14.3
million, an increase of 22.1% from $11.7 million in the Second Quarter 1998
which included goodwill and intangible assets amortization of $1.8 million. As a
percentage of sales, these expenses remained constant at 21.3%. These higher
costs are principally due to the addition of Monterey and ACT and higher sales
commissions.
Interest Expense. Net interest expense for the Second Quarter 1999 and 1998
were $3.8 million. This flatness was due to lower total indebtedness during the
period until the consummation of the Monterey Acquisition (see Liquidity and
Capital Resources discussion).
Net Income. Net income for the Second Quarter 1999 increased to $6.0
million from $4.7 million in the Second Quarter 1998. This was due to the
combined result of the factors described above.
EBITDA. EBITDA is defined as operating income plus depreciation,
amortization and equity in earnings of Chroma Systems Partners. EBITDA for the
Second Quarter 1999 was $17.2 million, an increase of $2.6 million from $14.6
million in the Second Quarter 1998. As a percentage of sales, EBITDA was 25.5%
in the Second Quarter 1999 and 26.5% in the Second Quarter 1998. EBITDA is
provided as certain investors commonly use it as a measure of a company's
ability to service its indebtedness. EBITDA is not a measure of financial
performance under generally accepted accounting principles and should not be
considered an alternative to net income as a measure of performance or to cash
flow as a measure of liquidity.
RESULTS OF OPERATIONS
- ---------------------
Twenty-Six Weeks July 31, 1999 ("Six Months 1999") As Compared with Twenty-Six
- ------------------------------------------------------------------------------
Weeks Ended August 1, 1998 ("Six Months 1998")
- ----------------------------------------------
Net Sales. Net sales for the Six Months 1999 were $106.5 million, an
increase of 13.2% from the $94.1 million for the Six Months 1998. This sales
increase was attributable to the increased sales of the Company's products and
the addition of ACT and Monterey sales offset by slightly lower average selling
prices.
Cost of Goods Sold. Cost of goods sold increased to $62.4 million for the
Six Months 1999 from $54.5 million in the Six Months 1998, an increase of 14.5%.
As a percentage of sales, these costs were 58.6% and 57.9%, respectively. This
cost increase was due to increased sales volume partially offset by improved
manufacturing efficiencies on the higher volume from the Company's products and
the sales activities of ACT and Monterey. The increase in cost of goods sold as
a percentage of sales was due to lower average selling prices.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses, including goodwill and other intangible assets
amortization of $3.3 million, for the Six Months 1999 increased to $26.0
million, an increase of 9.7% from $23.7 million in the Six Months 1998 which
included goodwill and intangible assets amortization of $3.7 million. As a
percentage of sales, these expenses decreased to 24.4% from 25.2%. These higher
costs principally related to the addition of ACT and Monterey and higher sales
commissions offset by the reduced amortization of intangible assets.
Interest Expense. Net interest expense for the Six Months 1999 decreased to
$7.2 million from $7.4 million in the Six Months 1998. This slight decrease was
due to lower indebtedness during the period until the consummation of the
Monterey Acquisition (see Liquidity and Capital Resources discussion).
Net Income. Net income for the Six Months 1999 increased to $6.7 million
from $5.2 million in the Six Months 1998, an increase of 29.1%. This was due to
the combined result of the factors described above.
11
<PAGE>
EBITDA. EBITDA is defined as operating income plus depreciation and
amortization and equity in earnings. EBITDA for the Six Months 1999 was $24.8
million and the Six Months 1998 was $22.2 million. As a percentage of sales,
EBITDA was 23.3% in the Six Months 1999 and 22.9% in the Six Months 1998. EBITDA
is provided as certain investors commonly use it as a measure of a company's
ability to service its indebtedness. EBITDA is not a measure of financial
performance under generally accepted accounting principles and should not be
considered an alternative to net income as a measure of performance or to cash
flow as a measure of liquidity.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary cash needs have historically been for operating
expenses, working capital, capital expenditures and debt service. The Company
has historically financed its cash requirements primarily through internally
generated cash flows.
Net cash provided by operating activities in the Second Quarter 1999 was
$1.6 million compared to $2.4 million in the Second Quarter 1998. The change is
primarily due to a negative $1.8 million swing in net working capital and $0.4
million benefit in deferred income tax expense, offset by the $1.3 million
increase in net income. Net cash provided by operating activities in the Six
Months 1999 was $3.3 million compared to $2.7 million in the Six Months 1998.
The change is primarily due to a negative $1.0 million swing in net working
capital, offset by the $1.5 million increase in net income.
Capital expenditures totaled $1.0 million during the Second Quarter 1999
compared to $3.1 million during the Second Quarter 1998. For the Six Months
1999, capital expenditures totaled $2.1 million compared to $4.6 million for the
Six Months 1998. The decrease in capital expenditures for the fiscal 1999
periods is primarily due to heavier spending in 1998 for expansions in the
Company's Dalton tufting and finishing plants. Fiscal 1999 capital expenditures
are focused on cost reduction/maintenance measures, efficiency improvements and
capacity enhancements. The Company expects to incur capital expenditures of
approximately $8.4 million during the fiscal year 1999.
Concurrent with the consummation of the Floorcoverings Acquisition, the
Company incurred significant indebtedness, which consisted of $100.0 million of
10% Senior Subordinated Notes due 2007 (the "Senior Notes"), $55.0 million in
term loan borrowings ("A-1 Term Loan Facility") and $2.0 million in revolving
credit borrowings under a $85.0 million Credit Facility (the "Credit Facility").
In connection with the Monterey Acquisition, the Company amended the Credit
Facility to provide an additional $40.0 million in term loan borrowings ("A-2
Term Loan Facility"), permit the Monterey and Crossley acquisitions, and adjust
certain convenants. During fiscal 1998 and 1997, the Company voluntarily prepaid
$23.1 million of the term loan borrowings. Additionally, on February 18, 1999,
the Company prepaid an additional $1.9 million of the term loan borrowings. The
A-1 Term Loan facility of the Credit Facility will mature on June 30, 2002 and,
as of July 31, 1999, will require annual principal payments (payable in
quarterly installments) totaling $1.3 million in the third quarter of fiscal
2000 and $3.7 million in the fourth quarter of fiscal 2000, $15.0 million in
fiscal 2001 and $8.0 million in fiscal 2002. The A-2 Term Loan Facility will
mature on December 31, 2003 and requires annual principal payments (also payable
in quarterly installments) totaling $12.0 million in fiscal 2002 and $28.0
million in fiscal 2003. The revolving credit portion of the Credit Facility will
mature on June 30, 2002 and may be repaid and reborrowed from time to time. As
of July 31, 1999, there was $10.9 million (net of $14.0 million in borrowings
and $5.1 million in letters of credit outstanding) available under the revolving
credit portion of the Credit Facility.
The Company assumed approximately $17.6 million in short term and long term
debt during the Crossley Acquisition. Of this amount, term loans associated with
financing of equipment purchases and other specific needs totaled $1.2 million.
These term loans are payable monthly according to set schedules of repayment
with the lenders. Approximately $6.9 million of short term debt was assumed
which relates to a revolving line of credit agreement of Crossley which is used
to finance working capital requirements. Approximately $9.5 million of long-term
debt is sinking fund bonds held and issued by the Novia Scotia Business
Development Corporation (the "Bond Holder"). The Bond Holder agreed to forgive
the principal amount of the bonds at various rates, dependant upon certain
factors, to a maximum of $6.3 million. The remaining balance will become
repayable over five years once the forgiveness has expired.
12
<PAGE>
The Company's ability to make scheduled payments of principal, interest, or
to refinance its indebtedness (including the Senior Notes), depends on its
future performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond its
control. Based upon the current level of operations and anticipated growth,
management of the Company believes that cash flow from operations, together with
available borrowings under the Credit Facility, will be adequate to meet the
Company's anticipated future requirements for capital expenditures, working
capital and debt service. However, there can be no assurance that the Company's
business will generate sufficient cash flow from operations or that future
borrowings will be available in an amount sufficient to enable the Company to
service its indebtedness or to make necessary capital expenditures.
IMPACT OF INFLATION
- -------------------
The impact of inflation on the Company's operations has not been
significant in recent years. Historically, when the Company has received
inflationary price increases in its primary raw material, nylon fiber, it has
generally been passed on to the Company's customers. However, there can be no
assurance that a high rate of inflation in the future would not have an adverse
effect on the Company's operating results.
The Company experiences seasonal fluctuations, with generally lower sales
and gross profit in the first quarter of the fiscal year and higher sales and
gross profit in the second and third quarters of the fiscal year. This is
primarily due to higher education market sales during the summer months while
schools generally are closed and floorcovering can be installed.
YEAR 2000
- ---------
The Company has evaluated its Year 2000 risk in three separate categories,
information technology systems ("IT"), non-IT systems ("Non-IT") and material
third party relationships ("Third Party Risk"). The Company has developed a
plan in which the risks in each of these categories are being addressed and
reviewed by the appropriate level of management as follows:
The Company's review of its IT systems was substantially completed in
conjunction with the systems review for the Floorcoverings Acquisition while
remaining reviews were completed during the first quarter of 1999. Due to
conversions already completed to address the separation from its former parent
and conversions completed in the first quarter of 1999, the Company considers
its IT systems risk to be minimal and will only formulate contingency plans
should it become necessary. Costs associated with these conversions were planned
outside of the Company's Year 2000 review.
The Company's review of Non-IT systems has been completed. Non-IT systems
involve embedded technologies such as microcontrollers or microprocessors.
