UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 29, 1995
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number: 0-22138
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Triangle Pacific Corp.
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(Exact name of registrant as specified in its charter)
Delaware 94-2998971
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
16803 Dallas Parkway, Dallas, Texas 75248
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 887-2000
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, Par Value $.01 per share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
At March 1, 1996, the aggregate market value of the registrant's
common stock held by non-affiliates was $244,034,830.
The number of shares outstanding of the registrant's Common Stock, par
value $.01 per share, as of March 1, 1996: Common Stock - 14,664,465
shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates certain information by
reference from the registrant's Proxy Statement to be issued in connection
with its Annual Meeting of Shareholders to be held May 1, 1996.
PART I
Item 1. Business
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The Company is a Delaware corporation organized in February 1986 for
the purpose of acquiring Triangle Pacific Corp., a New York corporation
("Old Triangle"), in a leveraged buyout transaction completed in May 1986.
In September 1988, TPC Holding Corp. ("Holding") acquired the Company in a
second leveraged buyout transaction pursuant to which the Company became a
wholly-owned subsidiary of Holding.
On June 8, 1992, the Company successfully completed a capital
restructuring (the "1992 Restructuring") pursuant to which substantially
all of the Company's outstanding long-term indebtedness, redeemable
preferred stock and common stock were exchanged for new debt with lower
interest rates and new common stock.
The Company filed two registration statements with the Securities and
Exchange Commission in 1993 and sold to the public 7,939,750 shares of the
Company's Common Stock and $160 million aggregate principal amount of
10-1/2% Senior Notes due 2003 (collectively, "the Offerings"). The net
proceeds of the Offerings together with borrowings under a new $90 million
credit facility were used (i) to repay the entire unpaid balance under the
Company's previously-existing senior debt financing agreements, redeem
certain previously outstanding debentures and pay related accrued interest,
for a total of approximately $227 million, and (ii) for working capital and
general corporate purposes.
The Company's operations are conducted through a single business
segment which consists of the manufacture and distribution of building
products. The Company through its Hardwood Floors Division produces
hardwood flooring and related products and through its Cabinet Division
manufactures and distributes kitchen and bathroom cabinets. The Company's
products are used primarily in residential new construction and remodeling.
The Company's products are also used for commercial applications such as
retail stores and restaurants. The Company's business is seasonal, with
demand for its products generally highest between April and November.
Presented below is a summary of sales results for each of the fiscal
years 1991 through 1995.
1995 1994 1993 1992 1991
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(in millions)
Net Sales:
Hardwood
Floors Division $ 261.8 $ 244.0 $ 202.0 $ 152.9 $ 117.2
Cabinet Division 183.2 146.5 125.6 123.2 125.1
Building Products
Division 16.1 21.5 20.7 19.2 16.2
Intracompany
sales* (2.2) (1.8) (2.0) (2.5) (2.4)
------ ------ ------ ------ ------
Total Net Sales $ 458.9 $ 410.2 $ 346.3 $ 292.8 $ 256.1
====== ====== ====== ====== ======
*Represents intracompany sales from the Cabinet Division to the
Building Products Division which are eliminated in consolidation.
Bruce, Premier, Sterling, Kennedale, Natural Reflections, Traffic Zone,
Traffic Zone Elite, CrystalGuard, Coronet, Vantage, Aspen, Tamarisk,
TriPac, IXL and Classic Bath Products are trademarks or registered
trademarks of Triangle Pacific Corp.
Hardwood Floors Division
- ------------------------
The Company's Hardwood Floors Division is the largest and best known
manufacturer of hardwood flooring in the world. The Company produces a
complete line of hardwood flooring products and believes that it is
generally recognized for its superior quality and service. The Company
believes the Bruce name is one of the most recognized brand names in the
floorcovering industry.
Industry Overview
Hardwood flooring competes primarily with carpet, vinyl and ceramic
tile in the floorcovering market. The Company believes that the principal
competitive factors in the floorcovering market are aesthetic appeal,
price, durability and ease of installation and maintenance.
Sales of hardwood flooring have grown from 2.9% of total United States
floorcovering sales in 1982 to an estimated 7% of estimated total United
States floorcovering sales in 1995. The Company believes that the growth
of hardwood flooring sales is due to increased consumer preference for the
aesthetic appeal of hardwood flooring and technological advances in the
production, installation and maintenance of hardwood flooring, which allows
wood flooring to compete favorably in total cost to other flooring
products.
Products and Product Development
The Company offers approximately 100 varieties of flooring products in
four basic categories - 3/4" thick solid strip and plank, 3/8" thick
laminated strip, plank and parquet and 5/16" thick solid strip and parquet
- - in unfinished and a variety of pre-finished styles and colors. The
Company's hardwood flooring products are generally available in various
widths and lengths and are differentiated in terms of quality and price
based primarily on whether the product is finished or unfinished and on the
grade of the raw materials used to produce the product.
The Company has been a leader in developing a wide variety of new
flooring products, including (i) 5/16" thick solid parquet flooring, (ii)
3/8" thick laminated flooring, (iii) 3/8" thick laminated, square-edge,
pre-finished flooring, (iv) 3/8" thick acrylic-impregnated flooring for
commercial applications (all of the above for glue-down installation), (v)
3/4" thick square-edge, pre-finished flooring and (vi) most recently, 5/16"
thick solid strip flooring. The Company believes that new product
development has enabled it to increase its sales and has contributed to the
overall growth of hardwood flooring since the mid-1970s. The Company's
product innovations have made hardwood flooring a viable alternative for a
variety of floorcovering applications.
The Company has been instrumental in the development of thinner
hardwood flooring products which can be glued to the concrete slab
foundations increasingly used in new home construction. Installation of
3/4" thick hardwood flooring over concrete slabs requires the construction
of a false floor above the slab to which the hardwood flooring can be
nailed, thereby increasing installation time and expense. The Company has
developed 5/16" thick flooring products, which can be glued to wood or
concrete slab foundations, eliminating the need for a false floor. The
development of 3/8" thick laminated flooring (consisting of multiple layers
of oak veneer, glued and pressed together), which can be glued to a wood or
concrete sub-floor, further expanded the uses for hardwood flooring. The
dimensional stability of laminated flooring permits its installation in
kitchens and basements where the presence of moisture had previously
rendered hardwood flooring impractical.
In 1995, the Company introduced Natural Reflections, a 5/16" thick
solid oak pre-finished strip. This was developed as an alternative to the
traditional 3/4" thick unfinished strip that is the primary commodity
product of the hardwood flooring industry. This thinner strip offers many
benefits. It approximately doubles the yield of product from raw material,
saving resources by using fewer trees in the manufacturing process.
Because it contains less than half the wood in a traditional 3/4" thick
strip, it is less expensive to make, less expensive to ship, and easier and
faster to install.
Also in 1995, the Company introduced a new product group, high
performance laminate flooring. This product, which is called Traffic Zone,
features a CrystalGuard melamine wear-layer surface over a high-density
fiberboard core. It offers superior wear characteristics in a variety of
overlays that simulate fine wood finishes as well as marble, granite, and
other materials. Traffic Zone is designed for consumers who want highly
durable easy-care hard surface floorcovering as an alternative to sheet
vinyl, vinyl tile and carpet. In addition to a residential product line of
24 styles and colors, the Company also offers a commercial-grade version
called Traffic Zone Elite, which provides even greater durability for high-
traffic areas.
Manufacturing
The Company manufactures its 3/4" thick solid oak hardwood flooring
products at its plants in Nashville, and Jackson, Tennessee; Beverly, West
Virginia, and West Plains, Missouri. The Beverly, West Virginia plant also
produces 5/16" thick solid strip prefinished flooring. The Company
manufactures its 3/8" thick laminated hardwood flooring products at its
plants in Center, Texas, Port Gibson, Mississippi and Statesville, North
Carolina. The Center plant produces sufficient 1/8" thick oak veneer to
supply approximately one-half of its veneer requirements. The Port Gibson,
Mississippi plant supplies most of the remainder of the Center plant's
veneer requirements and a portion of the veneer requirements for the
Statesville plant for the production of 3/8" thick laminated products. The
Company manufactures its 5/16" thick solid parquet products at its plant in
Jackson, Tennessee in addition to its production of 3/4" thick product.
The Company's continuous advances in the area of technology and
manufacturing are the basis for its ability to improve yields from raw
material and make products that are more appealing to consumers, easier to
install, and more cost competitive. This year again, the Company made even
greater improvements in labor efficiency and productivity as it sought ways
to counter the difficult economic and market conditions.
The 1994 expansion of its Beverly, West Virginia, and Port Gibson,
Mississippi, plants gave the Company additional manufacturing capacity,
along with the acquisition of Premier Wood Floors in Statesville, North
Carolina. Following the acquisition, the Company improved productivity in
Premier's operations and broadened the Premier product line to include 3/4"
thick solid strip and 5/16" thick solid parquet. At all plants, further
efficiencies were achieved. The expanded capacities and improvements
allowed the Company to postpone plans for further plant expansion until the
second half of 1996 while retaining its ability to meet sales goals.
The following table sets forth certain information concerning the
manufacturing facilities operated by the Hardwood Floors Division.
Owned/
Location Leased Product
- -------- ------ ------------------------
Nashville, TN Owned 3/4" thick strip and plank;
pre-finished, unfinished
West Plains, MO Owned 3/4" thick strip; pre-finished,
unfinished
Beverly, WV (1) Leased 5/16" thick solid strip;
pre-finished
and 3/4" thick strip;
pre-finished, unfinished
Jackson, TN (2) Owned 5/16" thick solid parquet;
pre-finished, unfinished
3/4" thick strip; unfinished
Center, TX (3) Owned 3/8" thick laminated strip,
plank and parquet; pre-finished,
unfinished
Port Gibson, MS (3) Owned 3/8" thick laminated strip,
plank and parquet; pre-finished,
unfinished
Statesville, NC Owned 3/8" thick laminated strip,
plank, prefinished, unfinished
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(1) During 1995, the operating lease agreement was amended to allow for a
purchase option of $1 until 2018. The Company recorded the present
value of the remaining future minimum lease payments as a capitalized
lease asset and related capitalized lease obligation.
(2) The Jackson plant also manufactures dimension parts used by the
Cabinet Division in cabinet production. See "- Cabinet Division -
Manufacturing" below.
(3) The Center and Port Gibson plants also produce 1/8" thick veneer,
which is used in the manufacture of 3/8" thick laminated products at
these plants and at the Statesville, N.C. plant.
Raw materials for the hardwood flooring products produced at the
Nashville, Jackson, Beverly and West Plains plants consist primarily of
rough cut oak lumber. Each plant obtains lumber from local independent
sawmill operators, purchasing entire truckloads of ungraded, mixed specie
lumber. The Company maintains an inventory of purchased lumber which is
sufficient for approximately three to four months of operations. The
quality and efficiency of lumber purchasing and grading operations are
important determinants of manufacturing yields and productivity.
Purchased lumber is stacked for drying in the open air for 90 to 120
days, and then placed in dry kilns for approximately five to seven days to
reduce moisture content. Where necessary, the Company operates pre-drying
kilns, which shorten the required open-air drying time. The Company's
drying processes are another important determinant of satisfactory product
yields. Following drying, the flooring-grade lumber is cut into various
sizes of strip, plank and parquet flooring. The products are then sanded
and, in most cases, beveled. A majority of the Company's products are pre-
finished with a urethane or combination stain and wax finish. Pre-finished
products are more durable and do not require a time-consuming sanding and
finishing process at the installation site. The Company also treats a
portion of its 3/8" thick laminated product with an acrylic impregnating
process to produce its Wear Master line of commercial flooring. The
Statesville, N.C. plant purchases veneer from outside sources and also
obtains veneer from the Port Gibson plant, which is converted into
laminated products.
Raw materials for the laminated hardwood flooring products
manufactured at the Company's plants in Center, Texas and Port Gibson,
Mississippi consist of oak logs which are purchased primarily from
independent loggers located within about 100 miles of the respective
plants. Purchased logs are stored in soaking ponds until needed, and then
debarked, soaked in hot water or steamed, cut into five-foot lengths,
loaded into a lathe, and peeled to produce sheets of thin oak veneer.
Layers of veneer are then pressed into plywood which is cut into strip,
plank and parquet hardwood flooring and pre-finished. The Company employs
advanced veneer manufacturing processes which substantially increase
material yields, thereby reducing costs. The total conversion time for
laminated products, from log to finished product, is approximately one
week.
Sales
The Hardwood Floors Division sells its products to over 100
independent wholesale floorcovering distributors located throughout the
United States and a number of other countries. Most distributors handle a
diverse line of floorcovering products in addition to hardwood flooring.
The Company's distributors sell their products to retail floorcovering
dealers, installation contractors, builders, remodelers and retail home
center stores. The Company believes that new home construction and
remodeling account for approximately 40% and 60%, respectively, of its
hardwood flooring sales.
The Bruce trademark is a valuable asset because of its significant
brand name recognition. Based on independent surveys, the Company believes
that the Bruce name is one of the highest recognized consumer brand names
of any floorcovering product. Sales and marketing efforts for Bruce
Hardwood Floors are designed to heighten Bruce's brand name recognition
among end users. The Company advertises its Bruce flooring products in
national and regional publications including House Beautiful, Better Homes
and Gardens, Sunset, Southern Living and others.
The Company has developed Bruce product displays, more than 20,000 of
which have been placed in floorcovering dealer showrooms across the U.S.
These product displays are available in a variety of sizes designed to
accommodate the varying floor spaces available in dealer showrooms. The
Company has also developed marketing programs specifically tailored to
retail home center stores and commercial users and has developed displays
to demonstrate the ease of do-it-yourself installation of hardwood floors.
The do-it-yourself installation displays have been placed in floorcovering
retailers, lumber yards, home centers and other do-it-yourself specialty
stores. Management believes that both the product displays and the do-it-
yourself installation displays are important sales promotion devices.
The Company operates a training facility at its Nashville plant to
give its Bruce floorcovering distributors, dealers and contractors,
training in the sale, installation and maintenance of hardwood floors.
Providing this training results in better educated resellers and
installers, which the Company believes should enhance their ability to sell
more Bruce products and improve consumer satisfaction with the installed
products.
The Hardwood Floors Division currently employs 50 salespersons who are
assigned geographical sales territories. In addition to making direct
sales to independent distributors, the sales force assists distributors in
broadening their market penetration by making joint sales calls on dealers,
conducting installation training for distributors and their customers, and
advising on the use of advertising and special product promotions.
Salespersons earn bonuses, in addition to their salaries, based on volume
and sales mix.
Competition
While the Hardwood Floors Division is currently the largest
manufacturer of hardwood flooring in the world it is a small part of the
highly competitive floor covering market. The floor covering market
includes companies which are substantially larger in sales and financial
resources then the Company. Also,the domestic floor covering industry is
facing greater competition from imported flooring products.
The floorcovering industry, which includes carpeting, sheet vinyl,
vinyl tile, hardwood flooring and ceramic tile, is highly competitive. The
principal competitive factors in floorcovering are aesthetic appeal, price,
durability and ease of installation and maintenance. Hardwood flooring is
generally more durable than other floorcoverings. Thus, although the
average selling price of hardwood flooring is higher than that of the
selling price of most other floorcoverings, the Company believes that the
overall cost is competitive after taking into account average product life,
maintenance expenses and removal and replacement costs.
The Company believes it competes favorably based on the high quality
of the Company's products and the additional product support services
offered by the Company and on the Company's network of independent
distributors, its production of a complete line of hardwood flooring
products, its innovative product development and manufacturing technology,
and its well-known Bruce trademark.
Cabinet Division
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The Company estimates that new construction accounts for approximately
one-third of the total cabinet industry sales with remodeling generating
the remaining two-thirds. Residential new construction activity is more
cyclical than remodeling activity, which has historically been relatively
stable. Cabinet manufacturing is a highly fragmented industry with
competitors of widely varying production capacities, distribution
capabilities and financial resources. In recent years, contraction in the
industry has resulted in smaller competitors leaving the market and more
aggressive cost controls and marketing programs being implemented by the
remaining participants. The Kitchen Cabinet Manufacturing Association
estimates that there are 8,000 manufacturers of kitchen and bathroom
cabinets competing for approximately 50% of the total cabinet market. The
balance of the market is supplied by trim carpenters and job-site cabinet
makers. The market is dependent on new home construction and remodeling
activity.
The entire cabinet manufacturing industry is characterized by
substantial excess capacity. In the late 1970's, new construction expanded
to meet the demands of more than two million housing starts annually plus
remodeling. Price competition is severe, due principally to the excess
industry capacity.
Products and Product Development
The Company manufactures kitchen and bathroom cabinets in
approximately 100 different styles and colors. Cabinets are marketed under
the brand names "TriPac", "IXL", "Classic Bath Products" and "Bruce"." The
Company continues to develop new product styles. While the styles of the
Company's cabinets vary from other manufacturers' brands, kitchen and
bathroom cabinet construction is fundamentally the same throughout the
industry. Differences in the price and quality of the Company's cabinets
result from variations in basic materials (e.g., solid oak, plywood,
particleboard or fiberboard doors), the type and quality of exterior and
interior finish, the quality of the hardware and other features such as
adjustable shelves and interior storage aids.
During the latter part of 1994 and throughout 1995, the Company
revamped its product line to improve marketability and mix of offerings.
Among the many innovations that have emerged from this effort is a new line
called Coronet, which is made of Plantation hardwood from Malaysia. Months
of testing and research preceded the use of this new raw material, which
produces an end product of the same durability and styling as its other
woods, but which can be sold at a lower price point. The Company also
completed the introduction of the Vantage Collection of melamine laminate
products, aimed primarily at the multi-family housing market. With 24
product choices and five different price points, the Vantage Collection
offers builders a wide variety of styles and prices. In its continuing
effort to offer more value to builders and end-users, the Company
introduced the Aspen Collection, a line of thermofoil-process products
which feature high-quality vinyl laminates applied to fiberboard. Through
innovative manufacturing techniques, the Company was able to produce a
lower-priced version of this popular line, available in maple and white
finishes, for the townhouse and single-family housing market.