Examples of Non-IT systems include telephones, security systems and computer
controlled manufacturing equipment. Any costs of addressing Non-IT risks are
included in normal upgrade and replacement expenditures, which were planned
outside of the Company's Year 2000 review. Management believes its Non-IT risks
are minimal and will formulate contingency plans only should it become
necessary.
The Company's review of its Third Party Risk includes detailed reviews of
critical relationships with suppliers and business partners, such as banking
institutions, with broader reviews of less critical relationships. The Third
Party Risk review is ongoing and is expected to be completed by October 1999.
Contingency plans for critical relationships are being developed and are
expected to be in place by December 1999. The Company presently does not expect
the risk associated with or costs of addressing the Company's Third Party Risk
to be material.
13
<PAGE>
The Company's most likely Year 2000 worst case scenario would be a critical
third party's system malfunction where the Company would suffer business
interruption until the supplier corrected the problem or an alternative supply
was found. At this point in the Company's review, it is not aware of any
potential situations which may cause this scenario to occur, but will formulate
a contingency plan should its review indicate it is necessary to do so.
There can be no assurance that these conclusions will be achieved and
actual results could differ from those anticipated. Specific factors that might
cause differences include, but are not limited to, the ability of the third
parties with which the Company has material relationships to modify or convert
their systems to be Year 2000 compliant and similar uncertainties.
14
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
- ------ -----------
2.2 Agreement and Plan of Merger among Collins & Aikman Floorcoverings,
Inc., Monterey Merger Company, Inc. and Monterey Carpets, Inc. dated
June 4, 1999, incorporated by reference to Exhibit 2.2 of the
Company's Form 8-K filed on July 9, 1999.
10.1(d) Fifth Amendment to the Credit Agreement among CAF Holdings, Inc.,
Collins & Aikman Floorcoverings, Inc. various lending institutions
and Bankers Trust Company as Agent.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
1. On July 9, 1999, the Company filed on Form 8-K information regarding
the acquisition of the capital stock of Monterey Carpets, Inc. which
occurred on June 28, 1999.
2. On August 24, 1999, the Company filed on Form 8-K information
regarding a press release concerning the acquisition of the capital
stock of Crossley Carpet Mills Limited which occurred on July 30,
1999.
3. On September 9, 1999, the Company filed on Form 8-K/A information to
amend Item 7 of the Company's current report on Form 8-K dated July
9, 1999.
15
<PAGE>
SIGNATURE
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.
Dated: September 14, 1999
COLLINS & AIKMAN FLOORCOVERINGS, INC.
(Registrant)
By: /s/ Darrel V. McCay
----------------------------------------------
Darrel V. McCay
Vice-President and Chief Financial Officer
(Duly authorized Officer and Principal
Financial and Accounting Officer)
16
<PAGE>
FIFTH AMENDMENT AND CONSENT
---------------------------
FIFTH AMENDMENT AND CONSENT (this "Amendment"), dated as of June 3,
1999, among CAF HOLDINGS, INC. ("Holdings"), COLLINS & AIKMAN FLOORCOVERINGS,
INC. (the "Borrower"), the financial institutions party to the Credit Agreement
referred to below (each, a "Bank" and, collectively, the "Banks"), BANKERS
TRUST COMPANY, as Agent for the Banks (in such capacity, the "Agent") and
BANKERS TRUST COMPANY, as Pledgee and Collateral Agent (the "Pledgee") under the
Pledge referred to below. All capitalized terms used herein and not otherwise
defined herein shall have the respective meanings provided such terms in the
Credit Agreement referred to below.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties
to a Credit Agreement, dated as of February 6, 1997 (as amended, modified or
supplemented to but not including the date hereof, the "Credit Agreement");
WHEREAS, Holdings, the Borrower, various Subsidiaries of the Borrower
and the Collateral Agent are parties to a Security Agreement, dated as of
February 6, 1997 (as in effect on the date hereof, the "Security Agreement");
WHEREAS, Holdings, the Borrower, various Subsidiaries of the Borrower
and the Collateral Agent are parties to a Pledge Agreement, dated as of February
6, 1997 (as in effect on the date hereof, the "Pledge Agreement");
WHEREAS, the Borrower desires to acquire all of the capital stock of a
corporation previously identified to the Agent and the Banks (the "First
Identified Target"), by way of a one-step merger of a newly-formed Wholly-Owned
Subsidiary of the Borrower ("MergeCo") with and into the First Identified
Target, pursuant to, and in accordance with the terms of, an Agreement and Plan
of Merger (as amended, modified or supplemented to the date hereof, the "First
Identified Merger Agreement"), dated as of June 4, 1999, among the Borrower, the
First Identified Target and MergeCo, with the First Identified Target to be the
surviving corporation of such merger (the "First Identified Acquisition"), which
acquisition, after giving effect to this Amendment, will constitute a Permitted
Acquisition effected in accordance with the requirements of the Credit Agreement
as amended by this Amendment;
WHEREAS, the Borrower desires to acquire, indirectly through a newly-
formed Wholly-Owned Subsidiary of the Borrower which may, but need not be, a
Foreign Subsidiary ("Second Identified Acquisition Corp."), all of the capital
stock of a corporation previously identified to the Agent and the Banks (the
"Second Identified Target"), pursuant to, and in accordance with the terms of, a
definitive Stock Purchase Agreement in the form furnished to the Agent prior to
the date hereof (with such amendments, modifications and waivers thereto as may
<PAGE>
be consented to by the Required Banks, the "Identified Stock Purchase
Agreement"), to be entered into among Second Identified Acquisition Corp., the
Borrower, as guarantor, the Second Identified Target and the selling
shareholders specified therein (the "Second Identified Acquisition"), which
acquisition, after giving effect to this Amendment, will constitute a Permitted
Acquisition effected in accordance with the requirements of the Credit Agreement
as amended by this Amendment;
WHEREAS, the Borrower has requested certain amendments and consents to
the Credit Agreement, the Security Agreement and the Pledge Agreement in
connection with the First Identified Acquisition, the Second Identified
Acquisition and the financing thereof as described below; and
WHEREAS, subject to the terms and conditions of this Amendment, the
Banks wish to grant certain consents to the Credit Agreement and the parties
hereto wish to amend the Credit Agreement, the Security Agreement and the Pledge
Agreement, in each case as herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments and Consents to Credit Agreement.
-------------------------------------------
1. Notwithstanding anything to the contrary contained in the
Credit Agreement, the Banks hereby acknowledge and agree that the First
Identified Acquisition may be effected as a Permitted Acquisition under the
Credit Agreement (and thereupon constitute a "Permitted Acquisition" for all
purposes of the Credit Agreement), so long as:
(i) immediately after giving effect to the First Identified
Acquisition, the Permitted Acquisition Cost thereof (exclusive of
transaction fees and expenses) shall not exceed $50,000,000 plus the amount
----
of any purchase price adjustment as determined pursuant to the First
Identified Merger Agreement;
(ii) except for (x) the deviation from the requirements of a
Permitted Acquisition contained in the Credit Agreement as set forth in
clause (i) above and (y) the consummation of the First Identified
Acquisition by MergeCo (rather than the Borrower as otherwise contemplated
by Section 8.02(p) under the Credit Agreement), the First Identified
Acquisition shall otherwise be effected as a "Permitted Acquisition" in
accordance with all applicable terms of (and meet all applicable
requirements for a Permitted Acquisition under) the Credit Agreement,
including, without limitation, Sections 7.11, 8.02(p) and 8.15(a) thereof;
(iii) on or prior to the First Identified Acquisition Date, there
shall have been delivered to the Agent true and correct copies of the First
Identified Merger Agreement and all documents entered into in connection
with the First Identified Acquisition (the "First Identified Acquisition
Documents"), certified as such by an officer of the Borrower;
-2-
<PAGE>
(iv) on the First Identified Acquisition Date, (w) all First
Identified Acquisition Documents shall have been duly executed and
delivered by the parties thereto and shall be in full force and effect, (x)
the representations and warranties set forth in the First Identified
Acquisition Documents shall be true and correct in all material respects,
(y) each of the material conditions precedent to the Borrower's and its
Subsidiaries' obligations to consummate the First Identified Acquisition as
set forth in the First Identified Acquisition Documents shall have been
satisfied to the reasonable satisfaction of the Agent or waived with the
consent of the Agent, and (z) the First Identified Acquisition shall have
been consummated in accordance with all applicable law and the First
Identified Acquisition Documents (without giving effect to any amendment or
modification thereof or waiver with respect thereto unless consented to by
the Agent);
(v) on or prior to the First Identified Acquisition Date, the Agent
shall have received from McGuire, Woods Battle & Boothe LLP, special
counsel to the Credit Parties, an opinion addressed to the Agent, the
Collateral Agent and each of the Banks and dated the First Identified
Acquisition Date, which opinion shall be in form and substance reasonably
satisfactory to the Agent and shall cover the perfection of security
interests in the assets of the First Identified Target and its Subsidiaries
granted pursuant to the Security Documents and such other matters incident
to the transactions contemplated herein as the Agent may reasonably
request;
(vi) on the First Identified Acquisition Date, all necessary and
material governmental (domestic and foreign) and third party approvals in
connection with the First Identified Acquisition and the transactions
contemplated by the First Identified Acquisition Documents and this
Amendment and otherwise referred to therein or herein, shall have been
obtained and remain in effect, and all applicable waiting periods shall
have expired without any action being taken by any competent authority
which restrains, prevents or imposes, in the judgment of the Agent,
materially adverse conditions upon the consummation of the First Identified
Acquisition and the transactions contemplated by this Amendment;
(vii) on the First Identified Acquisition Date, there shall not exist
any judgment, order, injunction or other restraint issued or filed or a
hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the consummation
of the First Identified Acquisition or the transactions contemplated by
this Amendment;
(viii) on the First Identified Acquisition Date, after giving effect
to the First Identified Acquisition, nothing shall have occurred since July
31, 1998 (and neither the Banks nor the Agent shall have become aware of
any facts or conditions not previously known) which the Agent or the
Required Banks shall determine has, or could reasonably be expected to have
(x) a material adverse effect on the rights or remedies of the Agents or
the Banks, or on the ability of the Credit Parties to perform their
respective obligations to the Agent and the Banks under the Credit
Documents, (y) a Material Adverse Effect or (z) a material adverse effect
on the business, properties, assets, liabilities, condition
-3-
<PAGE>
(financial or otherwise) or prospects of the First Identified Target and
its Subsidiaries taken as a whole;
(ix) on the First Identified Acquisition Date, no actions, suits or
proceedings by any entity (private or governmental) shall be pending or
threatened (a) with respect to the First Identified Acquisition, the Credit
Agreement or any documentation executed in connection therewith or (b)
which the Agent or the Required Banks shall determine could reasonably be
expected to (x) have a Material Adverse Effect or (y) have a materially
adverse effect on (I) the First Identified Acquisition, (II) the rights or
remedies of the Banks or the Agent under the Credit Agreement or under any
other Credit Document or on the ability of any Credit Party to perform its
respective obligations to the Banks or the Agent under the Credit Agreement
or under any other Credit Document or (III) the business, properties,
assets, liabilities, condition (financial or otherwise) or prospects of
the First Identified Target and its Subsidiaries taken as a whole;
(x) on the First Identified Acquisition Date, the Agent shall have
received a solvency certificate from the chief financial officer of the
Borrower, dated the First Identified Acquisition Date, in form and
substance satisfactory to the Agent;
(xi) on the First Identified Acquisition Date, the Agent shall have
received a certificate from the chief financial officer of the Borrower,
dated the First Identified Acquisition Date, in form and substance
satisfactory to the Agent, containing (I) a representation and warranty
that (x) the incurrence of A-2 Term Loans on such date does not violate the
terms of the Senior Subordinated Notes Indenture (including Section 4.12
thereof) and (y) the Indebtedness evidenced by the A-2 Term Loans
constitutes "Senior Debt" and "Designated Senior Debt" under the Senior
Subordinated Notes Indenture and (II) financial calculations (in form and
substance reasonably satisfactory to the Agent) establishing compliance
with a Consolidated Fixed Charge Coverage Ratio (as defined in the Senior
Subordinated Notes Indenture) of greater than 2.00:1.0 (after giving effect
to the incurrence of A-2 Term Loans) as required by the proviso to Section
4.12 of the Senior Subordinated Notes Indenture; and
(xii) on the First Identified Acquisition Date, the Agent shall have
received a certificate, dated the First Identified Acquisition Date and
signed on behalf of the Borrower by an appropriate officer of the Borrower,
stating all of the conditions in clauses (i), (ii), (iii), (iv), (vi),
(vii), (viii) and (ix) of above and Section 5.02 of the Credit Agreement
have been satisfied on such date.
2. Notwithstanding anything to the contrary contained in the Credit
Agreement or Section 1 of Part I of this Amendment, the parties hereto hereby
acknowledge and agree that the First Identified Acquisition shall not constitute
a "Permitted Acquisition" for purposes of determining compliance with clause
(vi) of the proviso to Section 8.02(p) in connection with any new Permitted
Acquisition to be effected after the Fifth Amendment Effective Date.
-4-
<PAGE>
3. The Banks hereby acknowledge and agree that the Second
Identified Acquisition may be effected as a Permitted Acquisition in accordance
with all applicable requirements of the Credit Agreement, including, without
limitation, Section 8.02 thereof; provided that, notwithstanding anything to the
--------
contrary contained in the Credit Agreement, the following deviations from the
requirements of a Permitted Acquisition under Section 8.02(p) of the Credit
Agreement shall be permitted (and only such deviations shall be permitted) in
connection with the Second Identified Acquisition so long as the same otherwise
meets all applicable requirements for a Permitted Acquisition pursuant to the
Credit Agreement:
(i) the Second Identified Acquisition may be (but shall not be
required to be) consummated by Second Identified Acquisition Corp. rather
than the Borrower (notwithstanding any contrary requirement contained in
Section 8.02(p) of the Credit Agreement);
(ii) upon the consummation of the Second Identified Acquisition, the
Second Identified Target may become a Wholly-Owned Foreign Subsidiary of
the Borrower (notwithstanding any contrary requirement contained in clause
(ii) to the proviso to Section 8.02(p) of the Credit Agreement); and
(iii) the consideration paid (and Indebtedness assumed) in connection
with the Second Identified Acquisition may include Indebtedness expressly
permitted by Sections 8.04(p) and (q) of the Credit Agreement.
4. Section 1.01(a) of the Credit Agreement is hereby amended by
deleting each reference to the word "Term" appearing in said Section and
inserting the text "A-1 Term" in lieu thereof.
5. Section 1.01 of the Credit Agreement is hereby further amended
by inserting the following text at the end of said Section:
"(e) Subject to and upon the terms and conditions set forth herein,
each Bank with an A-2 Term Loan Commitment severally agrees to make a term
loan or term loans (each, an "A-2 Term Loan" and, collectively, the "A-2
Term Loans") to the Borrower, which A-2 Term Loans (i) shall be incurred by
the Borrower pursuant to a single drawing on the First Identified
Acquisition Date, (ii) shall be denominated in U.S. Dollars, (iii) except
as hereafter provided, shall, at the option of the Borrower, be incurred
and maintained as, and/or converted into, Base Rate Loans or Eurodollar
Loans, provided, that (x) all A-2 Term Loans made as part of the same
--------
Borrowing shall, unless otherwise specifically provided herein, consist of
A-2 Term Loans of the same Type and (y) unless the Agent has determined
that the A-2 Term Loan Syndication Date has occurred (at which time this
clause (y) shall no longer be applicable), no more than three Borrowings of
A-2 Term Loans to be maintained as Eurodollar Loans may be incurred prior
to the 90th day after the First Identified Acquisition Date (each of which
Borrowings of Eurodollar Loans may only have an Interest Period of one
month, and the first of which Borrowings may only be made on or within five
Business Days following the First Identified Acquisition Date, the second
of which Borrowings may only be made on the
-5-
<PAGE>
last day of the Interest Period of the first such Borrowing and the third
of which Borrowings may only be made on the last day of the Interest Period
of the second such Borrowing) and (iv) shall not exceed for any Bank at the
time of incurrence thereof on the First Identified Acquisition Date that
aggregate principal amount as is equal to the A-2 Term Loan Commitment of
such Bank as in effect on the First Identified Acquisition Date (after
giving effect to any reductions thereto pursuant to Section 3.03(d)(ii) but
before giving effect to any reductions thereto on such date pursuant to
Section 3.03(d)(i)). Once repaid, A-2 Term Loans incurred hereunder may not
be reborrowed.".
6. Section 1.03(a) of the Credit Agreement is hereby amended by
deleting the text "Term Loans" appearing in said Section and inserting the text
"A-1 Term Loans, A-2 Term Loans" in lieu thereof.
7. Section 1.05(a) of the Credit Agreement is hereby amended by (x)
deleting the text "Term" in each place it appears in clause (i) of said Section
and inserting the text "A-1 Term" in lieu thereof, (y) deleting the word "and"
appearing at the end of clause (ii) of said Section and inserting a comma in
lieu thereof and (z) inserting the following new clause (iv) at the end of said
Section:
"and (iv) if A-2 Term Loans, by a promissory note substantially in the form
of Exhibit B-4 with blanks appropriately completed in conformity herewith
(each, an "A-2 Term Note" and, collectively, the "A-2 Term Notes")".
8. Section 1.05(b) of the Credit Agreement is hereby amended by
deleting each reference to the word "Term" appearing in said Section and
inserting the text "A-1 Term" in lieu thereof.
9. Section 1.05 of the Credit Agreement is hereby further amended
by (i) redesignating clause (e) thereof as clause (f) and (ii) inserting the
following new clause (e) immediately following clause (d) of said Section:
"(e) The A-2 Term Note issued to each Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of such Bank or its registered
assigns and be dated the Fifth Amendment Effective Date, (iii) be in a
stated principal amount equal to the A-2 Term Loan Commitment of such Bank
on the Fifth Amendment Effective Date (or, if issued after the termination
of the Total A-2 Term Loan Commitment, the A-2 Term Loans made by such
Bank) and be payable in the principal amount of A-2 Term Loans evidenced
thereby, (iv) mature on the A-2 Term Loan Maturity Date, (v) bear interest
as provided in the appropriate clause of Section 1.08 in respect of the
Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to voluntary repayment as provided in Section 4.01
and mandatory repayment as provided in Section 4.02 and (vii) be entitled
to the benefits of this Agreement and the other Credit Documents.".
10. Section 1.06 of the Credit Agreement is hereby amended by (x)
redesignating clause (iv) of the proviso to the first sentence of said Section
as clause (v) and (y)
-6-
<PAGE>
inserting the following new clause (iv) immediately following clause (iii) of
the proviso to the first sentence of said Section:
", (iv) unless the Agent has determined that the A-2 Term Loan
Syndication Date has occurred (at which time this clause (iv) shall
no longer be applicable), prior to the 90th day after the First
Identified Acquisition Date, A-2 Term Loans maintained as Base Rate
Loans may not be converted into Eurodollar Loans unless any such
conversion is effective on the first, second or third Interest
Period referred to in clause (y) of Section 1.01(e)(iii) and so
long as such conversion does not result in a greater number of
Borrowings of Eurodollar Loans prior to the 90th day after the
First Identified Acquisition Date as are permitted under such
Section".