Manufacturing
The Company operates seven cabinet manufacturing plants, generally
located within 500 miles of most major population centers in the United
States. These regional plants enable the Company to compete with local and
regional manufacturers on the basis of the cost of freight, speed of
delivery and service to customers. The Company also operates a
manufacturing facility at Jefferson City, Tennessee which supplies cultured
marble vanity tops, primarily to the Cabinet Division, and to retail home
center stores.
The following table sets forth certain information concerning the
Company's cabinet manufacturing facilities:
Owned/
Location Leased Product
- -------- ------ --------------------
Auburn, NE Owned Kitchen and bathroom
cabinets
Elizabeth City, NC Owned Bruce and IXL kitchen
and bathroom cabinets
and European frameless
cabinets
McKinney, TX Owned Kitchen and bathroom
cabinets
Morristown, TN (1) Owned Kitchen and bathroom
cabinets
Morristown, TN Owned Kitchen and bathroom
cabinets
Thompsontown, PA Owned Kitchen and bathroom
cabinets
Union City, IN Owned Kitchen and bathroom
cabinets
- ------------------
(1) This plant also produces finished end panels for certain other
cabinet plants.
The plants are primarily cabinet assembly operations. The plant
inventories consist of raw materials, component parts and a limited amount
of work-in-process. Raw materials utilized by the plants consist of sheet
stock of plywood, particleboard or fiberboard, and component parts consist
of dimension parts (front frame parts, doors and drawer fronts), finished
end panels, finishing materials and hardware. In the cabinet assembly
operations, front frame parts, doors and drawer fronts are sanded smooth
and color stained and finished. Then, end panels, tops, bottoms and
shelves are glued and stapled to the front frames, drawers are assembled to
drawer fronts and hardware is attached. The completed cabinet is
inspected, packed and staged for shipment.
Sheet stock is a commodity product purchased from a variety of
suppliers. The Company obtains its dimension parts, consisting of front
frame parts, doors and drawer fronts, primarily from its manufacturing
facility located at the hardwood flooring plant in Jackson, Tennessee. See
"- Hardwood Floors Division - Manufacturing" above. The Jackson plant
supplies 74% of the Cabinet Division's front frame parts requirements. The
Company manufacturers finished end panels at its Morristown, Tennessee
cabinet plants. Finishing materials and hardware are purchased from
several suppliers.
The Cabinet Division is not dependent on any single supplier for any
of its raw materials or component parts, other than the Jackson dimension
parts plant. The Company believes its sources of supply are adequate to
meet its needs. Imports from foreign suppliers, which account for less
than ten percent of the Company's cabinet materials, consist of wood
veneer, laminated veneer door panels and certain hardware items. While the
Company maintains insurance coverage on all of its properties, including
the Jackson dimension parts plant, the loss of that plant could have an
adverse effect on the Company's operations. See "- Properties" below.
Sales and Marketing
The Company distributes its cabinets directly from the factories and
also through 51 Company-operated distribution centers, including twelve new
locations opened in 1995, in major markets across the country. These
centers, which cater largely to builders and remodeling contractors,
generate more than 50% of the Cabinet Division's total sales.
The Company-operated distribution centers are also used to support
sales to major builders and retail home centers by providing prompt
replacements for lost or damaged cabinets and delivery and storage for
truckload quantities of cabinets pending staged deliveries to job sites.
The Company believes that its distribution centers are an important factor
in maintaining and increasing its sales, and intends to open additional
distribution centers in new geographic markets as conditions warrant.
The Company provides personal computer software for use primarily by retail
home center stores to create complete kitchen floor plans, including
elevations and product specifications lists, with related prices, based on
room measurements provided by customers. Management believes this software
package to be a significant sales aid.
The Cabinet Division has one of the largest sales forces in the
cabinet industry, currently employing approximately 233 salespersons. The
sales force makes direct sales and service calls on builders, independent
distributors and retail home center stores, and offers kitchen design,
cabinet installation and cabinet display and marketing advice to retail
home center stores and independent distributors. Most sales personnel are
affiliated with one of the Company's distribution centers and are
responsible for sales to all customers within their sales area including
sales of cabinets directly by the plant. The Cabinet Division maintains a
competitive salary base and provides performance incentives by compensating
its sales force with bonuses tied to volume and profitability.
Competition
The Company is one of the largest manufacturers of kitchen and
bathroom cabinets in the U.S.
The cabinet industry is a mature, highly competitive, regionalized and
highly fragmented industry with thousands of cabinet makers competing
primarily on a local basis. There is a relatively high manual labor
content in cabinet products. Because of the low capital requirements for
cabinet assembly, it is relatively easy and inexpensive for small cabinet
makers to enter the industry as manufacturing competitors. In addition,
high transportation costs limit the area to which a manufacturer can ship
cabinets and still remain competitive. This has led the Company, and more
recently, some of its larger competitors, to open regional manufacturing
plants and distribution centers. The Company's seven regional
manufacturing plants and 51 Company-operated distribution centers are
important factors in the Company's ability to maintain cost and price
competitiveness with local and regional manufacturers.
Due to significant excess manufacturing capacity, the cabinet industry
has been subject to severe price competition. Other competitive factors
include quality of product, production capacity and speed of delivery. The
Company believes it competes favorably because of its breadth and quality
of product offerings, and its production capacity, regional manufacturing
facilities, national sales force and distribution capabilities.
Building Products Division
- --------------------------
Since 1969, the Company operated a general building materials
distribution center in Beltsville, Maryland, which had offered a range of
products including dimension lumber, millwork, pre-hung windows and doors,
and kitchen and bathroom cabinets. As of January 1996, the Company elected
to discontinue the sale of lumber, which had remained a low-profit item,
and to consolidate the building products division into the Cabinet
Division. Beginning with the first quarter of 1996, the financial results
of this operation will be combined with those of the Cabinet Division. The
Beltsville facility will continue to feature cabinets and a limited number
of other products, which have been the major contributors to its sales.
Backlog
- -------
The Company generally sells its flooring products from inventories on
hand. The Company produces its cabinets primarily in response to firm
orders and, to a lesser extent, to maintain a working inventory at
distribution centers operated by the Company. The Company generally ships
its cabinets within a short time (e.g., one week) after receipt of an
order. Accordingly, the dollar amount of backlog orders believed to be
firm is not significant or indicative of the Company's future sales
and earnings.
Employees
- ---------
As of December 29, 1995, the Company employed approximately 4,166
persons, of which 2,494 were employed by the Hardwood Floors Division,
1,529 by the Cabinet Division, and the remainder in the Company's
headquarters and other operations. The Company has entered into collective
bargaining agreements with hourly employees at three of its seven hardwood
flooring plants, and three of its seven cabinet plants covering in the
aggregate approximately 1,743 employees. Management considers its employee
relations to be satisfactory.
Environmental Matters
- ---------------------
The Company's operations are subject to extensive federal, state and
local laws and regulations relating to the generation, storage, handling,
emission, transportation and discharge of materials into the environment.
Permits are required for certain of the Company's operations, and these
permits are subject to revocation, modification and renewal by issuing
authorities. Governmental authorities have the power to enforce compliance
with their regulations, and violations may result in the payment of fines
or the entry of injunctions, or both. The Company does not believe it will
be required under existing environmental laws and enforcement policies to
expend amounts which will have a material adverse effect on its results of
operations or financial condition. However, the requirements of such laws
and enforcement policies have generally become stricter in recent years.
Accordingly, the Company is unable to predict the ultimate cost of
compliance with environmental laws and enforcement policies.
Item 2. Properties
----------
The Company's principal manufacturing facilities are described under
"- Hardwood Floors Division - Manufacturing" and "- Cabinet Division -
Manufacturing" above. Management believes that the Company's plants and
properties are generally well-maintained and in good operating condition.
The Company maintains blanket property insurance coverage on all its
properties with aggregate limits of $100 million. The Company is also
insured for losses arising from loss of inventory, business interruption
and certain extra expense. Although this coverage is sufficient to replace
any of the Company's manufacturing facilities, the complete loss of the
dimension parts plant in Jackson, Tennessee for an extended period of time
could adversely affect the Company's operations. See "- Cabinet Division -
Manufacturing" above.
Item 3. Legal Proceedings
-----------------
The Company is not a party to any material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Executive Officers of the Registrant
- ------------------------------------
Set forth below as of March 1, 1996 are the names, ages and principal
occupations of the executive officers of the Company, as well as certain
other information concerning their business experience.
Name and Positions held Principal Occupation
with the Company and Other Information
----------------------- ---------------------
Floyd F. Sherman Mr. Sherman has served as Chairman
Chairman of the Board of of the Board and Chief Executive
Directors, and Chief Officer since July, 1992. Prior to
Executive Officer November, 1994 he served as
President of the Company since 1981.
Prior to 1981, he served as
Executive Vice President of the
Company. Mr. Sherman is 56 years
old and became a director of the
Company in 1982.
M. Joseph McHugh Mr. McHugh has served as President
Director, President and Chief Operating Officer of the
and Chief Operating Company since November, 1994.
Officer Prior thereto, he served as Senior
Executive Vice President and
Treasurer of the Company since 1981.
Prior to 1981, he served as
Executive Vice President of the
Company. He became a director of
the Company in 1986. Mr. McHugh is
also a director of Pillowtex
Corporation. He is 58 years old.
Robert J. Symon Mr. Symon has served as Executive
Executive Vice President, Vice President, Treasurer and
Treasurer and Chief Chief Financial Officer of the
Financial Officer Company since November, 1994. Prior
thereto, he served as Vice President
- Controller of the Company since
1978. Mr. Symon is 64 years old and
served as a director of the Company
from December 1988 to June 1992.
Darryl T. Marchand Mr. Marchand has served as Vice
Vice President, Secretary President, Secretary and General
and General Counsel Counsel of the Company since 1986.
Prior thereto, he served as Vice
President - Legal of the Company
from 1981 to 1986 and as Treasurer
from February to August, 1981. Mr.
Marchand is 53 years old.
Charles A. Engle Mr. Engle has served as President of
Vice President the Cabinet Division since January,
1996. Prior thereto, he served as Vice
President of the Company since 1979.
Mr. Engle is 52 years old.
John W. Esch Mr. Esch has served as a Vice
Vice President President of the Company since
November, 1994. He has been a
division Controller of the Cabinet
Division since 1977. Mr. Esch is
51 years old.
James T. Fidler Mr. Fidler has served as a Vice
Vice President President of the Company since 1981.
He has been Vice President-Operations
since August, 1995. Prior thereto, he
was Director-Management Information
Operations for the Company. Mr. Fidler
is 53 years old.
Michael J. Kearins Mr. Kearins has served as a Vice
Vice President President of the Company since 1985.
He had been a divisional Vice
President of sales of the Bruce
Hardwood Floors Division from
December, 1983 to May, 1985. He is
primarily responsible for sales and
marketing in the Bruce Hardwood
Floors Division. Prior to 1983, he
had been a Regional Sales Manager of
the Company. Mr. Kearins is 49
years old.
E. Dwain Plaster Mr. Plaster has served as a Vice
Vice President President of the Company since
November, 1994. He has been a
divisional Controller of the Bruce
Hardwood Floors Division since 1977.
Mr. Plaster is 46 years old.
James E. Price Mr. Price has served as a Vice
Vice President President of the Company since
November, 1994. He has been Vice
President of manufacturing of the
Bruce Hardwood Floors Division since
March, 1993. Prior thereto, he was
General Manager of that division
since 1984. He had been a Plant
Manager of the Company since 1979.
Mr. Price is 53 years old.
Allen Silver Mr. Silver has served as a Vice
Vice President President of the Company since 1985.
Prior to that time he had been a
divisional Vice President of
manufacturing of the Cabinet
Division. Mr. Silver is 56 years
old.
PART II
Item 5. Market for the Registrant's Common Equity and Related
-----------------------------------------------------
Stockholder Matters
-------------------
A) Price range of common stock
The following table shows the range of market prices for the common
stock on the NASDAQ National Market System for each quarter during the past
two fiscal years.
Market Price
1994 High Low
---- ------ ------
First Quarter 17-1/4 12-5/8
Second Quarter 14-1/8 11-1/4
Third Quarter 14-3/8 11-1/2
Fourth Quarter 13-7/8 11-3/4
1995
----
First Quarter 14 11-7/8
Second Quarter 17-3/8 12-7/8
Third Quarter 19-1/8 14-5/8
Fourth Quarter 18-3/4 15-1/4
B) Approximate number of equity security holders (As of December
29, 1995)
Class of Security Number of Record Holders
----------------- ------------------------
Common Stock ($.01 par value) 1,700
C) Dividend Policy
The Company has not declared or paid any dividends on its Common
Stock. Management currently intends to retain future earnings for the
operation and expansion of the Company's business and does not anticipate
paying any cash dividends in the foreseeable future. The payment of cash
dividends is restricted under the terms of the bank credit facility and the
indenture relating to the Company's 10 1/2% Senior Notes due 2003.
Item 6. Selected Consolidated Financial Data
------------------------------------
(In thousands, except per share amounts)
The selected consolidated financial data of the Company presented
below for the five fiscal years ended December 29, 1995 was derived from
the consolidated financial statements of the Company and should be read
in conjunction with the consolidated financial statements and related
notes included herein.
Fiscal Fiscal Fiscal Seven Five Fiscal
year year year months months year
ended ended ended ended ended ended
Dec. Dec. Dec. Jan. Jun. Jan.
INCOME 29, 30, 31, 1, 8, 3,
STATEMENT 1995 1994 1993 1993 1992(2) 1992(2)
DATA ----------------------------------------------------------
Net sales $458,868 $410,159 $346,296 $173,426 $119,417 $256,112
Cost of sales 342,348 300,160 269,360 137,413 90,991 204,026
----------------------------------------------------------
Gross profit 116,520 109,999 76,936 36,013 28,426 52,086
Selling,
general and
admin-
istrative 60,841 57,928 44,213 27,179 19,404 41,597
Gain on
insurance
settlement - - - (1,350) (3,624) -
Amortization
of goodwill 1,520 1,520 1,613 884 1,863 4,463
Interest 18,380 18,920 19,406 11,289 25,786 59,719
----------------------------------------------------------
Income (loss)
before income
taxes and
extra-
ordinary
items 35,779 31,631 11,704 (1,989) (15,003) (53,693)
Provision
(benefit) for
income taxes 13,774 12,829 4,501 (940) - (10,028)
-----------------------------------------------------------
Income (loss)
before extra-
ordinary
items 22,005 18,802 7,203 (1,049) (15,003) (43,665)
Extraordinary
items - gain
from extin-
guishment
of debt - - - - 201,308 -
- Loss from
repayment of
debt - - (11,307) - - -
-----------------------------------------------------------
Net income
(loss) $ 22,005 $ 18,802 $ (4,104) $ (1,049) $186,305 $(43,665)
===========================================================
Per share
data: (1)
Net income (loss)
before
extraordinary
items $ 1.49 $ 1.28 $ 0.74 $ (0.16)
Net income
(loss) $ 1.49 $ 1.28 $ (0.42) $ (0.16)
Weighted average
shares out-
standing 14,815 14,660 9,714 6,707
Dec. Dec. Dec. Jan. June Jan.
BALANCE 29, 30, 31, 1, 8, 3,
SHEET DATA 1995 1994 1993 1993 1992(2) 1992
---------------------------------------------------------
Working
capital $113,397 $ 94,354 $ 74,082 $ 53,480 $ 79,421 $ 78,927
Total assets 399,815 363,451 326,545 302,259 323,563 453,105
Long-term
debt, net
of current
maturities,
and
redeemable
preferred
stock 183,044 168,388 162,897 198,332 222,483 470,506
Common
shareholders'
investment 128,901 106,894 88,047 18,951 20,000 (121,081)
__________
(1) As the Company was a wholly-owned subsidiary of another company,
earnings per share are not meaningful for the periods prior to
June 8, 1992.
(2) In connection with the Company's June 8, 1992 Restructuring, the
Company applied quasi-reorganization accounting procedures.
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
The following table sets forth selected information concerning the
Company's results of operations for fiscal 1995, 1994 and 1993.
Fiscal Year
----------------------------------
1995 1994 1993
----------------------------------
(Dollars in millions)
Net sales:
Hardwood Floors Division $ 261.8 $ 244.0 $ 202.0
Cabinet Division 183.2 146.5 125.6
Building Products Division 16.1 21.5 20.7
Intracompany sales (2.2) (1.8) (2.0)
------- -------- --------
Total net sales 458.9 410.2 346.3
======== ======== ========
Gross profit 116.5 110.0 76.9
Selling, general and
administrative expenses 60.8 57.9 44.2
Amortization of goodwill 1.5 1.5 1.6
------- ------- -------
Operating income $ 54.2 $ 50.6 $ 31.1
======= ======= =======
As a percent of net sales:
Gross profit 25.4% 26.8% 22.2%
Selling, general and
administrative expenses 13.2 14.1 12.8
Operating income 11.8 12.3 9.0
Fiscal Year 1995 Compared to Fiscal Year 1994
- ---------------------------------------------
Record net sales for fiscal 1995 were $458.9 million, or 11.9% greater
than the $410.2 million in net sales for fiscal 1994. This was in spite of
housing starts in 1995 being 7.8% lower. Single-family starts were lower
by 11.9%. Remodeling expenditures were flat and existing home sales were
down 3.4%. Net sales for the Hardwood Floors Division increased 7.3% to
$261.8 million from $244.0 million in the prior year. Unit sales of
hardwood flooring products were up almost 10%.
Cabinet Division net sales for 1995 were $183.2 million or an increase
of 25.1% over 1994 net sales of $146.5 million. This increase resulted
primarily from an increase in unit sales of 12.2% and higher-priced mix of
cabinets sold. During 1995, we introduced many new Cabinet products,
completely revitalized the kitchen cabinet product line, and increased the
number of Company-operated distribution centers and the retail-remodeling
showrooms. Cabinet sales to the remodeling sector were $47 million, up
20.5% over 1994. We also had significant increased sales to the single-
family builder. In the government sector, where we are one of three
cabinet suppliers to the City Housing Authorities, our sales were up 30.9%.
Net sales of the Building Products Division decreased 25.1% in 1995 to
$16.1 million compared to $21.5 million in 1994. The Company has decided
to discontinue the sale of lumber which was a low-margin product and to
consolidate the Building Products Division into the Cabinet Division.
Consolidated gross profit for fiscal 1995 was $116.5 million, or 25.4%
of net sales, compared to $110.0 million, or 26.8% of net sales in fiscal
1994. A major factor in 1995 impacting gross margins was the incentive
pricing and promotional programs which were designed to improve sales
performance in the Hardwood Floors Division. In 1995, the LIFO charge for
lumber, primarily in the Hardwood Floors Division, was $0.5 million. In
1994, we had a LIFO benefit of $2.7 million, resulting in a net difference
between the two years of $3.2 million.
Selling, general and administrative expenses were $60.8 million, or
13.2% of net sales in fiscal 1995, compared to $57.9 million, or 14.1% of
net sales in fiscal 1994.
Operating income was $54.2 million, or 11.8% of net sales in fiscal
1995, compared to $50.6 million, or 12.3% of net sales in fiscal 1994.
Interest expense was $18.4 million in fiscal 1995, compared to $18.9
million in fiscal 1994.
Net income for fiscal 1995 was $22.0 million, compared to $18.8
million in fiscal 1994, an increase of 17% on a 11.9% increase in net
sales.
Fiscal Year 1994 Compared to Fiscal Year 1993
- ---------------------------------------------
Net sales for fiscal 1994 were $410.2 million, or 18.4% greater than
the $346.3 million in net sales for fiscal 1993. Net sales for the
Hardwood Floors Division increased 20.8% to $244.0 million from $202.0
million in the prior year. The increase in hardwood flooring sales
resulted primarily from an increase in units sold. The second half of 1994
benefited from the sales generated by Premier Wood Floors which was
acquired on July 1, 1994.
Cabinet Division net sales for 1994 were $146.5 million, or an
increase of 16.7% over 1993 net sales of $125.6 million. While unit sales
increased by 2.7%, the major portion of the growth in sales was
attributable to a more favorable mix of cabinets sold and to a lesser
extent to price increases.
Net sales of the Building Products Division increased 3.9% in 1994 to
$21.5 million, compared to $20.7 million in 1993.
Gross profit for fiscal 1994 was $110.0 million or 26.8% of net sales,
compared to $76.9 million or 22.2% of net sales in fiscal 1993. The
improvement in gross profit resulted primarily from higher unit sales and
to a lesser extent from increased prices. Lower lumber costs in 1994
compared to 1993 were also a significant factor. In addition, the Company
benefited from improved efficiency generated at the plants and in part from
capital improvements in recent years to increase productivity.
Selling, general and administrative expenses were $57.9 million, or
14.1% of net sales, in fiscal 1994, compared to $44.2 million, or 12.8% of
net sales, in fiscal 1993. The major portion of the increased expenses was
higher spending levels for selling expense in the Hardwood Floors Division.
These increased expenses were for consumer, co-op and trade advertising,
display and trade show expenses and the expenses associated with the
promotion of new products. Administrative expenses were higher due to
larger provisions for incentive bonuses and profit sharing plans in
accordance with pre-set goals.
Operating income was $50.6 million, or 12.3% of net sales, in fiscal
1994, compared to $31.1 million, or 9.0% of net sales in fiscal 1993.
These improved results were generated by the improved performance in gross
profit offset in part by higher levels of spending for selling, general and
administrative expenses.
Interest expense was $18.9 million in fiscal 1994, compared to $19.4
million in fiscal 1993.
Net income for fiscal 1994 was $18.8 million, compared to net income
before an extraordinary item for fiscal 1993 of $7.2 million. Higher net
sales along with an increase in operating income accounted for this
improvement.
Liquidity And Capital Resources
- -------------------------------
In December 1995, the Company negotiated a bank credit facility ("New
Credit Facility") which provides for up to $90 million of revolving credit
loans for working capital and for letters of credit. Availability of
borrowings under the New Credit Facility is based upon a formula related to
inventory and accounts receivable. At December 29, 1995, there were no
borrowings under this facility.
For the fiscal year ended December 29, 1995, cash increased by $7.7
million. Net cash provided by operating activities was $23.8 million,
including $1.8 million received from the West Virginia Economic Development
Authority representing the final phase of construction deposits for the
Beverly, West Virginia plant expansion. Cash of $16.1 million was used for
additions to property, plant and equipment and long-term debt payments.
At December 29, 1995, the Company had working capital of $113.4
million, or 28.4% of total assets, and $74.2 million of unused bank
borrowing capacity.
The Company believes that borrowing availability under the New Credit
Facility and cash generated form operations will be adequate to fund
working capital requirements, debt service payments and any planned capital
expenditures.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Triangle Pacific Corp.:
We have audited the accompanying consolidated balance sheets of
Triangle Pacific Corp. and subsidiaries (a Delaware corporation) as of
December 29, 1995, and December 30, 1994, and the related consolidated
statements of operations, changes in shareholders' investment, and cash
flows for the fiscal years ended December 29, 1995, December 30, 1994, and
December 31, 1993. These financial statements and the schedule referred to
below, are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Triangle Pacific Corp. and subsidiaries as of December 29, 1995, and
December 30, 1994, and the results of their operations and their cash flows
for the fiscal years ended December 29, 1995, December 30, 1994, and
December 31, 1993, in conformity with general accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. Schedule II is
the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in our
audits of the basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data required to be
set forth therein in relation to the basic consolidated financial
statements taken as a whole.
Arthur Andersen LLP
Dallas, Texas
February 5, 1996
Triangle Pacific Corp. and Subsidiaries
Consolidated Balance Sheets
(In Thousands)
December 29, December 30,
1995 1994
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 32,581 $ 24,906
Receivables (net of allowances of
$2,588 and $2,491 respectively) 50,406 43,303
Inventories 74,572 70,900
Prepaid expenses 4,735 3,934
-------- ---------
Total current assets 162,294 143,043
-------- ---------
Property, plant & equipment
Land 15,855 12,003
Buildings 49,808 43,452
Equipment, furniture & fixtures 110,719 79,568
-------- --------
176,382 135,023
Less: accumulated depreciation 30,540 21,110
-------- --------
145,842 113,913
Other assets:
Goodwill 55,090 56,617
Trademark 29,133 29,933
Other 1,468 13,237
Deferred financing costs 5,988 6,708
-------- --------
Total assets $ 399,815 $ 363,451
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current portion of long-term debt $ 3,210 $ 1,527
Accounts payable 17,086 17,723
Accrued liabilities 28,601 29,439
-------- --------
Total current liabilities 48,897 48,689
-------- --------
Long-term debt, net of current portion 183,044 168,388
-------- --------
Deferred income taxes 38,973 39,480
-------- --------
Total liabilities 270,914 256,557
-------- --------
Shareholders' investment:
Common stock - $.01 par value,
authorized shares - 30,000,000
issued and outstanding shares -
14,663,365 at December 29, 1995
and 14,662,609 at December 30, 1994 147 147
Additional paid-in capital 93,100 93,098
Retained earnings 35,654 13,649
------- -------
Total shareholders' investment 128,901 106,894
------- -------
Total liabilities & shareholders' investment $ 399,815 $ 363,451
======= ========
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
Triangle Pacific Corp. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, except per share amounts)
Fiscal Fiscal Fiscal
Year Year Year
Ended Ended Ended
December 29, December 30, December 31,
1995 1994 1993
------------------------------------------
Net Sales $ 458,868 $ 410,159 $ 346,296
-------- -------- --------
Costs and expenses:
Cost of sales 342,348 300,160 269,360
Selling, general and
administrative 60,841 57,928 44,213
Amortization of goodwill 1,520 1,520 1,613
Interest 18,380 18,920 19,406
-------- -------- --------
423,089 378,528 334,592
Income before income taxes
and extraordinary item 35,779 31,631 11,704
Provision for income taxes 13,774 12,829 4,501
-------- -------- --------
Net income before
extraordinary item 22,005 18,802 7,203
Extraordinary item
Loss from repayment of
debt, net of tax - - (11,307)
-------- -------- --------
Net income (loss) $ 22,005 $ 18,802 $ (4,104)
======== ======== ========
Per Share Data:
Net income
before extraordinary item $ 1.49 $ 1.28 $ 0.74
Net income (loss) $ 1.49 $ 1.28 $ (0.42)
Weighted average shares
outstanding 14,815 14,660 9,714
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Triangle Pacific Corp. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Investment
(In Thousands)
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Total
- -----------------------------------------------------------------------
Balance, January 1, 1993 $ 67 $ 19,933 $ (1,049) $ 18,951
Net Loss - - (4,104) (4,104)
Sale of Common Stock - net 79 73,121 - 73,200
- ------------------------------------------------------------------------
Balance, December 31, 1993 $ 146 $ 93,054 $ (5,153) $ 88,047
Net income - - 18,802 18,802
Exercise of stock options 1 44 - 45
- ------------------------------------------------------------------------
Balance, December 30, 1994 $ 147 $ 93,098 $ 13,649 $106,894
Net income - - 22,005 22,005
Exercise of stock options - 2 - 2
- ------------------------------------------------------------------------
Balance, December 29, 1995 $ 147 $ 93,100 $ 35,654 $128,901
========================================================================
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Triangle Pacific Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
Fiscal Fiscal Fiscal
Year Year Year
Ended Ended Ended
December 29, December 30, December 31,
1995 1994 1993
- ---------------------------------------------------------------------------
Cash flows from
operating activities:
Net income (loss) $ 22,005 $ 18,802 $ (4,104)
Adjustments:
Depreciation 9,439 8,217 7,929
Deferred income taxes (507) 2,163 2,680
Amortization of
goodwill and trademark 2,320 2,320 2,413
Amortization of
deferred financing
costs 1,432 1,432 536
Amortization of
original issue
discount - - 1,037
Extraordinary item - - 11,307
Provision for doubtful
accounts 435 884 485
Changes in assets and
liabilities:
Receivables (7,538) (3,936) (7,522)
Inventories (3,672) (6,328) (16,460)
Prepaid expenses (801) 364 982
Accounts payable (637) 4,238 1,502
Accrued liabilities -
other (197) 7,964 1,414
Accrued liabilities -
interest (641) 1,197 3,688
Deferred compensation - - (5,068)
Other 348 (278) 1,684
- -----------------------------------------------------------------------
Net cash provided by operating
activities 21,986 37,039 2,503
- -----------------------------------------------------------------------
Cash flows from investing
activities:
Proceeds from sale of
property, plant and
equipment 10 913 34
Additions to property,
plant and equipment (11,624) (12,217) (7,636)
Acquisition of Premier
Wood Floors - (5,123) -
Construction deposits - (2,073) (7,504)
- -----------------------------------------------------------------------
Net cash used in investing
activities (11,614) (18,500) (15,106)
- -----------------------------------------------------------------------
Triangle Pacific Corp. and Subsidiaries
Consolidated Statements of Cash Flows (Cont'd)
(In Thousands)
Fiscal Fiscal Fiscal
Year Year Year
Ended Ended Ended
December 29, December 30, December 31,
1995 1994 1993
- ---------------------------------------------------------------------------
Cash flows from financing
activities:
Long-term debt borrowings - 7,000 500
Long-term debt payments (3,767) (1,449) (10,332)
Tranche I and II Note
payments - - (207,400)
Refinancing costs (712) (14) (14,860)
Proceeds from senior
notes issued - - 160,000
Sale of common stock - - 79,398
Exercise of stock options 2 45 -
Reimbursement of
construction deposits 1,780 - 5,535
- -----------------------------------------------------------------------
Net cash provided by (used in)
financing activities (2,697) 5,582 12,841
- -----------------------------------------------------------------------
Net increase in cash $ 7,675 $ 24,121 $ 238
Cash and cash equivalents,
beginning of period 24,906 785 547
- -----------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 32,581 $ 24,906 $ 785
=======================================================================
Supplemental disclosures of cash flow information:
Cash paid during the
period for:
Interest (net of
amount capitalized) $ 18,603 $ 16,969 $ 14,667
Income taxes 17,831 8,935 45
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Triangle Pacific Corp. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Nature of Operations and Summary of Significant Accounting
Policies:
Triangle Pacific Corp. ("The Company") conducts its operations through
a single business segment which consists of the manufacture and
distribution of building products. The Company through its Hardwood Floors
Division produces hardwood flooring and through its Cabinet Division
manufactures and distributes kitchen and bathroom cabinets. The Company's
products are used primarily in residential new construction and remodeling.
The Hardwood Floors Division and the Cabinet Division accounted for
approximately 57% and 40%, respectively, of the Company's revenues during
1995. The Company's products are sold throughout the U.S. and a portion of
the Hardwood Floors products are sold worldwide.
Basis of Consolidation:
The consolidated financial statements include the accounts of Triangle
Pacific Corp. and its subsidiaries. All intercompany balances and
transactions have been eliminated. The Company maintains its records on a
52/53 week year.
Cash and Cash Equivalents:
The Company considers all investments with an original maturity of
less than three months to be cash equivalents. All cash equivalents are
investment grade such as U.S. Government or A-1 or better securities rated
by Standard & Poor's Corporation.
Inventories:
Inventories are valued at the lower of cost or market. The last-in,
first-out (LIFO) method is used for certain lumber inventories and the
first-in, first-out (FIFO) method is used for all other inventories.
Inventories valued by the LIFO method were $21,154,000 at December 29, 1995
and $20,870,000 at December 30, 1994. Had all inventories been valued by
the FIFO method, which approximates current cost, inventories would have
been increased by $2,071,000 at December 29. 1995, and $2,069,000 at
December 30, 1994. Raw materials inventories include purchased parts and
supplies to be used in manufactured products. Work-in-process and finished
goods inventories include material, labor and overhead costs incurred in
the manufacturing process. The major components of inventories are as
follows:
December 29, December 30,
1995 1994
----------------------------------
(in thousands)
Raw materials $ 42,088 $ 39,092
Work-in-process 3,625 3,640
Finished goods 28,859 28,168
------- -------
Total $ 74,572 $ 70,900
======= =======
Property, Plant and Equipment:
Property, plant and equipment are stated at fair value as of June 8,
1992, when the Company successfully completed a capital restructuring, plus
acquisition or construction costs subsequent thereto. Expenditures for
maintenance, repairs, renewals and improvements which do not extend the
useful lives of assets are charged to appropriate expense accounts in the
year incurred. Upon disposition of an asset, cost and accumulated
depreciation are removed from the accounts, and any gain or loss is
included in the results of operations. Depreciation and amortization are
computed on the straight-line basis using the following estimated useful
lives:
Buildings 10 to 50 years
Equipment, furniture and fixtures 3 to 22 years
Amortization of leasehold improvements is provided over the terms of
the leases or the useful lives of the assets, whichever is shorter. For
income tax purposes, all assets are depreciated under allowable tax
depreciation methods.
Intangible Assets:
The Company annually evaluates its carrying value and expected period
of benefit of trademark and goodwill in relation to results of operations.
In determining the recoverability of these assets, the Company analyzes its
historical and future ability to generate earnings before interest and
taxes using the non-discounted method. Deferred financing costs are being
amortized on the straight-line method over the lives of the related debt.
The trademark and goodwill are being amortized over 40 years. Accumulated
amortization of trademark and goodwill is $2,867,000 and $5,537,000,
respectively, at December 29, 1995, and $2,067,000 and $4,017,000,
respectively, at December 30, 1994.
Fair Value of Financial Instruments:
The Company's cash equivalents and long-term debt are recorded at
cost, which approximates fair market value at December 29, 1995.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
New Accounting Standard:
The Company has not yet adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets," which was issued in March 1995. The
Company will be required to adopt SFAS No. 121 during the first quarter of
fiscal year 1996. The Company does not believe the adoption of SFAS No.
121 will have a material effect on the financial statements.
Note 2 - Long-Term Debt:
Long-term debt consists of the following:
December 29, December 30,
1995 1994
-------------------------------
(in thousands)
Senior Notes, 10 1/2%
due 8-1-2003 $ 160,000 $ 160,000
Capitalized lease obligations 19,547 68
Mortgages payable 6,707 9,847
-------- --------
186,254 169,915
Less: Current portion
of long-term debt (3,210) (1,527)
-------- --------
$ 183,044 $ 168,388
======== ========
Letters of credit outstanding were $9.7 million at December 29, 1995,
and $9.8 million at December 30, 1994, under a facility pursuant to which
they can be renewed or replaced.
Senior Notes:
The Senior Notes are senior unsecured obligations of the Company with
an aggregate principal amount of $160 million. The Senior Notes mature on
August 1, 2003, and bear interest at an annual rate of 10 1/2%, payable in
two equal semi-annual installments of $8,400,000 each, with each semi-
annual period deemed to have 180 days. The Senior Notes were issued under
an Indenture (the "Indenture") between the Company and a predecessor to
Texas Commerce Bank National Association, as Trustee (the "Trustee"). The
Senior Notes rank pari passu with all present and future senior
indebtedness of the Company and senior to all present and future
subordinated indebtedness of the Company. However, because borrowings
under the New Credit Facility are secured by inventory and accounts
receivable of the Company and the proceeds thereof, the Senior Notes are
effectively subordinated to such borrowings to the extent of such security
interest.
The Senior Notes are not redeemable prior to August 1, 1998.
Thereafter, the Senior Notes are redeemable at the option of the Company at
redemption prices specified in the Indenture. The Senior Notes are not
subject to any mandatory sinking fund requirements.