11. Section 1.07 of the Credit Agreement is hereby amended by
deleting the first sentence of said Section in its entirety and inserting the
following sentence in lieu thereof:
"All Borrowings of A-1 Term Loans, A-2 Term Loans and Revolving
Loans under this Agreement shall be incurred by the Borrower from
the Banks pro rata on the basis of their A-1 Term Loan Commitments,
--- ----
A-2 Term Loan Commitments or Revolving Loan Commitments, as the
case may be; provided that all Borrowings of Revolving Loans made
--------
pursuant to a Mandatory Borrowing shall be incurred from the Banks
pro rata on the basis on their Percentages.".
--- ----
12. Section 1.09 of the Credit Agreement is hereby amended by (i)
deleting clause (v) appearing in said Section in its entirety and inserting the
following new clause (v) in lieu thereof:
"(v) no Interest Period for any Borrowing under a Facility shall be
elected which would extend beyond the respective Maturity Date for such
Facility;"
and (ii) deleting clause (vii) appearing in said Section in its entirety and
inserting the following new clause (vii) in lieu thereof:
"(vii) no Interest Period in respect of any Borrowing of Term Loans
shall be elected which extends beyond any date upon which a mandatory
repayment of such Term Loans is required to be made under Section
4.02(A)(b)(i) or (ii), as the case may be, if, after giving effect to the
election of such Interest Period, the aggregate principal amount of such
Term Loans which have Interest Periods which will expire after such date of
mandatory repayment will be in excess of the aggregate principal amount of
such Term Loans permitted to be outstanding after such mandatory
repayment.".
13. Section 1.13 of the Credit Agreement is hereby amended by (i)
deleting the text "and/or (b) Term Loans, the outstanding Term Loans)" appearing
in said Section and inserting the text "and/or (b) the outstanding Term Loans
and Term Loan Commitment of any Facility, the outstanding Term Loans and Term
Loan Commitment of the respective Facility or Facilities)" in lieu thereof, (ii)
deleting the text "(except for the replacement of only the outstanding Term
Loans of the respective Bank)" appearing in said Section and inserting the text
-7-
<PAGE>
"(except for the replacement of only the outstanding Term Loans and Term Loan
Commitment of any or all Facilities of Term Loans of the respective Bank)" in
lieu thereof, (iii) inserting the text "and/or the Term Loan Commitment"
immediately following the text "or (II) the Term Loans" appearing in said
Section, (iv) inserting the text "and/or the Term Loan Commitment" immediately
after the text "Term Loans" appearing in clause (x)(B) of said Section, (v)
inserting the text "and Term Loan Commitment of any or all Facilities of Term
Loans" immediately after the text "outstanding Term Loans" appearing in clause
(y) of said Section and (vi) inserting the text ", a Term Loan Commitment"
immediately following the text "Term Loans" appearing in the last sentence of
said Section.
14. Section 3.02(a) of the Credit Agreement is hereby amended by
deleting said Section in its entirety and inserting the following new Section
3.02(a) in lieu thereof:
"(a) Upon at least three Business Days' prior written notice (or telephone
notice promptly confirmed in writing) to the Agent at its Notice Office
(which notice the Agent shall promptly transmit to each of the Banks), the
Borrower shall have the right, without premium or penalty, to terminate or
partially reduce the Total A-2 Term Loan Commitment or the Total Unutilized
Revolving Loan Commitment, provided that (w) any such termination or
--------
partial reduction shall apply to proportionately and permanently reduce the
Total A-2 Term Loan Commitment or the Revolving Loan Commitment, as the
case may be, of each Bank with such a Commitment, (x) any partial reduction
pursuant to this Section 3.02(a) shall be in integral multiples of
$1,000,000, (y) the reduction to the Total Unutilized Revolving Loan
Commitment shall be in no case be in an amount which would cause the
Revolving Loan Commitment of any RL Bank to be reduced (as required by the
preceding clause (w)) by an amount which exceeds the remainder of (A) the
Unutilized Revolving Loan Commitment of such RL Bank as in effect
immediately before giving effect to such reduction minus (B) such RL Bank's
Percentage of the aggregate principal amount of Swingline Loans then
outstanding and (z) any partial reduction to the Total A-2 Term Loan
Commitment pursuant to this Section 3.02(a) shall apply to reduce the then
remaining Scheduled A-2 Repayments on a pro rata basis (based upon the then
--- ----
remaining Scheduled A-2 Repayments after giving effect to all prior
reductions thereto).".
15. Section 3.02(b) of the Credit Agreement is hereby amended by
deleting said Section in its entirety and inserting the following new Section
3.02(b) in lieu thereof:
"(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in
Section 12.12(b), the Borrower shall have the right, subject to obtaining
the consents required by Section 12.12(b), upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent
shall promptly transmit to each of the Banks), to terminate the entire
Revolving Loan
-8-
<PAGE>
Commitment and/or, if prior to the termination of the Total A-2 Term Loan
Commitment, the A-2 Term Loan Commitment of such Bank, so long as all
Loans, together with accrued and unpaid interest, Fees and all other
amounts, owing to such Bank (including all amounts, if any, owing pursuant
to Section 1.11 but excluding amounts owing in respect of any Loans
maintained by such Bank, if such Loans are not being repaid pursuant to
Section 12.12(b)) are repaid concurrently with the effectiveness of such
termination (at which time Annex I shall be deemed modified to reflect such
changed amounts) and at such time, unless the respective Bank continues to
have outstanding Loans or Commitments of any Facility hereunder, such Bank
shall no longer constitute a "Bank" for purposes of this Agreement, except
with respect to indemnifications under this Agreement (including, without
limitation, Sections 1.10, 1.11, 2.05, 4.04, 12.01 and 12.06), which shall
survive as to such repaid Bank. Unless otherwise specifically agreed in
writing by the Required Banks, any reduction to the Total A-2 Term Loan
Commitment pursuant to this Section 3.02(b) shall apply to reduce the
remaining Scheduled A-2 Repayments on a pro rata basis (based upon the then
--- ----
remaining amount of each such Scheduled A-2 Repayment, after giving effect
to all prior reductions thereto).".
16. Section 3.03 of the Credit Agreement is hereby amended by (i)
deleting the text "The Total Commitment (and the" appearing in clause (a) of
said Section and inserting the text "Each of the Total A-1 Term Loan Commitment
and the Total Revolving Loan Commitment (and the A-1" in lieu thereof, (ii)
inserting the text "A-1" immediately prior to each appearance of the word "Term"
appearing in clause (b) of said Section, (iii) redesignating clauses (d) and (e)
of said Section as clauses (e) and (f), respectively, (iv) inserting the
following new clause (d) immediately following clause (c) of said Section:
"(d) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, the Total A-2 Term Loan Commitment shall (i)
terminate in its entirety (to the extent not theretofore terminated) on the
earlier to occur of (x) the First Identified Acquisition Date (after giving
effect to the incurrence of A-2 Term Loans on such date) and (y) August 31,
1999 and (ii) prior to the termination of the Total A-2 Term Loan
Commitment as provided in clause (i) above, be permanently reduced on each
date upon which a mandatory repayment of Term Loans pursuant to Section
4.02(A)(c), (d), (e), (f), (g) and (h) is required (and exceeds in amount
the aggregate principal amount of Term Loans then outstanding) or would be
required if Term Loans were then outstanding, by the amount, if any, by
which the amount required to be applied pursuant to said Sections
(determined as if an unlimited amount of Term Loans were actually
outstanding) exceeds the aggregate principal amount of Term Loans then
outstanding.";
(v) inserting the text "occurring on and after the termination of the Total A-2
Term Loan Commitment pursuant to this Section 3.03" immediately after the text
"this Section 3.03 on each date" appearing in clause (e) of said Section (as
redesignated pursuant to clause (iii) above) and
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(vi) deleting clause (f) of said Section (as redesignated pursuant to clause
(iii) above) in its entirety and inserting the following new clause (f) in lieu
thereof:
"(f) Each reduction to the Total A-1 Term Loan Commitment, the Total
A-2 Term Loan Commitment or Total Revolving Loan Commitment pursuant to
this Section 3.03 shall be applied proportionately to reduce the A-1 Term
Loan Commitment, A-2 Term Loan Commitment or the Revolving Loan Commitment,
as the case may be, of each Bank with such a Commitment.".
17. Section 4.01(a) of the Credit Agreement is hereby amended by
(i) deleting the text "and/or Term Loans" appearing in said Section and
inserting the text ", A-1 Term Loans and/or A-2 Term Loans" in lieu thereof,
(ii) deleting the text "Term Loans" appearing in clause (i) of said Section and
inserting the text "A-1 Term Loans, A-2 Term Loans" in lieu thereof, (iii)
deleting the word "and" appearing at the end of clause (iv) of said Section,
(iv) deleting clause (v) of said Section in its entirety and inserting the
following new clauses (v), (vi) and (vii) in lieu thereof:
"(v) each prepayment of Term Loans pursuant to this Section 4.01
must consist of a prepayment of A-1 Term Loans (in an amount equal to the
A-1 TL Percentage of such prepayment) and A-2 Term Loans (in an amount
equal to the A-2 TL Percentage of such prepayment);
(vi) each prepayment of A-1 Term Loans pursuant to this Section 4.01
shall reduce the then remaining Scheduled A-1 Repayments in direct order of
maturity (based upon the then remaining principal amount of each such
Scheduled A-1 Repayment); and
(vii) each prepayment of A-2 Term Loans pursuant to this Section 4.01
shall reduce the then remaining Scheduled A-2 Repayments in direct order of
maturity (based upon the then remaining principal amount of each such
Scheduled A-2 Repayment).".