Upon a "change of control" (as defined in the Indenture), the Company
is required to offer to purchase all outstanding Senior Notes at 101% of
the principal amount thereof, plus accrued interest to the date of
repurchase. In addition, the Company may be required to offer to purchase
the Senior Notes at 100% of the principal amount plus accrued interest with
the net cash proceeds of certain sales or other dispositions of assets.
The Indenture contains covenants which limit, among other things, the
incurrence of additional indebtedness by the Company and its subsidiaries,
the payment of dividends on, or the purchase of the capital stock of the
Company ("Restricted Payments"), the creation of liens on the assets of the
Company and its subsidiaries, the creation of certain restrictions on the
payment of dividends and other distributions by the Company's subsidiaries,
the issuance of preferred stock by the Company's subsidiaries, and certain
mergers, sales of assets and transactions with affiliates.
Based on the Company's operations through December 29, 1995, the
amount of Restricted Payments that the Company could make under the
Indenture was $26,443,000.
The Indenture specifies a number of events of default including, among
others, the failure to make timely principal and interest payments or to
perform the covenants contained therein. The Indenture contains a cross-
default to other indebtedness of the Company aggregating more than
$5,000,000 and certain customary bankruptcy and insolvency defaults. Upon
the occurrence of an event of default under the Indenture, the Trustee or
the holders of not less than 25% in principal amount of the outstanding
Senior Notes may declare all amounts thereunder immediately due and
payable, except that such amounts automatically become immediately due and
payable in the event of a bankruptcy or insolvency default.
New Credit Facility:
In December 1995, the Company entered into a New Credit Facility,
which provides for up to $90 million of revolving loans for working capital
and general corporate purposes and for letters of credit. Availability of
borrowings under the New Credit Facility is based upon a formula related to
inventory and accounts receivable. At December 29, 1995, the Company had
no borrowings under the New Credit Facility and had $74.2 million of
borrowing capacity under this facility. Borrowings under the New Credit
Facility bear interest at the agent's prime rate plus 0.375% (8.875% at
December 29, 1995) or, at the Company's option, at certain alternate
floating rates and is secured by a pledge of the Company's inventory and
accounts receivable. The New Credit Facility expires on December 21, 2000.
The New Credit Facility contains covenants which restrict, among other
things, the incurrence of additional indebtedness and rental obligations by
the Company and its subsidiaries, the payment of dividends and other
distributions with respect to the capital stock of the Company, the
creation of liens on the assets of the Company and its subsidiaries, the
creation of certain restrictions on the payment of dividends and other
distributions by the Company's subsidiaries, the making of investments and
capital expenditures by the Company and its subsidiaries, the creation of
new subsidiaries by the Company, and certain mergers, sales of assets and
transactions with affiliates.
The New Credit Facility also contains certain financial covenants
relating to the consolidated financial condition of the Company and its
subsidiaries, including covenants relating to their net worth, the ratio of
their earnings to their fixed charges, the ratio of their earnings to their
interest expense, the ratio of their current assets to their current
liabilities, and the ratio of their indebtedness to their total
capitalization. At December 29, 1995, the Company was in compliance with
all financial covenants.
The New Credit Facility specifies a number of events of default
including, among others, the failure to make timely payments of principal,
fees, and interest, the failure to perform the covenants contained therein,
the failure of representations and warranties to be true, the occurrence of
a "change of control" (as defined in the New Credit Facility, to include,
among other things, the ownership by any person or group of more than 25%
(or, in case of The TCW Group, Inc. and its affiliates, 50%) of the total
voting securities of the Company), and certain impairments of the security
for the New Credit Facility. The New Credit Facility also contains a
cross-default to other indebtedness of the Company aggregating more than
$2,000,000 and certain customary bankruptcy, insolvency and similar
defaults. Upon the occurrence of an event of default under the New Credit
Facility, at least three of the lenders holding at least 60% in amount of
the principal indebtedness outstanding under the New Credit Facility may
declare all amounts thereunder immediately due and payable, except that
such amounts automatically become immediately due and payable in the event
of certain bankruptcy, insolvency or similar defaults.
The New Credit Facility generally prohibits the Company from prepaying
in excess of $50.0 million of the Senior Notes whether the prepayment would
result from the redemption of the Senior Notes, an offer by the Company to
purchase the Senior Notes following a change of control or a sale or other
disposition of assets, or the acceleration of the due date for payment of
the Senior Notes.
Capitalized Lease Obligations:
During the fourth quarter of 1995, the operating lease agreement
relating to the Company's Beverly, West Virginia, plant and related
equipment was amended to allow for a purchase option of $1 until 2018. As
a result, the Company recorded the present value of the remaining future
minimum lease payments of $19.5 million as a capitalized lease asset and
related capitalized lease obligation. In addition, certain related lease
assets of $9.7 million were reclassified from other long-term assets to
property, plant and equipment.
Mortgages Payable:
Mortgages payable represent primarily various Industrial Revenue Bond
(IRB) notes. In June 1994, the Company entered into an industrial revenue
financing agreement in the amount of $7,000,000 with Mississippi Business
Finance Corp., a public corporation in Mississippi, to finance the
expansion of the Bruce Hardwood Floors plant in Port Gibson, Mississippi.
The funds required were provided by a bank term loan which matures on June
28, 2001. Collateral for the loan is the plant and equipment at Port
Gibson, Mississippi. The IRB notes vary in interest rates. At December
29, 1995, the interest rates ranged up to 7.88%, and at December 30, 1994,
the rates ranged up to 9.0%.
These notes are payable through 2001 and are collateralized by the
related underlying assets.
Maturities for all long-term debt are as follows:
(in thousands)
1996 $ 3,210
1997 2,452
1998 2,410
1999 2,450
2000 5,005
Thereafter 170,727
----------
Total $ 186,254
==========
Note 3 - Income Taxes:
The components of the deferred tax liability and asset are as follows:
December 29, December 30,
1995 1994
------------------------------
(in thousands)
Deferred Tax Liability:
Property, plant and equipment $ 24,229 $ 22,511
Trademark 11,449 11,764
Other 7,250 8,527
------- -------
Total $ 42,928 $ 42,802
======= =======
Deferred Tax Asset:
Other $ 3,955 $ 3,322
------- -------
Total $ 3,955 $ 3,322
======= =======
The provision (benefit) for income taxes consists of the following:
Fiscal year Fiscal year Fiscal year
ended ended ended
December 29, December 30, December 31,
1995 1994 1993
----------------------------------------------
(in thousands)
Current:
Federal $ 12,006 $ 10,015 $ 168
State and local 1,689 651 -
------- ------- --------
$ 13,695 $ 10,666 $ 168
======= ======= ========
Deferred:
Federal $ 22 $ 1,926 $ 3,841
State and local 57 237 492
------- ------- --------
$ 79 $ 2,163 $ 4,333
------- ------- --------
Subtotal $ 13,774 $ 12,829 $ 4,501
======= ======= ========
Extraordinary benefit:
Federal $ - $ - $ (6,251)
State and local - - (768)
------- ------- -------
$ - $ - $ (7,019)
------- ------- --------
Total $ 13,774 $ 12,829 $ (2,518)
======= ======= ========
The effective tax rate for the periods ending December 29, 1995, December
30, 1994 and December 31, 1993 was 38.5%, 40.6%, and 38.5% of pre-tax
income, respectively. The factors causing the rate to vary from the U.S.
Federal Statutory rate are as follows:
Fiscal year Fiscal year Fiscal year
ended ended ended
December 29, December 30, December 31,
1995 1994 1993
------------------------------------------
(in thousands)
Computed (expected)
tax provision $ 12,522 $ 11,059 $ 4,097
Increase (decrease)
from:
State and local
taxes 1,155 1,359 503
Amortization of
goodwill 532 597 634
Foreign sales (292) - -
Other book to tax
differences, net (143) (186) (733)
------- ------- -------
Total $ 13,774 $ 12,829 $ 4,501
======= ======= =======
Note 4 - Operating Lease Commitments:
The Company rents certain real estate and equipment under leases
expiring at various dates to 2008. Several leases include options for
renewal or purchase and contain clauses for payment of real estate taxes
and insurance. In most cases, management expects that in the normal course
of business, leases will be renewed or replaced by other leases.
The following is a summary of minimum future rental payments required
under operating leases that have initial non-cancelable lease terms in
excess of one year:
(in thousands)
1996 $ 2,036
1997 1,711
1998 1,110
1999 485
2000 197
--------
Total $ 5,539
========
Rental expense for operating leases amounted to $8,335,000, $7,704,000
and $6,309,000 for the fiscal years ended December 29, 1995, December 30,
1994 and December 31, 1993, respectively.
Note 5 - Employee Benefit Plans:
Pension and Profit Sharing Plans:
The Company sponsors several defined benefit pension plans and is
required to contribute to several labor union-related defined contribution
plans. Total pension expense was $1,114,000, $991,000 and $967,000 for the
fiscal years ended December 29, 1995, December 30, 1994 and December 31,
1993, respectively, including $538,000, $419,000 and $481,000,
respectively, for defined benefit plans, which includes amortization of
prior service costs over the estimated average remaining service period of
active employees. The Company does not have any requirement to provide
life or health insurance coverage for retired employees.
The following table sets forth the defined benefit pension plans'
funded status at December 29, 1995, and December 30, 1994.
Fiscal Years Ended
---------------------------------
December 29, December 30,
1995 1994
------------ ------------
(in thousands)
Actuarial present value
of benefit obligation:
Vested $ 9,409 $ 9,011
Non-vested 463 426
-------- --------
Accumulated and projected
benefit obligation 9,872 9,437
Plan assets at fair value 9,129 8,276
-------- --------
Projected benefit
obligation in excess
of plan assets (743) (1,161)
Unrecognized prior service
costs 84 143
Unrecognized net loss from
past experience different
from that assumed and
effects of changes in
assumptions 1,492 1,684
Adjustment to recognize
minimum liability (1,435) (1,762)
-------- --------
Accrued pension expense $ (602) $ (1,096)
======== ========
Net periodic pension costs for defined benefit pension plans for the
fiscal years ended December 29, 1995, December 30, 1994, and December 31,
1993, include the following components:
Fiscal year Fiscal year Fiscal year
ended ended ended
December 29, December 30, December 31,
1995 1994 1993
------------------------------------------
(in thousands)
Service cost-benefits
earned during the
period $ 271 $ 267 $ 258
Interest cost on
projected benefit
obligation 779 735 696
Actual return on plan
assets (825) 106 (872)
Net amortization and
deferral 313 (689) 399
--------- --------- ---------
Net periodic pension
cost $ 538 $ 419 $ 481
========= ========= =========
A weighted average discount rate of 8.5% was used in 1995, 1994 and
1993 to determine the benefit obligations of the Company's defined benefit
pension plans. The plans do not provide for future compensation increases
in calculating benefit obligations as the benefits do not derive from
compensation levels but from length of service. The plans' assets are
invested in a diversified portfolio of common stocks and fixed income
securities. The expected long-term rate of return on plan assets was 8.0%
in 1995, 1994 and 1993.
The Company has a profit sharing plan for salaried employees, and a
supplemental profit sharing plan for certain salaried employees to which
contributions are made at the discretion of its Board of Directors as long
as the Company has met specified financial goals. The fiscal 1995, 1994
and 1993 contributions were $1,245,450, $1,255,385 and $500,000,
respectively.
Long-Term Incentive Plans:
In June 1993, the Company adopted the Triangle Pacific Corp. Long-Term
Incentive Compensation Plan, which authorized grants of various incentive
awards to all regular salaried full-time officers and key employees of the
Company. There are 1,000,000 shares of common stock reserved for this
plan. In February and March 1994, stock options were granted for 551,300
shares at 100% of fair market value at the date of grant. These options
expire in 10 years. Also granted in February 1994 were 28,200 stock bonus
shares and $425,517 in deferred cash bonuses. These awards vested 25% at
the date of grant and will vest 25% each year thereafter, with the vested
amount payable on the third anniversary of the date of grant.
In 1994, the Company established a performance-based cash incentive
plan for officers and other key employees to make annual bonus awards based
upon pre-established criteria which were approved by the Board of
Directors. The expense was $2,287,000 in 1995 and $1,780,000 in 1994. In
1993, the Company awarded $744,000 in cash bonuses to the same group of
officers and key employees under a discretionary bonus arrangement.
Stock Option Plan:
During 1992, in connection with the Company's restructuring, certain
members of management received options for 201,007 shares of common stock
pursuant to a Stock Option Plan which was adopted by the Board of Directors
of the Company. The management options are exercisable at a price of $2.99
per share. The exercisability of the management options is tied to the
achievement of certain levels of operating income. Twenty percent of the
management options will become exercisable in any fiscal year in which the
Company meets the annual target for such fiscal year.
For the years ended December 29, 1995, December 30, 1994, December 31,
1993, and January 1, 1993, twenty percent each year became exercisable. In
addition, if the Company fails to meet the annual target in any fiscal year
but meets the cumulative target in such fiscal year or any subsequent
fiscal year, the management options for such fiscal year and all prior
fiscal years will become exercisable if they had not previously become
exercisable.
Non-Employee Director Stock Option Plan:
In June 1993, the Company adopted a Non-Employee Director Stock Option
Plan for up to 50,000 shares of common stock. Options have been granted to
six non-employee directors for an aggregate of 30,000 shares, with option
prices at 100% of fair market value at the date of grant. These options
are currently exercisable and generally expire 10 years from the date of
grant.
Post-retirement and Post-employment Benefits:
The Company, as of December 29, 1995, does not provide post-retirement
medical benefits or any post-employment benefits other than those
previously discussed.
Note 6 - 1993 Recapitalization:
The Company filed in 1993 two registration statements with the
Securities and Exchange Commission and sold to the public 7,939,750 shares
of the Company's common stock and $160 million aggregate principal amount
of 10 1/2% Senior Notes due 2003 ("the Offerings"). The net proceeds of
the Offerings together with borrowings under a new $90 million bank credit
facility were used (i) to repay the entire unpaid balance under the
Company's previously existing senior debt financing agreements, redeem
certain previously outstanding debentures and pay related accrued interest,
for a total of approximately $227 million, and (ii) for working capital and
general corporate purposes. As a result of this repayment of debt, the
Company incurred an extraordinary loss of $11.3 million, net of tax, as a
result of the original issue discount on certain of the repaid notes as
well as the premium required to redeem the debentures.
On June 14, 1993, the Company's Board of Directors approved a
reclassification pursuant to which each share of Series A Common Stock was
changed and converted into .67 of a share of common stock. The transaction
became effective upon completion of the Offerings described above and has
been reflected retroactively in the accompanying consolidated financial
statements.
Note 7 - Accrued Liabilities:
Amounts included in accrued liabilities are as follows:
December 29, December 30,
1995 1994
------------------------------
(in thousands)
Payroll $ 5,827 $ 5,342
Pension and profit sharing 2,295 3,360
Taxes 3,224 3,974
Insurance 5,149 4,712
Interest 7,179 7,819
Other 4,927 4,232
-------- --------
Total $ 28,601 $ 29,439
======== ========
Note 8 - Supplementary Quarterly Financial Data (unaudited):
(In thousands, except per share amounts)
Net
Income
Net Gross Net Per
Quarters Sales Profit Income Share
- -------------------------------------------------------------------------
1995
First Quarter $ 107,192 $ 27,932 $ 4,534 $ 0.31
Second Quarter 116,609 30,807 6,461 0.44
Third Quarter 115,738 27,941 5,379 0.36
Fourth Quarter 119,329 29,840 5,631 0.38
1994
First Quarter $ 90,710 $ 22,083 $ 2,142 $ 0.15
Second Quarter 106,918 29,447 5,860 0.40
Third Quarter 104,236 28,176 5,217 0.35
Fourth Quarter 108,295 30,293 5,583 0.38
PART III
Item 10. Directors and Executive Officers of the Company
-----------------------------------------------
The section entitled "Election of Directors" appearing in the
definitive proxy statement of the Registrant for the annual meeting of
shareholders to be held on May 1, 1996 sets forth certain information
regarding the directors and is incorporated herein by reference. The
section entitled "Executive Compensation-Compliance with Section 16(a) of
the Exchange Act" appearing in the definitive proxy statement of the
Registrant for the annual meeting of shareholders to be held on May 1, 1996
sets forth certain information regarding reporting under Section 16 of the
Securities Exchange Act of 1934, as amended, and is incorporated herein by
reference. Certain information with respect to the executive officers of
the Registrant is set forth in Part I of this Form 10-K under the caption
"Executive Officers of the Company."
Item 11. Executive Compensation
----------------------
Information regarding the compensation of management is contained in
the definitive proxy statement of the Registrant for the annual meeting of
shareholders to be held on May 1, 1996, under the caption "Executive
Compensation" and, except for the report of the compensation committee of
the Board of Directors and the information contained under the caption
"Performance Graph," is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
Information regarding ownership of the Company's Common Stock is
contained in the definitive proxy statement of the Registrant for the
annual meeting of shareholders to be held on May 1, 1996, under the
captions "Security Ownership of Certain Beneficial Owners" and "Security
Ownership of Management" and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
None
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a)(1) Financial Statements
Included in Part II of this report.
- Report of independent public accountants
- Consolidated balance sheets as of December 29, 1995 and
December 30, 1994.
- Consolidated statements of operations for the fiscal
years ended December 29, 1995, December 30, 1994 and
December 31, 1993.
- Consolidated statements of changes in shareholders'
investment for the fiscal years ended December 29, 1995,
December 30, 1994 and December 31, 1993.
- Consolidated statements of cash flows for the fiscal
years ended December 29, 1995, December 30, 1994 and
December 31, 1993.
- Notes to consolidated financial statements.
(a)(2) Financial Statement Schedules
Included in Part IV of this report:
For the fiscal years ended December 29, 1995, December 30, 1994
and December 31, 1993.
- Schedule II - Valuation and qualifying accounts
and reserves.
Information required by other schedules called for under
Regulation S-X is either not applicable or is included in
the consolidated financial statements or notes thereto.
(a)(3) Exhibits
--------
The information required by this Item 14(a)(3) is set forth
in the Index to Exhibits in item 14(c) of this annual report on
form 10-K.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the fourth quarter
of the year ended December 29, 1995.
(c) Exhibits
--------
3.1 - Restated Certificate of Incorporation of the
Registrant (incorporated herein by reference to
Exhibit 3.1 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1993).
3.2 - Amended and Restated Bylaws of the Registrant
(incorporated herein by reference to Exhibit 3.2 to
the Registrant's Form 10-K for the fiscal year ended
December 31, 1993).
4.1 - Form of 10 1/2% Senior Notes due 2003 (incorporated
herein by reference to Exhibit 4.2 to the
Registrant's Form 10-K for the fiscal year ended
December 31,1993).
4.2 - Indenture governing 10 1/2% Senior Notes due 2003
(incorporated herein by reference to Exhibit 4.2 to
the Registrant's Form 10-K for the fiscal year ended
December 31, 1993).
4.3 - Credit Agreement dated as of August 4, 1993, as
amended, among the Registrant, the Lenders listed
therein and CitiCorp USA, Inc., as the Co-Agent for
the Lenders, and the Bank of Nova Scotia, as the
Agent for the Lenders (the "Credit Agreement")
(incorporated herein by reference to Exhibit 4.4 to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-64530)).
4.4 - Amendment No. 4 to the Credit Agreement dated as of
December 2, 1994.
4.5 - Amendment No. 6 to the Credit Agreement dated as of
December 21, 1995.
10.1 - Registration Rights Agreement, dated as of June 5,
1992 by and among the Registrant and the Persons
listed therein (incorporated herein by reference to
Exhibit 10.1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-50724)).
10.2 - Lenders' Equity Agreement dated as of June 5, 1992 by
and among the Registrant and the Banks and other
financial institutions listed herein (incorporated
herein by reference to Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-50724)).
10.3 - ESJ Exchange Agreement dated as of June 5, 1992 by
and among the Registrant, TPC Holding Corp. and the
ESJ Entities (incorporated herein by reference to
Exhibit 10.3 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-50724)).
10.4* - Management Equity Agreement dated as of June 5, 1992
by and among the Registrant and the individuals
listed therein, and including a form of the Triangle
Pacific Corp. Stock Option Plan (incorporated herein
by reference to Exhibit 10.4 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-50724)).
10.5* - Form of Amended and Restated Employment Agreement
dated as of March 8, 1995 between the Company and the
individuals named on Schedule 1 thereto.
10.6* - Form of Employment Agreement dated as of March 8,
1995 between the Company and the individuals named on
Schedule 1 thereto.
10.7* - Salaried Employees Profit Sharing Plan (as restated
January 1, 1993) of the Registrant
10.8* - Annual Cash Incentive Bonus System of the Registrant
for Officers and Managers.
10.9* - Form of Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10.12 to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-64530)).
10.10* - Form of Stock Option Agreement of the Registrant
(incorporated herein by reference to Exhibit 10.13 to
the Registrant's Registration Statement on From S-1
(Registration No. 33-64530)).
10.11 - Lease dated as of June 1, 1988 by and between West
Virginia Jobs and Development Corporation and
Registrant (incorporated herein by reference to
Exhibit 10.11 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-50724)).
10.12 - Amendment to lease effective as of April 14, 1989 by
and between West Virginia Jobs and Development
Corporation and the Registrant (incorporated herein
by reference to Exhibit 10.15 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-64530)).
10.13 - Second Amendment to lease effective as of November 1,
1991 by and between West Virginia Economic
Development Authority, as successor to West Virginia
Jobs and Development Corporation, and the Registrant
(incorporated herein by reference to Exhibit 10.16 to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-64530)).
10.14 - Third Amendment to lease effective as of March 10,
1993 by and between West Virginia Economic
Development Authority, as successor to West Virginia
Jobs and Development Corporation, and the Registrant
(incorporated herein by reference to Exhibit 10.17 to
the Registrant's Registration Statement on Forms S-1
(Registration No. 33-64530)).
10.15 - Fourth amendment to lease effective as of September 22,
1995 by and between West Virginia Economic Development
Authority, as successor to West Virginia Jobs and
Development Corporation, and the Registrant.
10.16* - Triangle Pacific Corp. 1993 Long-Term Incentive
Compensation Plan (incorporated herein by reference
to Exhibit 10.18 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-64530)).
10.17* - Triangle Pacific Corp. Nonemployee Director Stock
Option Plan (incorporated herein by reference to
Exhibit 10.19 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-64530)).
10.18 - Form of Indemnity Agreement between the Registrant
and each of its directors and executive officers
(incorporated herein by reference to Exhibit 10.20 to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-64530)).
10.19* - Supplemental Profit Sharing and Deferred Compensation
Plan of the Registrant.
11.1 - Statement re computation of per share earnings
23.1 - Consent of Arthur Andersen LLP
27.1 - Financial Data Schedule.
- --------------
* Management contract or compensatory plan or arrangement required to
be filed as an exhibit hereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereto duly
authorized.
TRIANGLE PACIFIC CORP.
By: /s/ Floyd F. Sherman
---------------------------
Floyd F. Sherman
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Floyd F. Sherman Chairman of the Board March 22, 1996
- ---------------------------- and Chief Executive Officer
Floyd F. Sherman (Principal Executive Officer)
/s/ M. Joseph McHugh Director and President March 22, 1996
- ----------------------------
M. Joseph McHugh
/s/ Robert J. Symon Executive Vice President March 22, 1996
- ---------------------------- Treasurer and Chief
Robert J. Symon Financial Officer
(Principal Financial & Accounting Officer)
/s/ B. William Bonnivier Director March 22, 1996
- ----------------------------
B. William Bonnivier
/s/ Charles M. Hansen, Jr. Director March 26, 1996
- ----------------------------
Charles M. Hansen, Jr.
/s/ David R. Henkel Director March 26, 1996
- ----------------------------
David R. Henkel
/s/ Jack L. McDonald Director March 26, 1996
- ----------------------------
Jack L. McDonald
/s/ Carson R. McKissick Director March 26, 1996
- ----------------------------
Carson R. McKissick
/s/ Karen Gordon Mills Director March 26, 1996
- ----------------------------
Karen Gordon Mills
SCHEDULE II
-----------
TRIANGLE PACIFIC CORP. AND SUBSIDIARIES
---------------------------------------
VALUATION AND QUALIFYING
------------------------
ACCOUNTS AND RESERVES
---------------------
(in thousands)
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
Balance at charged to Balance
beginning costs and at end of
Classifications of period expenses Deductions (1) period
- -----------------------------------------------------------------------
Fiscal Year ended
December 31, 1993:
Reserve for
doubtful accounts
and returns and
and allowances $ 5,098 $ 485 $ 2,260 $ 3,323
=================================================
Fiscal Year ended
December 30, 1994:
Reserve for
doubtful accounts
and returns and
and allowances $ 3,323 $ 884 $ 1,716 $ 2,491
=================================================
Fiscal Year ended
December 29, 1995:
Reserve for
doubtful accounts
and returns and
and allowances $ 2,491 $ 435 $ 338 $ 2,588
=================================================
(1) Write-offs of specific accounts, net of recoveries.
Exhibit 11.1
------------
TRIANGLE PACIFIC CORP.
COMPUTATION OF NET INCOME PER SHARE
Fiscal Years Ended
----------------------------------------------
December 29, December 30, December 31,
1995 1994 1993
------------ ------------ ------------
Net Income (loss) $ 22,005,000 $ 18,802,000 $ (4,104,000)
============ ============ ============
Shares outstanding
beginning of period 14,662,609 14,647,607 6,707,861
Weighted average number
of shares issued from
sale of common stock - - 3,006,035
Weighted average number
of shares issued from
exercise of stock options 567 12,182 -
----------- ------------ ------------
Weighted average number
of shares outstanding 14,663,176 14,659,789 9,713,896
Shares issuable from assumed
exercise of stock options,
reduced by the number of
shares which could have
been purchased with the
proceeds from exercise of
such options 151,884 - -
------------ ------------ ------------
Weighted average number
of shares outstanding as
adjusted 14,815,060 14,659,789 9,713,896
============ ============ ============
Primary income per common
and common equivalent
share $ 1.49 $ 1.28 $ (0.42)
============ ============ ============
Assuming full dilution:
Weighted average number
of shares outstanding 14,663,176 14,659,789 9,713,896
Shares issuable from
assumed exercise of
stock options reduced
by the number of shares
which could have been
purchased with the
proceeds from exercise
of such options 215,817 - -
----------- ----------- -----------
Weighted average number
of shares outstanding as
adjusted 14,878,993 14,659,789 9,713,896
============ ============ ============
Fully diluted income per
common and common
equivalent share $ 1.48 $ 1.28 $ (0.42)
============ ============ ============
Exhibit 23.1
------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K into the
Company's previously filed Registration Statement Files Nos. 33-69682,
33-69684 and 33-50724.
ARTHUR ANDERSEN LLP
Dallas, Texas
March , 199
This FOURTH LEASE AMENDMENT is made and effective this 22nd day of
September, 1995, by and between WEST VIRGINIA ECONOMIC DEVELOPMENT
AUTHORITY, a body created and established as a governmental instrumentality
of the State of West Virginia ("Landlord"), successor to West Virginia
Industry and Jobs Development Corporation, and TRIANGLE PACIFIC CORP., a
Delaware corporation, ("Tenant");
WHEREAS, Landlord and Tenant entered into an Agreement of Lease dated
June 1, 1988; and
WHEREAS, Landlord and Tenant entered into a Lease Amendment dated
April 14, 1989, a Second Lease Amendment dated November 1, 1991, and a
Third Lease Amendment dated March 10, 1993 which said Agreement of Lease as
so amended is sometimes hereinafter referred to as "the Lease"; and
WHEREAS, Landlord and Tenant wish to enter into a Fourth Amendment of
the Lease;
NOW, THEREFORE, for and in consideration of the covenants hereinafter
contained, the parties first mentioned above agree as follows:
1. Amendment to Paragraph 1. Paragraph 1 of the Lease which has a
paragraph heading of "Definitions" is amended by adding thereto
the following language:
"(x) "Stated Event" means the creation by Tenant of at least
eighty (80) new jobs at the Facility between May 17, 1995 and
December 31, 1996. In order for the Stated Event to occur,
Tenant must have a total payroll of at least four hundred and
sixty five (465) persons in full time positions at the Facility
by December 31, 1996"
2. Amendment to Paragraph 8. Paragraph 8 of the Lease which has a
paragraph heading of "Tenant"s Right to Extend Term of Lease' is
amended by adding thereto the following language:
"Notwithstanding the foregoing, upon the occurrence of the Stated
Event, Landlord agrees that Tenant may, at any time up to and
including the last day of the Phase I Equipment Term, extend the
initial terms for the Premises and all equipment phases until
midnight (local time) December 31, 2018. The extended terms
shall commence for each equipment phase and for the premises
immediately upon expiration of the respective initial terms. In
order to extend, Tenant shall give written notice of extension to
Landlord. Having so extended all four (4) lease terms, Tenant
shall make the following payments to Landlord:
(a) The rental during extension for the Premises shall be Five
Thousand Dollars ($5,000) payable on the first day of the
extended term and thereafter on or before January 1 of each
succeeding year of the extended term.
(b) At the election of Tenant, the rental for each extended
equipment term shall be either a lump sum payable on the
first day of the extended term or monthly rental payments
beginning on the first month of the extended term. If
Tenant elects to make a lump sum payment as to any extension
then the following amount shall be paid to Landlord on the
first day of the extended term:
Phase One Extension $3,095,610.54
Phase Two Extension $1,356,888.63
Phase Three Extension $ 436,239.48
If Tenant elects monthly payments as to any extended equipment
term then the rental during the extension shall be monthly
payments equal to the applicable lump sum amount shown above
amortized over the extended term with interest equal to the Wall
Street Journal Prime Rate adjusted quarterly. At any time during
any extended equipment term as to which Tenant has elected
monthly payments, Tenant may without penalty pay all remaining
monthly payments in full in advance by remitting to Landlord the
then outstanding principal ("lump sum") amount."
3. Amendment. Paragraph 9 of the Lease which has a paragraph
heading of "Purchase Option" is amended by adding thereto the
following language:
"Notwithstanding the foregoing, upon the occurrence of the Stated
Event and assuming Tenant has exercised its right to extend all
applicable lease terms then, Tenant shall have the right to
purchase the Facility on December 31, 2018 upon payment to
Landlord of the sum of One Dollar ($1.00) which payment must be
made on or before January 7, 2019."
4. Other Provisions. All other provisions of the Lease shall remain
in full force and effect, except as specifically amended herein.
IN WITNESS WHEREOF, Landlord has caused its corporate name hereunto
subscribed and its corporate seal hereunto affixed and attested by its duly
authorized officers and, Tenant has caused its corporate name to be
hereunto subscribed and its corporate seal to be hereunto affixed and
attested by its duly authorized officers, all on the day and year first
written above.
WEST VIRGINIA ECONOMIC
DEVELOPMENT AUTHORITY
By: /s/ David A. Warner
Its: Executive Director
(SEAL)
ATTEST:
/s/ Randy L. Elchridge
Deputy Director
TRIANGLE PACIFIC CORP.
By: /s/ Robert J. Symon
Its: Executive VP & CFO
(SEAL)
ATTEST:
/s/ Darryl Marchand
Secretary
STATE OF WEST VIRGINIA,
COUNTY OF KANAWHA, TO-WIT:
The foregoing Fourth Lease Amendment was acknowledged before me
this 22nd day of September, 1995, by David A. Warner, the Executive
Director, of West Virginia Economic Development Authority, a governmental
authority, on behalf of the authority.
My commission expires: January 20, 1998.
/S/ Beverly S. Dolin
(SEAL) Notary Public
STATE OF TEXAS,
COUNTY OF DALLAS, TO-WIT:
The foregoing Fourth Lease Amendment was acknowledged before me
this 30th day of September, 1995, by Robert J. Symon, the Executive VP -
CFO, of Triangle Pacific Corp., on behalf of the corporation.
My commission expires: October 7, 1999
/s/ Denice D. Knutson
(SEAL) Notary Public
[CONFORMED COPY]
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT, dated as of December 21, 1995
(this "Amendment"), to the Existing Credit Agreement (as defined below) is
entered into by and among TRIANGLE PACIFIC CORP., a Delaware corporation (the
"Borrower"), the various financial institutions parties hereto (collectively,
the "Lenders"), BANK OF AMERICA NT&SA as co-agent (the "Co-Agent") for the
Lenders, and THE BANK OF NOVA SCOTIA as the agent (the "Agent") for the
Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Agent have heretofore entered
into that certain Credit Agreement, dated as of August 4, 1993 (together with
all Exhibits, Schedules and Attachments thereto, in each case as amended or
otherwise modified prior to the date hereof, being collectively referred to
herein as the "Existing Credit Agreement");
WHEREAS, the Borrower has requested the Lenders and the Agent to amend
the Existing Credit Agreement in certain respects as set forth below; and
WHEREAS, the Lenders and the Agent are willing, on the terms and
conditions set forth below, to amend the Existing Credit Agreement in certain
respects as provided herein below (the Existing Credit Agreement, as amended
pursuant to the terms of this Amendment, being referred to as the "Credit
Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Borrower, the Lenders and the Agent hereby
agree as follows:
I
DEFINITIONS
.1. Certain Definitions. The following terms (whether or not underscored)
when used in this Amendment, including its preamble and recitals, shall,
except where the context otherwise requires, have the following meanings (such
meanings to be equally applicable to the singular and plural form thereof):
"Affirmation and Consent" means the affirmation and consent executed and
delivered pursuant to Subpart 3.1.4, substantially in the form of Annex III
hereto.
"Agent" is defined in the preamble.
"Amendment" is defined in the preamble.
"Borrower" is defined in the preamble.
"Credit Agreement" is defined in the third recital.
"Existing Credit Agreement" is defined in the first recital.
"Lenders" is defined in the preamble.
"Sixth Amendment" is defined in Subpart 3.1.
"Sixth Amendment Effective Date" is defined in Subpart 3.1.
.2. Other Definitions. Terms for which meanings are provided in the Existing
Credit Agreement are, unless otherwise defined herein or the context otherwise
requires, used in this Amendment with such meanings provided therein.
II
AMENDMENTS TO THE
EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Sixth Amendment
Effective Date, and in reliance upon the representations and warranties made
herein and (if any) in each other agreement furnished to the Agent pursuant to
the terms hereof or in connection herewith, the parties hereto hereby agree
that the Existing Credit Agreement is hereby amended in accordance with this
Part II. Except as expressly so amended or modified by this Amendment, the
Existing Credit Agreement and each other Loan Document shall continue in full
force and effect in accordance with their respective terms.
.1. Amendment to Preamble. The preamble contained in the Existing Credit
Agreement is hereby amended in its entirety to read as follows:
THIS CREDIT AGREEMENT, dated as of August 4, 1993, among TRIANGLE
PACIFIC CORP., a Delaware corporation (the "Borrower"), the various
financial institutions as are or may become parties hereto
(collectively, the "Lenders"), BANK OF AMERICA NT&SA, as co-agent
(in such capacity, the "Co-Agent") for the Lenders, and THE BANK OF
NOVA SCOTIA ("Scotiabank"), as the agent (in such capacity, the
"Agent") for the Lenders,
.2. Amendments to Article I ("DEFINITIONS AND ACCOUNTING TERMS"). Article I
of the Existing Credit Agreement is hereby amended in accordance with Subparts
2.2.1 and 2.2.2.