18. Section 4.01(b) of the Credit Agreement is hereby amended by
(i) redesignating clause (B) of said Section as clause (C) thereof and (ii)
inserting the following new clause (B) immediately following clause (A) of said
Section:
", (B) in the case of the repayment of A-2 Term Loans of any Bank pursuant
to this clause (b), the A-2 Term Loan Commitment of such Bank (to the
extent not theretofore terminated) is terminated concurrently with such
repayment (at which time Annex I shall be deemed modified to reflect the
changed A-2 Term Loan Commitments)".
19. Section 4.02(A)(b) of the Credit Agreement is hereby amended by
(i) inserting the text "(i)" immediately prior to the text "In addition"
appearing in said Section, (ii) deleting the word "Term" appearing in said
Section and inserting the text "A-1 Term" in lieu thereof, (iii) deleting the
text "Scheduled Repayment" appearing in said Section and inserting the
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text "Scheduled A-1 Repayment" in lieu thereof and (iv) inserting the following
clause (ii) at the end of said Section:
"(ii) In addition to any other mandatory repayments pursuant to this
Section 4.02, on each date set forth below, the Borrower shall be required
to repay that principal amount of A-2 Term Loans as is set forth opposite
such date (each such repayment, as the same may be reduced as provided in
Sections 4.01 and 4.02(B), a "Scheduled A-2 Repayment"):
Scheduled A-2 Repayment Date Amount
---------------------------- ------
September 30, 2002 $6,000,000
December 31, 2002 $6,000,000
March 31, 2003 $7,000,000
June 30, 2003 $7,000,000
September 30, 2003 $7,000,000
A-2 Term Loan Maturity Date $7,000,000
In the event that less than $40,000,000 in aggregate principal amount of A-
2 Term Loans has been incurred on the earlier to occur of (x) the First
Identified Acquisition Date and (y) August 31, 1999, an amount equal to the
remainder of $40,000,000 less the aggregate principal amount of the A-2
----
Term Loans incurred on the First Identified Acquisition Date (if any) shall
be applied to reduce the then remaining Scheduled A-2 Repayments on a pro
---
rata basis (based upon the then remaining principal amount of such
----
Scheduled A-2 Repayments after giving effect to all prior reductions
thereto).".
20. Each of Sections 4.02(A)(c), (d), (e), (f), (g) and (h) of the
Credit Agreement is hereby amended by inserting the text "(with the A-1 TL
Percentage of such amount to be applied as a repayment of the A-1 Term Loans and
the A-2 TL Percentage of such amount to be applied as a repayment of the A-2
Term Loans)" immediately after the first appearance of the text "shall be
applied as a mandatory repayment of principal of Term Loans" in each such
Section.
21. Section 4.02(A)(i) of the Credit Agreement is hereby amended by
deleting clause (ii) of said Section in its entirety and inserting the text
"(ii) all other then outstanding Loans of the respective Facility shall be
repaid in full on the respective Maturity Date for such Facility" in lieu
thereof.
22. Sections 4.02(B)(a) of the Credit Agreement is hereby amended
by deleting said Section in its entirety and inserting the following new Section
4.02(B)(a) in lieu thereof:
"(a) All repayments of Term Loans shall be applied in the following
manner:
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(i) any amount required to be applied to A-1 Term Loans or A-2 Term
Loans, as the case may be, shall apply to the repayment of the outstanding
principal amount of A-1 Term Loans and A-2 Term Loans, respectively, of the
respective Facility;
(ii) if required pursuant to Section 4.02(A)(c), (d), (e), (g) or
(h), such repayments of A-1 Term Loans and A-2 Term Loans shall be applied
to reduce the then remaining Scheduled Repayments of the respective
Facility on a pro rata basis (based upon the then remaining amount of each
--- ----
such Scheduled Repayment of the respective Facility after giving effect to
all prior reductions thereto); and
(iii) if required pursuant to Section 4.02(A)(f), such repayments of
A-1 Term Loans and A-2 Term Loans shall be applied (x) first to reduce the
-----
next two then remaining Scheduled Repayments of the respective Facility in
direct order of maturity and (y) second, thereafter (or to the extent in
excess thereof), to reduce the then remaining Scheduled Repayments of the
respective Facility on a pro rata basis (based upon the then remaining
--- ----
amount of each such Scheduled Repayment of the respective Facility after
giving effect to all prior reductions thereto, including reductions
pursuant to clause (x) above).".
23. Section 6.05 of the Credit Agreement is hereby amended by (i)
deleting the word "Term" appearing in clause (a) of said Section and inserting
the text "A-1 Term" in lieu thereof, (ii) inserting the text "(x)" immediately
after the text "provided that" appearing in clause (b) of said Section, (iii)
--------
inserting the text "and (y) proceeds of Revolving Loans incurred on the First
Identified Acquisition Date in an amount not to exceed $13,500,000 may be used
to finance the First Identified Acquisition and to pay fees and expenses
incurred in connection therewith" at the end of the proviso appearing in clause
(b) of said Section and (iv) inserting the following new clause (d) at the end
of said Section:
"(d) The proceeds of all A-2 Term Loans shall be utilized (i) to
finance the First Identified Acquisition and (ii) to pay fees and expenses
incurred in connection therewith, so long as such fees and expenses do not
exceed $1,000,000.".
24. Section 6.10 of the Credit Agreement is hereby amended by (x)
inserting the text "(i)" immediately after the text "(b)" appearing in clause
(b) of said Section, (y) inserting the following new clause (ii) at the end of
clause (b) of said Section:
"(ii) The audited consolidated balance sheets of the First Identified
Target for the fiscal years ended July 31, 1995, July 31, 1996, July 31,
1997 and July 31, 1998, and the unaudited consolidated balance sheet of the
First Identified Target at April 30, 1999, and the related consolidated
statements of operations and cash flows of the First Identified Target for
the fiscal years or nine-month period, as the case may be, ended as of said
dates, which annual financial statements have been examined by (x) BDO
Seidman LLP, in the case the financial statements for the fiscal years
ended July 31, 1995, July 31, 1996 and July 31, 1997 and (y)
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<PAGE>
Arthur Andersen LLP, in the case of the financial statements for the fiscal
year ended July 31, 1998, each certified public accountants, who delivered
an unqualified opinion with respect thereto and copies of which have
heretofore been delivered to each Bank, present fairly in all material
respects the financial position of the First Identified Target and its
Subsidiaries on a consolidated basis at the date of said statements and the
results for the periods covered thereby. All such financial statements have
been prepared in accordance with GAAP consistently applied except to the
extent provided in the notes to said financial statements and subject, in
the case of the April 30, 1999 financial statements, to normal year-end
audit adjustments and the absence of footnotes.";
and (z) inserting the following new clause (f) at the end of said Section:
"(f) The Updated Projections are based on good faith estimates and
assumptions made by the management of the Borrower. On the Fifth Amendment
Effective Date such management believed that the Updated Projections were
reasonable and attainable, it being recognized by the Banks, however, that
projections as to future events are not to be viewed as facts and that the
actual results during the period or periods covered by the Updated
Projections may differ from the projected results and that the differences
may be material.".
25. Section 7.10 of the Credit Agreement is hereby amended by (i)
inserting the text "(or, at the option of the Borrower at any time prior to the
first anniversary of the Fifth Amendment Effective Date (x) in the case of the
First Identified Target and each of its Subsidiaries, July 31 and (y) in the
case of Second Identified Target and each of its Subsidiaries, December 31)"
immediately after the text "January of each year" appearing in said Section and
(ii) inserting the text "(or, at the option of the Borrower at any time prior to
the first anniversary of the Fifth Amendment Effective Date (x) in the case of
the First Identified Target and each of its Subsidiaries, October 31, January
31, and April 30 and (y) in the case of Second Identified Target and each of its
Subsidiaries, March 31, June 30 and September 30)" immediately after the text
"such fiscal year ends" appearing in said Section.
26. Section 7 of the Credit Agreement is hereby amended by
inserting the following new Section 7.19: "Within 60 days following the Fifth
Amendment Effective Date, the Borrower shall have delivered to the Collateral
Agent, or caused to be delivered to the Collateral Agent, (x) fully executed
counterparts of amendments (the "Mortgage Amendments"), in form and substance
satisfactory to the Agent, to each of the Mortgages, together with evidence that
counterparts of each of the Mortgage Amendments have been delivered to the title
company insuring the Lien on the Mortgages for recording in all places to the
extent necessary or desirable, in the judgment of the Collateral Agent,
effectively to maintain a valid and enforceable first priority mortgage lien on
the Mortgaged Properties in favor of the Collateral Agent for the benefit of the
Secured Creditors and (y) either endorsements to the existing Mortgage Policies
or new Mortgage Policies assuring the Collateral Agent that each Mortgage is a
valid and enforceable first priority mortgage lien on the respective Mortgaged
Properties, free and clear of all defects and encumbrances except Permitted
Encumbrances."
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<PAGE>
27. Section 8.02 of the Credit Agreement is hereby amended by (i)
inserting the text "(x)" immediately prior to the text "the Borrower" appearing
in clause (g) said Section, (ii) inserting the text "and (y) the First
Identified Target may sell and repurchase accounts receivable pursuant to, and
in accordance with the terms of, the Permitted Factoring Agreement, so long as
the Indebtedness of the First Identified Target arising in connection therewith
is permitted by Section 8.04(o)" at the end of clause (g) of said Section, (iii)
deleting the word "and" at the end of clause (q) of said Section, (iv)
redesignating clause (r) of said Section as clause (s) and (v) inserting the
following new clause (r) after clause (q) appearing in said Section:
"(q) the First Identified Target may purchase certain equity interests
to the extent permitted by Section 8.05(v); and".
28. Section 8.03 of the Credit Agreement is hereby amended by (i)
redesignating clause (o) of said Section as clause (s), (ii) deleting the word
"and" at the end of clause (n) of said Section and (iii) inserting the following
new clauses (o), (p), (q) and (r) immediately following clause (n) of said
Section:
"(o) Liens created under the Permitted Factoring Agreement
securing Indebtedness permitted by Section 8.04(o) and the other
obligations of the First Identified Target under the Permitted
Factoring Agreement;
(p) Liens created by or pursuant to the Second Identified
Target Credit Agreement and the Second Identified Target Bonds;
(q) Liens on the capital stock of Second Identified Target
securing the Second Identified Target Secured Note;
(r) Liens securing Permitted Refinancing Indebtedness to the extent
permitted by Section 8.04(r); and".
29. Section 8.04 of the Credit Agreement is hereby amended by (i)
redesignating clause (o) of said Section as clause (s), (ii) deleting the word
"and" at the end of clause (n) of said Section and (iii) inserting the following
new clauses (o), (p), (q) and (r) immediately following clause (n) of said
Section:
"(o) Indebtedness consisting of recourse obligations of the
First Identified Target under the Permitted Factoring Agreement, so
long as the aggregate amount of all such Indebtedness shall not
exceed $4,000,000 at any time;
(p) Indebtedness of (x) Second Identified Acquisition Corp.
incurred pursuant to the Second Identified Target Secured Note in an
aggregate outstanding principal amount not to exceed CDN$4,000,000
(as reduced by any principal payments thereof) and (y) the Borrower
consisting of an unsecured guaranty of the Indebtedness permitted
pursuant to immediately preceding clause (x);
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<PAGE>
(q) Indebtedness of Second Identified Target incurred under
(x) the Second Identified Target Credit Agreement in an aggregate
principal amount not to exceed CDN$11,000,000 less the aggregate
----
amount of permanent commitment reductions thereunder, (y) the Second
Identified Target Bonds in an aggregate principal amount not to
exceed CDN$14,439,000 (as reduced by any repayments of principal
thereof and any forgiveness of principal prepayments thereunder by
the holders thereof) and (z) the Second Identified Target Loan
Agreement in the form of term loans in an aggregate principal amount
not to exceed CDN$1,830,000 less the aggregate amount of principal
----
repayments thereof;
(r) Permitted Refinancing Indebtedness, so long as no Default
or Event of Default is in existence at the time of the respective
incurrence thereof and immediately after giving effect thereto;
and".
30. Section 8.05 of the Credit Agreement is hereby amended by (i)
inserting the text "(including receivables in respect of obligations owing from
a financial institution to the First Identified Target under the Permitted
Factoring Agreement)" immediately following the text "owing to it" appearing in
clause (b) of said Section, (ii) deleting the amount "$500,000" appearing in
clause (o) of said Section and inserting the amount "$5,000,000" in lieu
thereof, "(iii) deleting the word "and" appearing at the end of clause (r) of
said Section, (iv) redesignating clause (s) of said Section as clause (w) and
(v) inserting the following new clauses (s), (t), (u) and (v) immediately
following clause (r) of said Section:
"(s) the Borrower may make cash capital contributions to each of
Second Identified Acquisition Corp. and MergeCo, in each case in such
amounts as may be required to finance the Second Identified Acquisition or
the First Identified Acquisition, as the case may be, on the respective
closing date of the Second Identified Acquisition or the First Identified
Acquisition, as the case may be;
(t) (I) the Borrower may make cash capital contributions and/or make
intercompany loans or advances to Second Identified Acquisition Corp., and
(II) Second Identified Acquisition Corp. may in turn use the proceeds of
any such contributions and/or intercompany loans to make cash capital
contributions and/or intercompany loans to Second Identified Target, so
long as (i) no Default or Event of Default is then in existence or would
result therefrom, (ii) the aggregate amount of all cash contributions plus
----
the aggregate outstanding principal amount of all intercompany loans and
advances, in each case made pursuant to sub-clause (I) this clause (t),
does not exceed CDN$5,000,000 (determined without regard to any write-downs
or write-offs thereof), (iii) each such intercompany loan (if any) is
evidenced by an Intercompany Note pledged to the Collateral Agent pursuant
to (and to the extent required by) the Pledge Agreement and (iv) Second
Identified Target uses the proceeds of any such contribution or
intercompany loan for its working capital purposes;
(u) the Borrower may make cash capital contributions and/or make
intercompany loans or advances to Second Identified Acquisition Corp. to
enable Second Identified
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<PAGE>
Acquisition Corp. to make payments on the Second Identified Target Secured
Note when and as due, so long as (i) no Default or Event of Default is then
in existence or would result therefrom, (ii) each such intercompany loan
(if any) is evidenced by an Intercompany Note pledged to the Collateral
Agent pursuant to the Pledge Agreement and (iii) the proceeds of any such
contribution or intercompany loan, as the case may be, are promptly used by
Second Identified Acquisition Corp. to make payments then due and owing on
the Second Identified Target Secured Note;
(v) the First Identified Target may purchase with cash equity
interests in an entity in which the First Identified Target has existing
investments at the time of the consummation of the First Identified
Acquisition, so long as the aggregate amount of consideration paid therefor
does not exceed $3,000,000; and"
31. Section 8.08(a) of the Credit Agreement is hereby amended by
(i) deleting the text "during any fiscal year set forth below" appearing in said
Section and inserting the text "during any fiscal year of the Borrower" in lieu
thereof and (ii) deleting the text "in any fiscal year set forth below the
amount set forth opposite such fiscal year below" and the table, in each case
appearing in said Section, and inserting the text "$10,000,000 in any fiscal
year of the Borrower." in lieu thereof.
32. Section 8.09 of the Credit Agreement is hereby amended by
inserting the following text at the end of the table appearing in said Section:
"July 31, 2002 $36,000,000
October 31, 2002 $36,000,000
January 31, 2003 $36,000,000
April 30, 2003 $36,000,000
July 31, 2003 $36,000,000
October 31, 2003 $36,000,000."
33. Section 8.10 of the Credit Agreement is hereby amended by
inserting the following text at the end of the table appearing in said Section:
"July 31, 2002 2.75:1.0
October 31, 2002 2.75:1.0
January 31, 2003 2.75:1.0
April 30, 2003 2.75:1.0
July 31, 2003 2.75:1.0
October 31, 2003 2.75:1.0".
34. Section 8.11 of the Credit Agreement is hereby amended by
inserting the following text at the end of the table appearing in said Section:
"July 31, 2002 3.20:1.0
October 31, 2002 3.20:1.0
January 31, 2003 3.20:1.0
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<PAGE>
April 30, 2003 3.20:1.0
July 31, 2003 3.20:1.0
October 31, 2003 3.20:1.0".
35. Section 8.13 of the Credit Agreement is hereby amended by (i)
inserting the text "the Permitted Factoring Agreement, any Second Identified
Target Bond Document, the Second Identified Target Secured Note, the First
Identified Merger Agreement, the Second Identified Target Loan Agreements,"
immediately after the text "any Merger Document," appearing in clause (iii) of
said Section and (ii) inserting the text ", any Second Identified Target Bond"
immediately following the text "Indebtedness to Remain Outstanding" appearing in
clause (i) of said Section.
36. Section 8.14 of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing immediately before clause (vi) of said Section
and inserting a comma in lieu thereof and (ii) inserting the text ", (vii) the
Second Identified Target Credit Agreement and (viii) the Second Identified
Target Bond Documents" immediately after clause (vi) appearing in said Section.
37. The definition of "Applicable Base Rate Margin" appearing in
Section 10 of the Credit Agreement is hereby amended by (x) inserting the text
"(i)" immediately following the text "Notwithstanding anything to the contrary
contained above in this definition," and (y) inserting the following text at the
end of said definition:
"and (ii) the Applicable Base Rate Margin shall be no less than
1.00% at any time on and after the Fifth Amendment Effective Date
and prior to the delivery of the financial statements required
pursuant to Section 7.01(b) for the fiscal quarter ended on the last
Saturday of July, 1999".
38. The definition of "Applicable Commitment Fee Percentage"
appearing in Section 10 of the Credit Agreement is hereby amended by (x)
inserting the text "(i)" immediately following the text "Notwithstanding
anything to the contrary contained above in this definition," and (y) inserting
the following text at the end of said definition:
"and (ii) the Applicable Commitment Fee Percentage shall be no less
than .450% at any time on and after the Fifth Amendment Effective
Date and prior to the delivery of the financial statements required
pursuant to Section 7.01(b) for the fiscal quarter ended on the last
Saturday of July, 1999".
39. The definition of "Applicable Eurodollar Margin" appearing in
Section 10 of the Credit Agreement is hereby amended by (x) inserting the text
"(i)" immediately following the text "Notwithstanding anything to the contrary
contained above in this definition," and (y) inserting the following text at the
end of said definition:
"and (ii) the Applicable Eurodollar Margin shall be no less than
2.00% at any time on and after the Fifth Amendment Effective Date
and prior to the delivery of the
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financial statements required pursuant to Section 7.01(b) for the
fiscal quarter ended on the last Saturday of July, 1999".