1. Section 1.1 ("Defined Terms") of the Existing Credit Agreement is hereby
amended by inserting the following definitions in the appropriate alphabetical
order:
"Base Capital Expenditures" is defined in Section 7.2.7.
"Base Rate Margin" means, with respect to any Revolving Loan or
Swing Line Loan made or maintained as a Base Rate Loan, a per annum
rate based on reference to the Leverage Ratio and Interest Coverage
Ratio, in each case as indicated in the Compliance Certificate most
recently delivered pursuant to clause (d) of Section 7.7.1, equal
to:
(a) 0.00% per annum, if the Leverage Ratio is less than 0.50:1 and
the Interest Coverage Ratio is greater than 4.00:1;
(b) 0.125% per annum, if the Leverage Ratio is less than 0.55:1 and
the Interest Coverage Ratio is greater than 3.50:1 and the
foregoing clause (a) does not apply;
(c) 0.375% per annum, if the Leverage Ratio is less than 0.60:1 and
the Interest Coverage Ratio is greater than 3.00:1 and the
foregoing clauses (a) and (b) do not apply;
(d) 0.75% per annum, if the Leverage Ratio is less than 0.65:1 and
the Interest Coverage Ratio is greater than 2.75:1 and the
foregoing clauses (a), (b) and (c) do not apply;
(e) 0.875% per annum, if the Leverage Ratio is less than 0.71 and
the Interest Coverage Ratio is greater than 2.50:1 and the
foregoing clauses (a), (b), (c) and (d) do not apply; and
(f) 1.375% per annum, if the Leverage Ratio is 0.71 or greater and
the Interest Coverage Ratio is 2.50:1 or less.
The Base Rate Margin shall only be increased or decreased from the then
existing Base Rate Margin if each of the Interest Coverage Ratio and
Leverage Ratio (as reflected in the most recently delivered Compliance
Certificate) is contained within the ranges set forth in the same
clause (a), (b), (c), (d), (e) or (f) above; provided, that, in the event
the Borrower fails to deliver a Compliance Certificate within 45 days
after the end of any Fiscal Quarter as required pursuant to clause (d) of
Section 7.1.1, the Base Rate Margin from and including the 46th day after
the end of such Fiscal Quarter to but not including the date the Borrower
delivers to the Agent a Compliance Certificate shall conclusively be
equal to 1.375% per annum.
"Carry Forward Capital Expenditures" is defined in Section 7.2.7.
"Co-Agent" is defined in the preamble.
"Deutsche Mark" and "DM" mean the lawful currency of Germany.
"Dollar Equivalent" means, (i) with respect to Dollars or an amount
denominated in Dollars, such amount, and (ii) with respect to any
monetary amount of a Letter of Credit denominated in a currency
other than Dollars, at any time for the determination thereof, the
amount of Dollars obtained by converting such foreign currency
involved in such computation into Dollars at the spot rate for the
purchase of Dollars with the applicable foreign currency as quoted
by the Issuer of such Letter of Credit at approximately 11:00 a.m.
(New York City time) on the date of determination thereof specified
herein.
"Excepted Capital Expenditures" means, with respect to determining
compliance with clause (c) of Section 7.2.4 for Fiscal Year 1996,
Base Capital Expenditures actually made during such Fiscal Year
pursuant to Section 7.2.7 in an amount not to exceed $5,000,000.
"Permitted Capital Expenditures" is defined in Section 7.2.7.
"Permitted Currency" means Dollars, Deutsche Marks and such other
currencies of major nations as shall be designated by the Borrower
and acceptable to the Agent (and, if different, the Issuer of the
applicable Letter of Credit to be issued in a denomination other
than Dollars).
"Sixth Amendment" means the Sixth Amendment to Credit Agreement,
dated as of December 21, 1995, among the Borrower, the Lenders
parties thereto and the Agent.
"Sixth Amendment Effective Date" is defined in Subpart 3.1 of the
Sixth Amendment.
2. Section 1.1 ("Defined Terms") of the Existing Credit Agreement is hereby
further amended as follows:
(a) The definition of "Borrowing Base Amount" is hereby amended in its
entirety to read as follows:
"Borrowing Base Amount" means, at any time, the sum (without
duplication) of
(a) the Net Asset Value of all Eligible Accounts at such
time as then most recently certified by the Borrower
to the Lenders in the most recently delivered
Borrowing Base Certificate;
plus
(b) the Net Asset Value of all Eligible Inventory
(excluding (i) work in process Inventory and (ii)
logs and lumber) at such time as then most recently
certified by the Borrower to the Lenders in the most
recently delivered Borrowing Base Certificate;
plus
(c) the Net Asset Value of all work in process Inventory
at such time as then most recently certified by the
Borrower to the Lenders in the most recently
delivered Borrowing Base Certificate;
plus
(d) subject to the proviso below, the Net Asset Value of
all logs and lumber at such time as then most
recently certified by the Borrower to the Lenders in
the most recently delivered Borrowing Base
Certificate;
provided, however, that at any time of determination of the
Borrowing Base Amount, the amount attributable to clause (d) above
shall not exceed 25% of the sum of the amounts attributable to
clauses (a), (b), (c) and (d) above.
(b) The definition of "Co-Agent" is hereby deleted in its entirety.
(c) The definition of "Commitment Fee Rate" is hereby amended in
its entirety to read as follows:
"Commitment Fee Rate" means, with respect to the commitment fee
set forth in Section 3.3.1, a per annum rate determined by
reference to the Leverage Ratio and Interest Coverage Ratio, in
each case as indicated in the Compliance Certificate most
recently delivered pursuant to clause (d) of Section 7.1.1,
equal to:
(a) 0.25% per annum, if the Leverage Ratio is less than
0.50:1 and the Interest Coverage Ratio is greater
than 4.00:1;
(b) 0.375% per annum, if the Leverage Ratio is less than
0.71:1 and the Interest Coverage Ratio is greater
than 2.50:1 and the foregoing clause (a) does not
apply; and
(c) 0.50% per annum, if the Leverage Ratio is 0.71:1 or
greater and the Interest Coverage Ratio is 2.50:1 or
less.
The Commitment Fee Rate shall only be increased or decreased from
the then existing Commitment Fee Rate if each of the Interest
Coverage Ratio and Leverage Ratio (as reflected in the most recently
delivered Compliance Certificate) is contained within the ranges set
forth in the same clause (a), (b) or (c) above; provided, that, in
the event the Borrower fails to deliver a Compliance Certificate
within 45 days after the end of any Fiscal Quarter as required
pursuant to clause (d) of Section 7.1.1, the Commitment Fee Rate
from and including the 46th day after the end of such Fiscal Quarter
to but not including the date the Borrower delivers to the Agent a
Compliance Certificate shall conclusively be equal to 0.50% per
annum.
(d) Clause (k) of the definition of "Eligible Accounts" is hereby
amended in its entirety to read as follows:
(k) with respect to any Account Debtor that the Borrower (or
such Subsidiary) is indebted, such Account shall
constitute an Eligible Account only to the extent of the
excess of such Account over the amount the Borrower (or
such Subsidiary) is indebted to such Account Debtor, or to
the extent that the Borrower (or such Subsidiary) and such
Account Debtor have entered into an agreement whereby the
Account Debtor is prohibited from exercising any right of
setoff with respect to such Account; provided, that this
clause (k) shall not apply to up to a maximum amount of
$300,000 of Accounts that otherwise would be excluded from
being Eligible Accounts as a result of this clause; and
(e) The definition of "Eligible Inventory" is hereby amended in its
entirety to read as follows:
"Eligible Inventory" means, with respect to the Borrower or any
Subsidiary of the Borrower that has executed and delivered a
Subsidiary Security Agreement and a Subsidiary Guaranty in
favor of the Agent for the benefit of the Lenders, at the time
of any determination thereof any Inventory arising in the
ordinary course of business and as to which each of the
following requirements has been fulfilled to the reasonable
satisfaction of the Agent:
(a) such Inventory is located in the United States at a
facility owned or leased by the Borrower or such
Subsidiary; provided, however, that (i) Inventory
with an aggregate fair market value in excess of
$300,000 and located at a facility leased on the
Effective Date by the Borrower or such Subsidiary
shall not constitute Eligible Inventory unless the
applicable landlord shall have executed and delivered
a waiver or subordination letter in form and
substance satisfactory to the Agent and its counsel
(a "Lessor's Waiver") as to such landlord's release
or subordination of any Lien (whether statutory or
otherwise) on or other rights and claims to all
Inventory located at such facility, and (ii)
Inventory located at any facility that is either
leased by the Borrower or such Subsidiary on the
Effective Date (but which lease is renewed or
extended after the Effective Date), or that is leased
by the Borrower or such Subsidiary after the
Effective Date, in each case shall only constitute
Eligible Inventory if a Lessor's Waiver has been
executed and delivered to the Borrower or such
Subsidiary by the lessor of such facility and,
promptly following any request by the Agent, the
Borrower or such Subsidiary has delivered, or caused
to be delivered, to the Agent, a true and complete
copy of each such Lessor's Waiver;
(b) the Borrower or such Subsidiary has full and
unqualified right to, and has, assigned and granted a
first priority perfected Lien in such Inventory to
the Agent, for its benefit and that of the Lenders,
as security for the Obligations;
(c) the Borrower or such Subsidiary owns such Inventory
free and clear of all Liens in favor of any Person
other than any Lien in favor of the Agent and the
Lenders granted pursuant to this Agreement or another
Loan Document or as otherwise permitted pursuant to
Section 7.2.3 of this Agreement; and
(d) none of such Inventory is obsolete, unsalable,
damaged or otherwise unfit for sale because of a
defect or damage to such Inventory or (except for
logs and lumber) has remained unsold in inventory for
over 180 days.
(f) The definition of "Expansion Capital Expenditures" is hereby deleted
in its entirety.
(g) The definition of "Fee Letter" is hereby amended in its entirety to
read as follows:
"Fee Letter" means the confidential fee letter, dated November
7, 1995, between the Borrower and the Agent.
(h) The definition of "Fixed Charge Coverage Ratio" is hereby amended in
its entirety to read as follows:
"Fixed Charge Coverage Ratio" means, as of the last day of any
Fiscal Quarter, the ratio, computed for the period of four
consecutive Fiscal Quarters, ending on the close of such Fiscal
Quarter of:
(a) EBITDA
to
(b) the sum of
(i) actual Capital Expenditures paid in cash during
such period less Excepted Capital Expenditures
made during such period,
plus
(ii) the amount of good faith cash taxes of the type
described in clause (c) of the definition of
EBITDA paid during such period,
plus
(iii) cash Interest Expense for such period,
plus
(iv) all regularly scheduled payments of principal in
respect of Indebtedness of the Borrower and its
Subsidiaries which, upon its incurrence, was
Funded Debt, in each case as paid during such
period,
plus
(v) dividends (if any) paid in cash during such
period,
plus
(vi) the aggregate amount of Investments made by the
Borrower and its Subsidiaries during such
period, but only to the extent that such amount,
when aggregated with the amount of all other
Investments made since the Sixth Amendment
Effective Date exceeds $25,000,000.
(i) The definition of "Interest Coverage Ratio" is hereby amended in its
entirety to read as follows:
"Interest Coverage Ratio" means, as of the last day of any
Fiscal Quarter, the ratio, computed for the period of four
consecutive Fiscal Quarters ending on the close of such Fiscal
Quarter of:
(a) EBITDA
to
(b) Interest Expense.
(j) The definition of "Interest Period" is hereby amended by deleting
the phrase "one, three or six months thereafter" appearing therein
and inserting in lieu thereof the following: "one, two, three or six
months thereafter".
(k) The definition of "Letter of Credit Commitment Amount" is hereby
amended in its entirety to read as follows:
"Letter of Credit Commitment Amount" means, on any date, a
maximum Dollar Equivalent amount of $25,000,000, as such
amount may be reduced from time to time pursuant to
Section 2.2.
(1) The definition of "Letter of Credit Outstandings" is hereby
amended in its entirety to read as follows:
"Letter of Credit Outstandings" means, on any date, an amount
equal to the sum of
(a) the then aggregate Dollar Equivalent amount which is
undrawn and available under all issued and
outstanding Letters of Credit
plus
(b) the then aggregate Dollar Equivalent amount of all
unpaid and outstanding Reimbursement Obligations.
(m) The definition of "Letter of Credit Rate" is hereby amended in its
entirety to read as follows:
"Letter of Credit Rate" means, with respect to any standby
Letter of Credit, a per annum rate based on reference to the
Leverage Ratio and Interest Coverage Ratio, in each case as
indicated in the Compliance Certificate most recently delivered
pursuant to clause (d) of Section 7.1.1, equal to:
(a) 0.875% per annum, if the Leverage Ratio is less than
0.50:1 and the Interest Coverage Ratio is greater
than 4.00:1;
(b) 1.125% per annum, if the Leverage Ratio is less than
0.55:1 and the Interest Coverage Ratio is greater
than 3.50:1 and the foregoing clause (a) does not
apply;
(c) 1.375% per annum, if the Leverage Ratio is less than
0.60:1 and the Interest Coverage Ratio is greater
than 3.00:1 and the foregoing clauses (a) and (b) do
not apply;
(d) 1.75% per annum, if the Leverage Ratio is less than
0.65:1 and the Interest Coverage Ratio is greater
than 2.75:1 and the foregoing clauses (a), (b) and
(c) do not apply;
(e) 1.875 per annum, if the Leverage Ratio is less than
0.71:1 and the Interest Coverage Ratio is greater
than 2.50:1 and the foregoing clauses (a), (b), (c)
and (d) do not apply; and
(f) 2.375% per annum, if the Leverage Ratio is 0.71:1 or
greater and the Interest Coverage Ratio is 2.50:1 or
less.
The Letter of Credit Rate shall only be increased or decreased from
the then existing Letter of Credit Rate if each of the Interest
Coverage Ratio and Leverage Ratio (as reflected in the most recently
delivered Compliance Certificate) is contained within the ranges set
forth in the same clause (a), (b), (c), (d), (e) or (f) above;
provided, that, in the event the Borrower fails to deliver a
Compliance Certificate within 45 days after the end of any Fiscal
Quarter as required pursuant to clause (d) of Section 7.1.1, the
Letter of Credit Rate from and including the 46th day after the end
of such Fiscal Quarter to but not including the date the Borrower
delivers to the Agent a Compliance Certificate shall conclusively be
equal to 2.375% per annum.
(n) The definition of "LIBO Rate Margin" is hereby amended in its
entirety to read as follows:
"LIBO Rate Margin" means, with respect to any LIBO Rate Loan, a
per annum rate based on reference to the Leverage Ratio and
Interest Coverage Ratio, in each case as indicated in the
Compliance Certificate most recently delivered pursuant to
clause (d) of Section 7.1.1, equal to:
(a) 0.875% per annum, if the Leverage Ratio is less than
0.50:1 and the Interest Coverage Ratio is greater
than 4.00:1;
(b) 1.125% per annum, if the Leverage Ratio is less than
0.55:1 and the Interest Coverage Ratio is greater
than 3.50:1 and the foregoing clause (a) does not
apply;
(c) 1.375% per annum, if the Leverage Ratio is less than
0.60:1 and the Interest Coverage Ratio is greater
than 3.00:1 and the foregoing clauses (a) and (b) do
not apply;
(d) 1.75% per annum, if the Leverage Ratio is less than
0.65:1 and the Interest Coverage Ratio is greater
than 2.75:1 and the foregoing clauses (a), (b) and
(c) do not apply;
(e) 1.875% per annum, if the Leverage Ratio is less than
0.71:1 and the Interest Coverage Ratio is greater
than 2.50:1 and the foregoing clauses (a), (b), (c)
and (d) do not apply; and
(f) 2.375% per annum, if the Leverage Ratio is 0.71:1 or
greater and the Interest Coverage Ratio is 2.50:1 or
less.
The LIBO Rate Margin shall only be increased or decreased from the
then existing LIBO Rate Margin if each of the Interest Coverage
Ratio and Leverage Ratio (as reflected in the most recently
delivered Compliance Certificate) is contained within the ranges set
forth in the same clause (a), (b), (c), (d), (e) or (f) above;
provided, that, in the event the Borrower fails to deliver a
Compliance Certificate within 45 days after the end of any Fiscal
Quarter as required pursuant to clause (d) of Section 7.1.1, the
LIBO Rate Margin from and including the 46th day after the end of
such Fiscal Quarter to but not including the date the Borrower
delivers to the Agent a Compliance Certificate shall conclusively be
equal to 2.375% per annum.
(o) The definition of "Maintenance Capital Expenditures" is hereby
deleted in its entirety.
(p) The second sentence of the definition of "Net Asset Sale Proceeds"
is hereby amended in its entirety to read as follows:
Notwithstanding anything to the contrary set forth above, Net Asset
Sale Proceeds shall be deemed not to include (a) an aggregate amount
of up to the first $10,000,000 of proceeds received by the Borrower
or any of its Subsidiaries from any sale, transfer, lease,
contribution or conveyance of such Person's assets pursuant to
clause (b) of Section 7.2.11 to the extent any of such proceeds are
used, at the election of the Borrower, to repurchase or otherwise
redeem a like principal amount outstanding under the Senior Notes,
and (b) an aggregate amount of up to the first $5,000,000 of
proceeds received by the Borrower or any of its Subsidiaries from
any sale, transfer, lease, contribution or conveyance of any assets
of any Permitted Foreign Subsidiary pursuant to clause (b) of
Section 7.2.11.