40. The definition of "Bank Default" appearing in Section 10 of the
Credit Agreement is hereby amended by deleting the text "1.01(a), (b) or (d)"
appearing in said definition and inserting the text "1.01(a), (b), (d) or (e)"
in lieu thereof.
41. The definition of "Facility" appearing in Section 10 of the
Credit Agreement is hereby amended by inserting the text "A-1 Term Loan
Facility, the A-2" immediately prior to the text "Term Loan Facility" appearing
in said definition.
42. The definition of "Loan" appearing in Section 10 of the Credit
Agreement is hereby amended by inserting the text "A-1 Term Loan, A-2"
immediately prior to the text "Term Loan" appearing in said definition.
43. The definition of "Note" appearing in Section 10 of the Credit
Agreement is hereby amended by inserting the text "A-1 Term Note, A-2"
immediately prior to the text "Term Note" appearing in said definition.
44. The definition of "Syndication Date" appearing in Section 10 of
the Credit Agreement is hereby amended by inserting the text "of the A-1 Term
Loans and the Revolving Loans" immediately prior to the text "has been
completed" appearing in said Section.
45. The definition of "Total Commitment" appearing in Section 10 of
the Credit Agreement is hereby amended by inserting the text "A-1 Term Loan
Commitment, the Total A-2" immediately prior to the text "Term Loan Commitment"
appearing in said definition.
46. Section 10 of the Credit Agreement is hereby further amended by
(i) deleting the definitions of "Aggregate Unutilized Commitment", "Commitment",
"Required Banks", "Scheduled Repayment", "Term Loan", "Term Loan Commitment",
"Term Loan Facility", "Term Note" and "Total Term Loan Commitment" appearing
therein in their entirety and (ii) inserting in the appropriate alphabetical
order the following new definitions:
"Aggregate Unutilized Commitment" with respect to any Bank at any time
shall mean the sum of (i) such Bank's A-1 Term Loan Commitment at such
time, if any, (ii) such Bank's A-2 Term Loan Commitment at such time, if
any and (iii) such Bank's Revolving Loan Commitment at such time less the
----
sum of (x) the aggregate outstanding principal amount of all Revolving
Loans made by such Bank, (y) such Bank's Percentage of the Letter of Credit
Outstandings at such time and (z) in the case of any determination with
respect to BTCo in its individual capacity as a Bank hereunder (and only in
such case), the aggregate outstanding principal amount of all Swingline
Loans made by BTCo at such time.
"A-1 Term Loan" shall have the meaning provided in Section 1.01(a).
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"A-1 Term Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the
column entitled "A-1 Term Loan Commitment," as the same may be reduced or
terminated pursuant to Sections 3.02, 3.03 and/or 9.
"A-1 Term Loan Facility" shall mean the Facility evidenced by the
Total A-1 Term Loan Commitment.
"A-1 Term Note" shall have the meaning provided in Section 1.05(a).
"A-1 TL Percentage" shall mean, at any time, a fraction (expressed as
a percentage) the numerator of which is equal to the aggregate principal
amount of all A-1 Term Loans outstanding at such time and the denominator
of which is equal to the aggregate principal amount of all Term Loans
outstanding at such time.
"A-2 Term Loan" shall have the meaning provided in Section 1.01(e).
"A-2 Term Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the
column entitled "A-2 Term Loan Commitment," as the same may be reduced or
terminated pursuant to Sections 3.02, 3.03 and/or 9.
"A-2 Term Loan Facility" shall mean the Facility evidenced by the
Total A-2 Term Loan Commitment.
"A-2 Term Loan Maturity Date" shall mean December 31, 2003.
"A-2 Term Loan Syndication Date" shall mean that date upon which the
Agent determines (and notifies the Borrower and the Banks) that the primary
syndication (and resultant addition of Persons as Banks pursuant to Section
12.04(b)) of the A-2 Term Loan Commitments and/or the A-2 Term Loans has
been completed.
"A-2 Term Note" shall have the meaning provided in Section 1.05(a).
"A-2 TL Percentage" shall mean, at any time, a fraction (expressed as
a percentage) the numerator of which is equal to the aggregate principal
amount of all A-2 Term Loans outstanding at such time and the denominator
of which is equal to the aggregate principal amount of all Term Loans
outstanding at such time.
"CDN$" shall mean shall mean freely transferable lawful money of
Canada.
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<PAGE>
"Commitment" shall mean, with respect to each Bank, such Bank's A-1
Term Loan Commitment, A-2 Term Loan Commitment and Revolving Loan
Commitment.
"Fifth Amendment" shall mean the Fifth Amendment and Consent to this
Agreement, dated as of June 3, 1999.
"Fifth Amendment Effective Date" shall have the meaning provided in
the Fifth Amendment.
"First Identified Acquisition" shall have the meaning provided in the
Fifth Amendment.
"First Identified Acquisition Date" shall mean the date of the
consummation of the First Identified Acquisition in accordance with the
requirements of Section 1 of the Fifth Amendment.
"First Identified Target" shall mean the U.S. corporation identified
in the Updated Projections as an acquisition target of the Borrower.
"Maturity Date" shall mean (x) with respect to the Revolving Loan
Facility and the A-1 Term Loan Facility, the Final Maturity Date and (y)
with respect to the A-2 Term Loan Facility, the A-2 Term Loan Maturity
Date.
"MergeCo" shall have the meaning provided in the Fifth Amendment.
"Permitted Factoring Agreement" shall mean the Factoring Agreement,
dated as of January 26, 1995, among the First Identified Target and Trust
Company Bank, as the same may be amended, modified or supplemented from
time to time in accordance with the terms hereof and thereof.
"Permitted Refinancing Indebtedness" shall mean any Indebtedness of
the Second Identified Target issued or given in exchange for, or the
proceeds of which are used to, extend, refinance, renew, replace,
substitute or refund Indebtedness under the Second Identified Target Credit
Agreement or any Indebtedness issued to so extend, refinance, renew,
replace, substitute or refund any such Indebtedness, so long as (a) such
Indebtedness has a weighted average life to maturity greater than or equal
to the weighted average life to maturity of the Indebtedness being
refinanced, (b) such refinancing or renewal does not (i) increase the
maximum amount of such Indebtedness permitted to be outstanding immediately
prior to such refinancing or renewal by more than CDN$2,000,000 or (ii) add
guarantors, obligors or security from that which applied to such
Indebtedness being refinanced or renewed, and (c) all other terms of such
refinancing or renewal (including, without limitation, with respect to the
amortization schedules, redemption provisions, maturities, covenants,
defaults and remedies), are not, taken as a whole, materially less
favorable to the Second
-20-
<PAGE>
Identified Target than those previously existing with respect to the
Indebtedness being refinancing or renewed.
"Required Banks" shall mean Non-Defaulting Banks the sum of whose
outstanding Term Loans (and, if prior to the termination of the Total A-2
Term Loan Commitment, A-2 Term Loan Commitments) and Revolving Loan
Commitments (or, if after the Total Revolving Loan Commitment has been
terminated, outstanding Revolving Loans and Percentages of outstanding
Swingline Loans and Letter of Credit Outstandings) constitute greater than
50% of the sum of (i) the total outstanding Term Loans of Non-Defaulting
Banks (and, if prior to the termination of the Total A-2 Term Loan
Commitment, the Total A-2 Term Loan Commitment less the aggregate A-2 Term
Loan Commitments of Defaulting Banks) and (ii) the Total Revolving Loan
Commitment less the aggregate Revolving Loan Commitments of Defaulting
Banks (or, if after the Total Revolving Loan Commitment has been
terminated, the total outstanding Revolving Loans of Non-Defaulting Banks
and the aggregate Percentages of all Non-Defaulting Banks of the total
outstanding Swingline Loans and Letter of Credit Outstandings at such
time).
"Scheduled A-1 Repayment" shall have the meaning provided in Section
4.02(A)(b)(i).
"Scheduled A-2 Repayment" shall have the meaning provided in Section
4.02(A)(b)(ii).
"Scheduled Repayment" shall mean any Scheduled A-1 Repayment and
Scheduled A-2 Repayment.
"Second Identified Acquisition Corp." shall mean a Wholly-Owned
Subsidiary of the Borrower previously identified to the Agent and the
Banks.
"Second Identified Target" shall mean the foreign corporation
identified in the Updated Projections as an acquisition target of the
Borrower.
"Second Identified Acquisition" shall have the meaning provided in the
Fifth Amendment.
"Second Identified Target Bond Indenture" shall mean the Deed of Trust
and Mortgage, dated as of November 1, 1968, among the Second Identified
Target and Canada Permanent Trust Company, and the related security
documentation, in each case, as in effect on the Fifth Amendment Effective
Date and as the same may be amended, modified or supplemented from time to
time in accordance with the terms of hereof and thereof.
"Second Identified Target Bond Documents" shall mean the Second
Identified Target Bonds, the Second Identified Target Bond Indenture and
the
-21-
<PAGE>
other documents and instruments entered into connection with the issuance
of the Second Identified Target Bonds, as the same may be amended, modified
or supplemented from time to time in accordance with the terms hereof and
thereof.
"Second Identified Target Bonds" shall mean the Series M, N and O
Income Bonds issued by the Second Identified Target pursuant to the Second
Identified Target Bond Indenture, as the same may be amended, modified or
supplemented from time to time in accordance with the terms hereof and
thereof.
"Second Identified Target Credit Agreement" shall mean the Credit
Agreement, dated as of July 15, 1998, among the Second Identified Target
and Canadian Imperial Bank of Commerce, and the related security
documentation, in each case, as in effect on the Fifth Amendment Effective
Date and as the same may be amended, modified or supplemented from time to
time.
"Second Identified Target Loan Agreements" shall mean the Letter
Agreements, dated as of February 27, 1997, August 1, 1997 and December 12,
1997, between the Second Identified Target and a business development
corporation identified to the Agent, as in effect on the Fifth Amendment
Effective Date and as the same may be amended, modified or supplemented
from time to time in accordance with the terms hereof and thereof.
"Second Identified Target Secured Note" shall mean the promissory note
to be issued by Second Identified Acquisition Corp. as consideration
pursuant to the Second Identified Acquisition, which promissory note shall
(i) be unguaranteed by any Person (other than the Borrower), (ii) bear no
interest, (iii) be unsecured (except by the capital stock of Second
Identified Target) and (iv) otherwise be in form and substance satisfactory
to the Agent, as the same may be amended , modified or supplemented from
time to time in accordance with the terms hereof and thereof
"Term Loan" shall mean each A-1 Term Loan and each A-2 Term Loan.
"Term Loan Commitment" shall mean either or both of the A-1 Term Loan
Commitment or the A-2 Term Loan Commitment, as the context may require.
"Total A-1 Term Loan Commitment" shall mean the sum of the A-1 Term
Loan Commitments of each of the Banks.
"Total A-2 Term Loan Commitment" shall mean the sum of the A-2 Term
Loan Commitments of each of the Banks.
"Updated Projections" shall have the meaning provided in the Fifth
Amendment.
-22-
<PAGE>
47. Section 12.04(b) of the Credit Agreement is hereby amended by (i)
inserting the text "(or, if prior to the termination of the Total A-2 Term Loan
Commitment, A-2 Term Loan Commitments)" immediately following the text "and/or
its outstanding Term Loans" and (ii) inserting the text "(or, if prior to the
termination of the Total A-2 Term Loan Commitment, A-2 Term Loan Commitments)"
immediately following the text "and/or outstanding principal amount of Term
Loans".
48. Annex I to the Credit Agreement is hereby amended by deleting
same in its entirety and inserting in lieu thereof the new Annex I as it appears
as attached hereto.
49. Exhibit A-1 to the Credit Agreement is hereby amended by deleting
the text "[Term Loans]" appearing in said Exhibit and inserting the text "[A-1
Term Loans][A-2 Term Loans]" in lieu thereof.
50. Exhibit B-1 and Exhibit J to the Credit Agreement are hereby
amended by deleting same in their entirety and inserting in lieu thereof a new
Exhibit B-1 or Exhibit J, as the case may be, in the form of Exhibit B-1 or
Exhibit J, as the case may be, attached hereto.
51. The Credit Agreement is hereby further amended by adding Exhibit
B-4 thereto in the form of Exhibit B-4 attached hereto.
II. Amendments to Security Agreement.
--------------------------------
1. Section 1.1 of the Security Agreement is hereby amended by
inserting the following sentence at the end of said Section:
"Notwithstanding the foregoing, the term "Collateral" shall not
include any Excluded Receivables."
2. The definition of "Receivables" appearing in Article IX of the
Security Agreement is hereby amended by inserting the following text immediately
prior to the period at the end of said definition:
"; provided that the term Receivable shall not include any Excluded
--------
Receivable."
3. Article IX of the Security Agreement is hereby amended by
inserting the following new definition in the appropriate alphabetical order in
said Article:
"Excluded Receivable" shall mean any Receivable (as defined herein
without giving effect to the proviso to the definition thereof) owned or
held by the First Identified Target.
III. Amendments to Pledge Agreement.
-------------------------------
1. Section 2 of the Pledge Agreement is hereby amended by (x)
inserting the text "(I)" immediately after the text "provided that," appearing
in clause (i) of said Section
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<PAGE>
and (y) inserting the following text immediately after the proviso appearing in
clause (i) of said Section:
"and (II) the term "Stock" shall not include any capital stock of
the Second Identified Target (to the extent owned by any Pledgor) at any
time (and only at such times) prior to the repayment in full of the Second
Identified Target Secured Note".
IV. Miscellaneous Provisions.
------------------------
1. In order to induce the Banks to enter into this Amendment, each
of Holdings and the Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Fifth Amendment
Effective Date, both before and after giving effect to this Amendment; and
(b) all of the representations and warranties contained in the Credit
Agreement or the other Credit Documents are true and correct in all
material respects on the Fifth Amendment Effective Date both before and
after giving effect to this Amendment, with the same effect as though such
representations and warranties had been made on and as of the Fifth
Amendment Effective Date (it being understood that any representation or
warranty made as of a specific date shall be true and correct in all
material respects as of such specific date).
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the "Fifth
Amendment Effective Date") when each of the following conditions shall have been
satisfied:
(i) the Agent shall have received for the account of each relevant
Bank the appropriate A-1 Term Note and A-2 Term Note for such Bank, in the
amount, maturity and as otherwise provided in Section 1.05 of the Credit
Agreement;
(ii) the Agent shall have received from each Credit Party certified
copies of resolutions of the Board of Directors of such Credit Party with
respect to the matters set forth in this Amendment and such resolutions
shall be satisfactory to the Agent;
-24-
<PAGE>
(iii) the Agent shall have received from McGuire, Woods Battle &
Boothe LLP, special counsel to the Credit Parties, an opinion addressed to
the Agent, the Collateral Agent and each of the Banks and dated the Fifth
Amendment Effective Date in form and substance satisfactory to the Agent,
and covering such matters incident to this Amendment and the transactions
contemplated herein as the Agent may reasonably request (including an
opinion as to no conflict with the Senior Subordinated Note Indenture);
(iv) the Banks shall have received a copy of the detailed
consolidated financial projections for Holdings and its Subsidiaries, and
after giving effect to the Transaction, the First Identified Acquisition,
the Second Identified Acquisition, the related financings therefor and the
transactions and financings contemplated by this Amendment (including the
A-2 Term Loans and the Senior Subordinated Notes), for the five fiscal
years ended after the Fifth Amendment Effective Date (the "Updated
Projections"), which Updated Projections shall be satisfactory in form and
substance to the Agent and the Required Banks;
(v) the Borrower shall have paid to the Agent and the Banks all
fees, costs and expenses (including, without limitation, legal fees and
expenses) payable to the Agent and the Banks to the extent then due; and
(vi) each of Holdings, the Borrower, the Pledgee, the Collateral
Agent, each Subsidiary Guarantor, the Required Banks and each Bank with an
A-2 Term Loan Commitment shall have signed a counterpart hereof (whether
the same or different counterparts) and shall have delivered (including by
way of facsimile transmission) the same to the Agent at its Notice Office.
6. By executing and delivering a copy hereof, each Credit Party
hereby agrees that all Loans (including, without limitation, the A-2 Term Loans)
shall be fully guaranteed pursuant to the various Guaranties in accordance with
the terms and provisions thereof and shall be fully secured pursuant to the
Security Documents.
7. From and after the Fifth Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to the
Credit Agreement, the Security Agreement and the Pledge Agreement shall be
deemed to be references to the Credit Agreement, the Security Agreement or the
Pledge Agreement, as the case may be, as modified hereby.
* * *
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
CAF HOLDINGS, INC.
By____________________________________
Title:
COLLINS & AIKMAN FLOORCOVERINGS, INC.
By____________________________________
Title:
<PAGE>
BANKERS TRUST COMPANY,
Individually and as Agent
By________________________________
Title:
<PAGE>
FIRST SOURCE FINANCIAL LLP
By: First Source Financial Inc., as its
agent/manager
By___________________________________
Title:
<PAGE>
HELLER FINANCIAL, INC.
By___________________________________
Title:
<PAGE>
LASALLE NATIONAL BANK
By______________________________
Title:
<PAGE>
BANKBOSTON, N.A.
By______________________________
Title:
<PAGE>
FIRST UNION NATIONAL BANK
By______________________________
Title:
<PAGE>
FLEET BUSINESS CREDIT CORPORATION
By_______________________________
Title:
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By________________________________________
Title:
<PAGE>
WACHOVIA BANK, N.A.
By_________________________
Title:
<PAGE>
CAF HOLDINGS, INC.,
as a Guarantor
By_____________________________
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JULY 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-29-2000 JAN-29-2000
<PERIOD-START> MAY-02-1999 JAN-31-1999
<PERIOD-END> JUL-31-1999 JUL-31-1999
<CASH> 2,137 2,137
<SECURITIES> 0 0
<RECEIVABLES> 40,002 40,002
<ALLOWANCES> 329 329
<INVENTORY> 35,980 35,980
<CURRENT-ASSETS> 88,589 88,589
<PP&E> 73,509 73,509
<DEPRECIATION> 27,530 27,530
<TOTAL-ASSETS> 305,998 305,998
<CURRENT-LIABILITIES> 37,464 37,464
<BONDS> 196,192 196,192
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 67,052 67,052
<TOTAL-LIABILITY-AND-EQUITY> 305,998 305,998
<SALES> 67,341 106,520
<TOTAL-REVENUES> 67,341 106,520
<CGS> 39,336 39,336
<TOTAL-COSTS> 53,667 88,413
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 5 10
<INTEREST-EXPENSE> 3,821 7,218
<INCOME-PRETAX> 9,987 11,023
<INCOME-TAX> 3,949 4,338
<INCOME-CONTINUING> 6,031 6,673
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,031 6,673
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