(q) The definition of "Net Asset Value" is hereby amended in its
entirety to read as follows:
"Net Asset Value" means, at any time of any determination
thereof
(a) with respect to Accounts of the Borrower or any
Subsidiary of the Borrower that has executed and
delivered a Subsidiary Security Agreement and a
Subsidiary Guaranty in favor of the Agent for the
benefit of the Lenders, an amount equal to 85% of the
book value of all Eligible Accounts as reflected on
the books of the Borrower or such Subsidiary in
accordance with GAAP, net of all credits, discounts
and allowances;
(b) with respect to Inventory (excluding (i) work in
process Inventory and (ii) logs and lumber) of the
Borrower or any Subsidiary of the Borrower that has
executed and delivered a Subsidiary Security
Agreement and a Subsidiary Guaranty in favor of the
Agent for the benefit of the Lenders, an amount equal
to 60% of the lesser of the market value and the cost
of goods (determined on a first-in, first-out basis)
of all Eligible Inventory as reflected on the books
of the Borrower or such Subsidiary as at such time,
valued in accordance with GAAP and net of book
reserves for obsolescence or similar matters;
(c) 25% of work in process Inventory (to the extent such
Inventory otherwise constitutes Eligible Inventory);
and
(d) an amount equal to 70% of the aggregate value of all
logs and lumber (to the extent such Inventory
otherwise constitutes Eligible Inventory).
(r) The definition of "Other Raw Material Inventory" is hereby deleted
in its entirety.
(s) The definition of "Other Rental Obligations" is hereby amended in
its entirety to read as follows:
"Other Rental Obligations" means all monetary obligations of
the Borrower or any of its Subsidiaries under any leasing or
similar arrangement which, in accordance with GAAP, would not
be classified as capitalized leases.
(t) The definition of "Revolving Loan Commitment Amount" is hereby
amended in its entirety to read as follows:
"Revolving Loan Commitment Amount" means, on any date,
$90,000,000, as such amount may be reduced from time to time
pursuant to Section 2.2.
(u) The definition of "Stated Amount" is hereby amended in its entirety
to read as follows:
"Stated Amount" of each Letter of Credit means, on any date,
the maximum Dollar Equivalent amount available to be drawn
thereunder on such date.
(v) The definition of "Stated Maturity Date" is hereby amended in its
entirety to read as follows:
"Stated Maturity Date" means December 21, 2000, the fifth
anniversary of the Sixth Amendment Effective Date.
(w) The definition of "Swing Line Loan Commitment Amount" is hereby
amended in its entirety to read as follows:
"Swing Line Loan Commitment Amount" means, on any date,
$5,000,000, as such amount may be reduced from time to time
pursuant to Section 2.2.
.3. Amendments to Article II ("COMMITMENTS, BORROWING AND ISSUANCE
PROCEDURES, NOTES AND LETTERS OF CREDIT"). Article II of the Existing Credit
Agreement is hereby amended in accordance with Subparts 2.3.1 through 2.3.5.
SUBPART 2.3.1. Clause (b) of Section 2.1 ("Commitments") of the Existing
Credit Agreement is hereby amended in its entirety to read as follows:
(b) the Issuer agrees that it will issue Letters of Credit in a
Permitted Currency pursuant to Section 2.1.3, and each other
Lender severally agrees that it will purchase participation
interests in such Letters of Credit pursuant to Section 2.4.7.
SUBPART 2.3.2. Clause (a) of Section 2.1.3 ("Letter of Credit
Commitment") of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:
(a) will issue one or more Letters of Credit denominated in a
Permitted Currency upon the request of the Borrower; and
SUBPART 2.3.3. Section 2.1.4 ("Issuer Not Permitted or Required to Issue
Letters of Credit") of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:
SECTION 2.1.4. Issuer Not Permitted or Required to Issue Letters
of Credit. The Issuer shall not be permitted or required to issue
any Letter of Credit if, after giving effect thereto,
(a) the aggregate Dollar Equivalent amount of all Letter of
Credit Outstandings would exceed the Letter of Credit
Commitment Amount; or
(b) the sum of the aggregate Dollar Equivalent amount of all
Letter of Credit Outstandings plus the aggregate unpaid
principal amount of all Loans then outstanding would
exceed the lesser of (i) the Revolving Loan Commitment
Amount or (ii) the then existing Borrowing Base Amount.
SUBPART 2.3.4. Section 2.2.1 ("Optional Reduction") of the Existing
Credit Agreement is hereby amended in its entirety to read as follows:
SECTION 2.2.1. Optional Reduction. The Borrower may, from time to
time on any Business Day occurring after the time of the initial
Credit Extension hereunder, voluntarily reduce the amount of either
the Revolving Loan Commitment Amount, the Swing Line Loan Commitment
Amount or the Letter of Credit Commitment Amount; provided, however,
that (i) all such reductions shall require at least three Business
Days' prior written irrevocable notice to the Agent and be
permanent, (ii) any partial reduction of (A) the Revolving Loan
Commitment Amount shall be in a minimum amount of $1,000,000 and in
an integral multiple of $1,000,000, (B) the Swing Line Loan
Commitment Amount shall be in a minimum amount of $100,000 and in an
integral multiple of $100,000, and (C) the Letter of Credit
Commitment Amount shall be in a minimum amount equal to the Dollar
Equivalent of $1,000,000 and in an integral multiple amount equal to
the Dollar Equivalent of $1,000,000, (iii) except as provided below,
(A) the Revolving Loan Commitment Amount may not be reduced to an
amount less than (x) the aggregate outstanding principal amount of
all Revolving Loans, Swing Line Loans and Letter of Credit
Outstandings, or (y) the then existing Letter of Credit Commitment
Amount, and (B) any reduction of the Revolving Loan Commitment
Amount which reduces the Revolving Loan Commitment Amount below the
then current Swing Line Loan Commitment Amount shall result in an
automatic and corresponding reduction of the Swing Line Loan
Commitment Amount to the amount of the Revolving Loan Commitment
Amount, as so reduced, without any further action on the part of
Scotiabank or otherwise, and (iv) except as provided below, the
Borrower may not reduce the Letter of Credit Commitment Amount to an
amount less than the then existing Letter of Credit Outstandings.
The Borrower may terminate the Commitments in whole if, at the time
of and as a condition of such termination, the Borrower shall have
repaid in full the aggregate outstanding principal amount of all
Loans and Reimbursement Obligations, together with all accrued
interest and fees thereon to the date of termination, and all
unexpired Letters of Credit shall have been returned to the Issuer
for cancellation.
SUBPART 2.3.5. Section 2.4 ("Issuance Procedures") of the Existing
Credit Agreement is hereby amended in its entirety to read as follows:
SECTION 2.4. Issuance Procedures. By delivering to the Agent and
the applicable Issuer an Issuance Request on or before 11:00 a.m.,
New York City time, the Borrower may request, from time to time
prior to the Letter of Credit Commitment Termination Date and on not
less than three nor more than five Business Days' notice, that such
Issuer issue an irrevocable commercial or standby letter of credit
denominated in a Permitted Currency in such form as may be requested
by the Borrower and approved by such Issuer (each a "Letter of
Credit"), in support of financial obligations of the Borrower or its
Subsidiaries incurred in the Borrower's or such Subsidiary's
ordinary course of business and which are described in such Issuance
Request. Upon receipt of an Issuance Request, the Agent shall
promptly notify the Lenders thereof. Each Letter of Credit shall by
its terms:
(a) be denominated in a Permitted Currency;
(b) be issued in a Stated Amount which does not exceed (or
would not exceed) the then Letter of Credit Availability;
and
(c) be stated to expire (or give the Issuer the right to give
notice which will cause such Letter of Credit to expire)
on a date (its "Stated Expiry Date") no later than the
earlier of one year from its date of issuance and the
Letter of Credit Commitment Termination Date.
So long as no Default has occurred and is continuing, by delivery to
the applicable Issuer and the Agent of an Issuance Request at least
three but not more than five Business Days prior to the Stated
Expiry Date of any Letter of Credit, the Borrower may request such
Issuer to extend the Stated Expiry Date of such Letter of Credit for
an additional period not to exceed the earlier of one year from its
date of extension and the Letter of Credit Commitment Termination
Date.
Each Issuer will make available the original of each Letter of
Credit which it issues in accordance with the Issuance Request
therefor to the beneficiary thereof and will notify the beneficiary
under any Letter of Credit of any extension of the Stated Expiry
Date thereof.
.4. Amendments to Article III ("REPAYMENTS, PREPAYMENTS, INTEREST AND FEES").
Article III of the Existing Credit Agreement is hereby amended in accordance
with Subparts 2.4.1 through 2.4.4.
1. Section 3.1.3 ("Mandatory Prepayments") of the Existing Credit Agreement
is hereby amended by inserting a new paragraph at the end of such Section,
which shall read as follows:
Notwithstanding any other provision of this Agreement to the contrary, if
there are any Letters of Credit denominated in a Permitted Currency other
than Dollars the Agent may periodically recompute (each such date
referred to as a "Recomputation Date") the Dollar Equivalent of such
Letters of Credit, and if pursuant to such recomputation the Agent
determines that (i) the sum of the aggregate principal amount of the
Revolving Loans and the Swing Line Loans together with all Letter of
Credit Outstandings exceeds the Revolving Loan Commitment Amount as then
in effect, (ii) the sum of the aggregate principal amount of the
Revolving Loans and the Swing Line Loans together with all Letter of
Credit Outstandings exceeds the Borrowing Base Amount as then in effect
or (iii) the aggregate amount of all Letter of Credit Outstandings
exceeds the Letter of Credit Commitment Amount as then in effect, then
the Agent shall so advise the Borrower, and the Borrower shall repay such
excess (together with accrued interest on the amount so repaid) within
two Business Days of receipt of such notice with the amount repaid to be
applied to repay Revolving Loans or Swing Line Loans (or both) (until
such Loans are repaid in full) and, if no Revolving Loans and Swing Line
Loans are then outstanding, the Borrower shall deposit the amount in
excess of the Letter of Credit Commitment Amount in a cash collateral
account maintained with the Agent to be held as cash collateral for the
Obligations until such time as the Dollar Equivalent of all Letter of
Credit Outstandings no longer exceeds the Letter of Credit Commitment
Amount then in effect.
2. Clauses (a) and (b) of Section 3.2.1 ("Rates") of the Existing Credit
Agreement are hereby amended in their entirety to read as follows:
(a) on that portion maintained from time to time as a Base Rate Loan,
equal to the sum of the Alternate Base Rate from time to time in
effect plus (i) for the period commencing on the Sixth Amendment
Effective Date and ending on March 31, 1996, a margin of 0.375% and
(ii) at all times thereafter, the applicable Base Rate Margin; and
(b) on that portion maintained as a LIBO Rate Loan, during each Interest
Period applicable thereto, equal to the sum of the LIBO Rate
(Reserve Adjusted) for such Interest Period as in effect on the
beginning of such Interest Period plus (i) for the period commencing
on the Sixth Amendment Effective Date and ending on March 31, 1996,
a margin of 1.375% and (ii) at all times thereafter, the applicable
LIBO Rate Margin as in effect on the beginning of such Interest
Period.
3. Section 3.3.1 ("Commitment Fee") of the Existing Credit Agreement is
hereby amended in its entirety to reads as follows:
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Agent for the account of each Lender, for the period (including any
portion thereof when its Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V)
commencing on the date on which such Lender's Commitment is
allocated by the Agent to, and accepted by, such Lender and
continuing through the final Revolving Loan Commitment Termination
Date, a commitment fee at the rate of the applicable Commitment Fee
Rate on such Lender's Percentage of the sum of the average daily
unused portion of the Revolving Loan Commitment Amount; provided,
however, that for the period commencing on the Sixth Amendment
Effective Date and ending on March 31, 1996, the applicable
Commitment Fee Rate shall be deemed to be equal to 0.375%. Such
commitment fees shall be payable by the Borrower in arrears on each
Quarterly Payment Date, commencing with the first such day following
the Closing Date and on the Revolving Loan Commitment Termination
Date. The making of Swing Line Loans by Scotiabank shall constitute
usage of the Revolving Loan Commitment with respect to Scotiabank
only and the commitment fees to be paid by the Borrower to the
Lenders shall be calculated and paid accordingly.
4. Section 3.3.3 ("Letter of Credit Face Amount Fee") of the Existing Credit
Agreement is hereby amended in its entirety to read as follows:
SECTION 3.3.3 Letter of Credit Face Amount Fee. The Borrower
agrees to pay to the Agent, for the account of the Lenders, a fee
for each Letter of Credit for the period from and including the date
of the issuance of such Letter of Credit to (but not including) the
date upon which such Letter of Credit expires, in an amount equal to
(a) in the case of each commercial Letter of Credit, 0.75% per annum
of the Stated Amount of such commercial Letter of Credit and (b) in
the case of each standby Letter of Credit, the applicable Letter of
Credit Rate multiplied by the Stated Amount of such standby Letter
of Credit. Such fees shall be payable by the Borrower in arrears on
each Quarterly Payment Date, and on the Revolving Loan Commitment
Termination Date for any period then ending for which such fee shall
not theretofore have been paid, commencing on the first such date
after the issuance of such Letter of Credit.
.5. Amendment to Article VI ("REPRESENTATIONS AND WARRANTIES"). Section 6.6
("No Material Adverse Change") of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
SECTION 6.6 No Material Adverse Change. Since December 31, 1992,
there has been no material adverse change in the financial
condition, operations, assets, business or properties of the
Borrower and its Subsidiaries, taken as a whole. Following the
Sixth Amendment Effective Date, there has been no material adverse
change in the financial condition, operations, assets, business or
properties of the Borrower and its Subsidiaries, taken as a whole,
since December 31, 1994.
.6. Amendments to Article VII ("COVENANTS"). Article VII of the Existing
Credit Agreement is hereby amended in accordance with Subparts 2.6.1 through
2.6.14.
1. Section 7.1.1 ("Financial Information, Reports, Notices") of the Existing
Credit Agreement is hereby amended as follows:
(a) clauses (a), (b) and (c) of such Section are hereby amended by
deleting the reference to "the Beltsville Divisions," appearing
therein;
(b) clause (h) of such Section is hereby amended by deleting the dollar
amount of "$200,000" appearing therein and inserting the amount of
"$500,000" in its place;
(c) clause (j) of such Section is hereby amended in its entirety to read
as follows:
(j) within fifteen Business Days following the last day of
each Fiscal Quarter, a Borrowing Base Certificate for the
preceding Fiscal Quarter that is calculated as of the last
day of such preceding Fiscal Quarter, together with
reports setting forth information with respect to
inventories and receivables for such Fiscal Quarter in
substantially the form of Exhibit B hereto;
(d) clause (k) of such Section is hereby amended in its entirety to
read as follows:
(k) within 45 days following the end of each Fiscal Quarter, a
list of all "other banks" described in clause (b) of
Section 4.1.2 of each Security Agreement that have not
delivered an agreement in the form of Exhibit A to such
Security Agreement, together with the average daily
balance in each account of the Borrower or any Subsidiary
maintained with such "other bank" during each month in the
previous Fiscal Quarter (provided, that no such list of
"other banks" shall be required to be delivered pursuant
to this clause (k) in the event that the aggregate amount
of all average daily balances in all such accounts is less
than $1,000,000);
2. Clause (b) of Section 7.1.6 ("Environmental Covenant") of the Existing
Credit Agreement is hereby amended by deleting the dollar amount of "$200,000"
appearing therein and inserting the amount of "$500,000" in its place.
4. Clause (d) of Section 7.2.2 ("Indebtedness") of the Existing Credit
Agreement is hereby amended in its entirety to read as follows:
(d) Indebtedness incurred in an aggregate principal amount not to
exceed $12,000,000 in any given Fiscal Year which is (i) in
respect of Capitalized Lease Liabilities incurred in connection
with a Permitted Business or (ii) incurred by the Borrower or
any of its Subsidiaries (A) for the purpose of financing the
construction of properties or fixed improvements or (B) in
respect of Purchase Money Obligations for property used in a
Permitted Business;
5. Section 7.2.2 ("Indebtedness") of the Existing Credit Agreement is hereby
further amended by (a) deleting the word "and" following the semi-colon
appearing at the end of clause (j) of such Section, (b) inserting the word
"and" following the semi-colon appearing at the end of clause (k) of such
Section and (c) inserting a new clause (l) to such Section immediately prior
to the proviso appearing at the end of such Section which shall read as
follows:
(l) Indebtedness of Permitted Foreign Subsidiaries to Persons other
than the Borrower in an aggregate amount not to exceed
$1,000,000;
7. Section 7.2.4 ("Financial Condition") of the Existing Credit Agreement is
hereby amended in its entirety to read as follows:
SECTION 7.2.4. Financial Condition. The Borrower will not permit:
(a) the Interest Coverage Ratio as of the last day of any
Fiscal Quarter during each Fiscal Year set forth below to
be less than the ratio set forth opposite such Fiscal
Year:
Interest
Fiscal Year Coverage Ratio
1995 2.75:1
1996 2.75:1
1997 3.00:1
1998 3.50:1
1999 3.75:1
2000 3.75:1;
(b) the ratio of Funded Debt (excluding Contingent Liabilities
relating to such Debt) to EBITDA, as of the last day of
any Fiscal Quarter during each Fiscal Year set forth below
to be greater than the ratio set forth opposite such
Fiscal Year:
Fiscal Year Ratio
1995 3.25:1
1996 3.00:1
1997 2.75:1
1998 2.50:1
1999 2.50:1
2000 2.50:1;
(c) the Fixed Charge Coverage Ratio as of the last day of any
Fiscal Quarter during each Fiscal Year set forth below to
be less than the ratio set forth opposite such Fiscal
Year:
Fixed Charge
Fiscal Year Coverage Ratio
1995 1.00:1
1996 1.00:1
1997 1.05:1
1998 1.05:1
1999 1.10:1
2000 1.10:1;
(d) the Current Ratio as of the last day of any Fiscal Quarter
to be less than 1.25:1; and
(e) its Net Worth at any time during any Fiscal Year set forth
below to be less than the amount set forth opposite such
Fiscal Year:
Fiscal Year Minimum Net Worth
1995 $115,000,000
1996 $120,000,000
1997 $140,000,000
1998 $150,000,000
1999 and each $150,000,000, plus
Fiscal Year thereafter an amount equal to 25%
of Net Income for such
Fiscal Year as of the
date of determination
thereof.
8. Clause (f) of Section 7.2.5 ("Investments") of the Existing Credit
Agreement is hereby amended in its entirety to read as follows:
(f) other Investments in an aggregate amount not to exceed the sum
of
(i) $25,000,000,
plus
(ii) the amount of Permitted Capital Expenditures permitted to
be made at such time (less the amount of Capital
Expenditures actually made during such applicable period)
pursuant to Section 7.2.7;
provided, that, in any event, at no time shall the aggregate amount of
Investments permitted pursuant to this clause (f) exceed $50,000,000; and
9. Clause (g) of Section 7.2.5 ("Investments") of the Existing Credit
Agreement is hereby amended by (a) deleting the dollar amount of "$5,000,000"
appearing therein and inserting the amount of "$10,000,000" in its place and
(b) deleting the parenthetical appearing at the end thereof which reads
"(calculated without giving any effect to reduction in such Investment by
reason of losses of such Subsidiaries)".
10. Clause (i) of Section 7.2.5 of the Existing Credit Agreement is hereby
amended in its entirety to read as follows:
(i) no Investment otherwise permitted by clause (e) or (f) shall be
permitted to be made if, immediately before or after giving
effect thereto, any Default shall have occurred and be
continuing.
11. Clause (a) of Section 7.2.6 ("Restricted Payments, etc.") of the Existing
Credit Agreement is hereby amended by adding a proviso at the end thereof
which shall read as follows:
provided, that, notwithstanding the foregoing, the Borrower may declare
and pay dividends and distributions in an aggregate annual amount equal
to
(i) $1,500,000, if and only if (after giving effect to such
dividend or distribution) the Borrower's Net Worth equals
or exceeds $150,000,000;
(ii) $2,500,000, if and only if (after giving effect to such
dividend or distribution) the Borrower's Net Worth equals
or exceeds $160,000,000; or
(iii) $3,500,000, if and only if (after giving effect to such
dividend or distribution) the Borrower's Net Worth equals
or exceeds $170,000,000;
12. Clause (b)(i) of Section 7.2.6 ("Restricted Payments, etc.") of the
Existing Credit Agreement is hereby amended in its entirety to read as
follows:
(i) make any payment or prepayment on, or redemption of, or purchase of,
or defeasance of, the Senior Notes (whether in respect of principal,
interest or premium) except (A) payments of interest on the Senior
Notes at the rates set forth in the Senior Note Indenture and (B)
payments in respect of the outstanding principal amount of the
Senior Notes (including any premiums thereon or in respect thereof)
in an aggregate amount not to exceed $50,000,000; or
13. Section 7.2.7 ("Capital Expenditures, etc.") of the Existing Credit
Agreement is hereby amended in its entirety to read as follows:
SECTION 7.2.7. Capital Expenditures, etc. The Borrower will
not, and will not permit any of its Subsidiaries to, make or commit
to make Capital Expenditures, except (subject to the second proviso
below) Capital Expenditures in an aggregate amount in any Fiscal
Year which do not aggregate in excess of the amount set forth below
opposite such Fiscal Year ("Base Capital Expenditures"):
Base Capital
Fiscal Year Expenditures
1995 $25,000,000
1996 $40,000,000
1997 $30,000,000
1998 $40,000,000
1999 $30,000,000
2000 $40,000,000;
provided, that for Fiscal Year 1995 only, the amount of Base Capital
Expenditures permitted to be made pursuant to this Section shall be
exclusive of lease liabilities capitalized during such Fiscal Year in
respect of the facility located at Beverly, West Virginia; provided,
further, that to the extent the amount of Base Capital Expenditures
permitted to be made in any Fiscal Year pursuant to this Section
(including the second proviso below) exceeds the aggregate amount of
Capital Expenditures actually made during such Fiscal Year, such excess
amount may be carried forward to (but only to) the next succeeding Fiscal
Year (any such amount to be certified by the Borrower to the Agent in the
Compliance Certificate delivered for the last Fiscal Quarter of such
Fiscal Year), and any such amount carried forward to a succeeding Fiscal
Year shall be deemed to be used only after the Borrower and its
Subsidiaries have fully used the amount of Base Capital Expenditures
permitted by this Section for such Fiscal Year without giving effect to
such carry-forward (any such Capital Expenditures being made as a result
of such carry-forward being referred to herein as "Carry Forward Capital
Expenditures"); provided, further, that, in any event, and
notwithstanding anything to the contrary set forth above, Capital
Expenditures (whether Base Capital Expenditures, Carry Forward Capital
Expenditures or Excepted Capital Expenditures) shall only be permitted to
be made to the extent (and only to the extent), and in such aggregate
amount (such aggregate amount being referred to herein as "Permitted
Capital Expenditures"), such that the Borrower would remain in compliance
with clause (c) of Section 7.2.4 after giving effect thereto.
14. Section 7.2.8 ("Rental Obligations") of the Existing Credit Agreement is
hereby amended in its entirety to read as follows:
SECTION 7.2.8. Rental Obligations. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into at any time any
arrangement which does not create a Capitalized Lease Liability and
which involves the leasing by the Borrower or any of its
Subsidiaries from any lessor of any real or personal property (or
any interest therein), except Other Rental Obligations which will
not require the payment of an aggregate amount of rentals by the
Borrower and its Subsidiaries in any Fiscal Year in excess of the
amount set forth below opposite such Fiscal Year (provided, that any
calculation made for purposes of this Section shall exclude any
amounts required to be expended for maintenance and repairs,
insurance, taxes, assessments, and other similar charges):
Aggregate Amount
Fiscal Year of Rentals
1996 $7,500,000
1997 $9,000,000
1998 $11,000,000
1999 $12,000,000
2000 $14,000,000.
15. Section 7.2.11 ("Asset Dispositions, etc.") of the Existing Credit
Agreement is hereby amended as follows:
(a) the word "or" appearing at the end of clause (c) of such Section is
hereby deleted;
(b) the period (".") appearing at the end of clause (d) of such Section
is hereby deleted, a semicolon (";") is inserted in its place and
the word "or" is inserted immediately following such semicolon; and
(c) a new clause (e) is added to such Section which shall read as
follows:
(e) in the case of any sale, transfer, lease, contribution or
conveyance by any Permitted Foreign Subsidiary to any
Persons that are not Affiliates of the Borrower or any of
its Subsidiaries, the fair market value of the assets so
sold, transferred, leased, contributed or conveyed does
not, at any time, in the aggregate exceed $5,000,000.
16. Section 7.2.16 ("No New Subsidiaries") of the Existing Credit Agreement
is hereby amended in its entirety to read as follows:
SECTION 7.2.16. No New Subsidiaries. The Borrower will not, and
will not permit any of its Subsidiaries to, form or otherwise
acquire (by way of Investments, merger or otherwise) any Subsidiary
following the Effective Date, unless
(a) in the case of any new Subsidiary incorporated, formed or
established under the laws of the U.S. or any subdivision
thereof, (i) the Borrower shall cause such new Subsidiary
to execute and deliver to the Agent, for the benefit of
each of the Lenders, the Issuer and the Agent, a guaranty
in respect of the Obligations, substantially in the form
of Exhibit K-1 hereto, and a security agreement
substantially in the form of Exhibit K-2 hereto, together
with such opinions, in form and substance and from counsel
satisfactory to the Agent, as the Agent may require, and
(ii) such new Subsidiary is prohibited (in such manner and
pursuant to such documentation and on such terms as may be
satisfactory to the Agent) from creating, incurring,
assuming, suffering to exist or otherwise becoming or
being liable in respect of any Indebtedness other than
Indebtedness in respect of the Loans, Letters of Credit
and other Obligations,
(b) in the case of any new Subsidiary which is a Permitted
Foreign Subsidiary, such formation or acquisition of such
Subsidiary is permitted hereunder and made in accordance
with the terms of this Agreement, including the provisions
of clause (g) of Section 7.2.5.
.7. Amendment to Article IX ("AGENT"). Article IX of the Existing Credit
Agreement is hereby amended by adding a new Section at the end of such Article
which shall read as follows:
SECTION 9.8. Co-Agents. None of the Lenders identified on the
signature pages of this Agreement as "Co-Agent" shall have any
right, power, obligation, liability, responsibility or duty under
this Agreement other than those applicable to all Lenders as such.
Without limiting the foregoing, none of the Lenders so identified as
a "Co-Agent" shall have or be deemed to have any fiduciary
relationship with any Lender. Each Lender acknowledges that it has
not relied, and will not rely, on any of the Lenders so identified
in deciding to enter into this Agreement or in taking or not taking
action hereunder.
.8. Amendment to Article X ("MISCELLANEOUS PROVISIONS"). Article X of the
Existing Credit Agreement is hereby amended in accordance with Subparts 2.8.1
through 2.8.3.
1. Section 10.11.1 ("Assignments") of the Existing Credit Agreement is
hereby amended by inserting a new paragraph at the end of such Section which
shall read as follows:
In the event that Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., Moody's Investors Service, Inc. or Thompson's
BankWatch (or InsuranceWatch Ratings Service, in the case of Lenders
that are insurance companies (or Best's Insurance Reports, if such
insurance company is not rated by InsuranceWatch Ratings Service))
shall, after the date that any Lender becomes a Lender, downgrade
the long-term certificate of deposit ratings of such Lender, and the
resulting ratings shall be below BBB-, Baa3 and C (or BB, in the
case of an insurance company not rated by InsuranceWatch Ratings
Service), then the Issuer shall have the right, but not the
obligation, upon notice to such Lender, to replace (or to request
the Borrower to use its reasonable efforts to replace) such Lender
with an Assignee Lender (in accordance with and subject to the
restrictions contained in this Section), and such affected Lender
hereby agrees to transfer and assign without recourse (in accordance
with and subject to the restrictions contained in this Section) all
of its interests, rights and obligations in respect of its
Commitments, Loans and other Obligations owing to it, together with
the obligations of such affected Lender hereunder, to such Assignee
Lender; provided, however, that (i) no such assignment shall
conflict with any law, rule and regulation or order of any
governmental authority and (ii) such Assignee Lender shall pay to
such affected Lender in immediately available funds on the date of
such assignment the principal of and interest accrued to the date of
payment on the Loans made by such Lender hereunder and all other
amounts accrued for such Lender's account or owed to it hereunder.
2. Section 10.13 ("Forum Selection and Consent to Jurisdiction") of the
Existing Credit Agreement is hereby amended by inserting between the second
sentence (ending with the words "IN CONNECTION WITH SUCH LITIGATION") and the
third sentence (beginning with the words "THE BORROWER FURTHER IRREVOCABLY
CONSENTS") appearing therein the following:
THE BORROWER HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEMS (THE
"PROCESS AGENT"), WITH AN OFFICE, AS OF THE SIXTH AMENDMENT EFFECTIVE
DATE, AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS ITS
AGENT TO RECEIVE, ON THE BORROWER'S BEHALF AND ON BEHALF OF THE
BORROWER'S PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND
ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING.
SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS
TO THE BORROWER IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE
ADDRESS, AND THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE
PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE
METHOD OF SERVICE,
3. Article X ("Miscellaneous Provisions") of the Existing Credit Agreement
is hereby further amended by adding a new Section at the end of such Article
which shall read as follows:
SECTION 10.15. Judgment Currency. The Obligations of the Borrower
and each other Obligor in respect of any sum due to any Lender, any
Issuer or the Agent hereunder, under the Notes or under or in
respect of any other Loan Document shall, notwithstanding any
judgment in a currency (the "Judgment Currency") other than the
currency in which such sum was originally denominated (the "Original
Currency"), be discharged only to the extent that on the Business
Day following receipt by such Lender, such Issuer or the Agent of
any sum adjudged to be so due in the Judgment Currency, such Lender,
such Issuer or the Agent, in accordance with normal banking
procedures, purchases the Original Currency with the Judgment
Currency. If the amount of Original Currency so purchased is less
than the sum originally due to such Lender, such Issuer or the
Agent, the Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender, such
Issuer or the Agent, as the case may be, against such loss, and if
the amount of Original Currency so purchased exceeds the sum
originally due to such Lender, such Issuer or the Agent, as the case
may be, such Lender, such Issuer or the Agent, as the case may be,
agrees to remit such excess to the Borrower.
.9. Global Amendment to Existing Credit Agreement and Loan Documents. In
addition to the amendments to the Existing Credit Agreement specifically set
forth above, the Credit Agreement and each other Loan Document (including each
of the exhibits to the Existing Credit Agreement) are hereby amended mutatis
mutandis to the extent necessary to give effect to the identification of Bank
of America NT&SA as "Co-Agent".
.10. Additional Conforming Amendments to Exhibits to Credit Agreement.
1. Exhibits C and E to the Existing Credit Agreement (Form of Borrowing
Request and Form of Continuation/Conversion Notice, respectively) are each
hereby amended by inserting the bracketed word two ("[two]") between the
options "[one]" and "[three]" appearing in the second paragraph of each such
Exhibit.
2. Exhibit F to the Existing Credit Agreement (Form of Borrowing Base
Certificate) is hereby amended in its entirety to read as set forth in Annex
IV hereto.
3. Exhibit G to the Existing Credit Agreement (Form of Compliance
Certificate) is hereby amended in its entirety to read as set forth in Annex V
hereto.
III
CONDITIONS TO EFFECTIVENESS
.1. Sixth Amendment Effective Date. This Amendment (and the amendments and
modifications contained herein) shall become effective, and shall thereafter
be referred to as the "Sixth Amendment", on the date (the "Sixth Amendment
Effective Date") when all of the conditions set forth in this Subpart 3.1 have
been satisfied.
1. Execution of Counterparts. The Agent shall have received counterparts of
this Amendment, duly executed and delivered on behalf of the Borrower, the
Agent and each of the Lenders.
2. Resolutions, etc. The Agent shall have received in form and substance
satisfactory to the Agent,
(a) a certificate, dated the Sixth Amendment Effective Date, of the
Borrower's Secretary or Assistant Secretary as to
(i) resolutions of the Borrower's Board of Directors then in
full force and effect authorizing the execution, delivery
and performance of this Amendment, the replacement Notes
and each other Loan Document executed or to be executed by
it in connection herewith; and
(ii) the incumbency and signatures of those officers of the
Borrower authorized to act with respect to this Amendment,
the replacement Notes and each other Loan Document
executed or to be executed by it in connection herewith,
upon which certificate each Lender may conclusively rely with respect to
the incumbency and signature of such Authorized Officers until it shall
have received a further certificate of the Secretary or Assistant
Secretary of the Borrower cancelling or amending such prior certificate;
(b) a certificate, dated the Sixth Amendment Effective Date, of the
Secretary or Assistant Secretary of each other Obligor as to
(i) resolutions of such Obligor's Board of Directors then in
full force and effect authorizing the execution, delivery
and performance of the Affirmation and Consent and each
other Loan Document executed or to be executed by it in
connection herewith; and
(ii) the incumbency and signatures of those officers of such
Obligor authorized to act with respect to the Affirmation
and Consent and each other Loan Document executed or to be
executed by it in connection herewith,
upon which certificate each Lender may conclusively rely with respect to
the incumbency and signature of such Authorized Officers until it shall
have received a further certificate of the Secretary or Assistant
Secretary of such Obligor cancelling or amending such prior certificate;
and
(c) such other documents (certified if requested) or certificates
as the Agent may reasonably request with respect to this
Amendment, the replacement Notes, the Affirmation and Consent,
any other Loan Document or any Organic Document or approval.
3. Delivery of Replacement Notes. The Agent shall have received, for the
account of each Lender, such Lender's replacement Notes, substantially in the
forms of Annex I and Annex II hereto, as applicable, each duly executed and
delivered by an Authorized Officer of the Borrower and in a maximum principal
amount equal to such Lender's Percentage (as of the Sixth Amendment Effective
Date) of the applicable Commitment Amount. Each replacement Revolving Note
and replacement Swing Line Note issued on the Sixth Amendment Effective Date
shall be issued in substitution and exchange for, and not in satisfaction or
payment of, the existing Revolving Note and the existing Swing Line Note
executed and delivered by the Borrower pursuant to the Existing Credit
Agreement, respectively, of each Lender, as applicable, and the Indebtedness
(together with the obligation to pay accrued interest thereon) originally
owing to such Lender and to be evidenced by such Lender's replacement Notes
delivered pursuant to this Amendment shall be (and the Borrower hereby
acknowledges and agrees that such Indebtedness is) a continuing Indebtedness,
and nothing herein contained shall be construed to release or terminate any
Lien or security interest given to secure such Indebtedness.
4. Affirmation and Consent. The Agent shall have received a duly executed
copy of the Affirmation and Consent to this Amendment, substantially in the
form of Annex III hereto and duly executed and delivered by each Obligor.
5. Process Agent Letter. The Agent shall have received with counterparts
for each Lender a letter from CT Corporation Systems, in form and substance
satisfactory to the Agent, dated the Sixth Amendment Effective Date, whereby
CT Corporation Systems acknowledges and accepts its appointment by the
Borrower under the Credit Agreement (after giving effect to the effectiveness
of this Amendment), as agent for service of process.
6. No Material Adverse Change. Since December 31, 1994, there has been no
material adverse change in the financial condition, operations, assets,
business or properties of the Borrower and its Subsidiaries, taken as a whole.
7. Closing Fees, Expenses, etc. The Agent shall have received for its own
account, or for the account of each Lender, as the case may be, all fees,
costs and expenses due and payable as of the Sixth Amendment Effective Date.
8. Opinions of Counsel. The Agent shall have received such opinions, each
dated the Sixth Amendment Effective Date, in form and substance and from
counsel satisfactory to the Agent, as the Agent may require.
9. Legal Details, etc. All documents executed or submitted pursuant hereto
shall be satisfactory in form and substance to the Agent and its counsel. The
Agent and its counsel shall have received all information and such counterpart
originals or such certified or other copies or such materials as the Agent or
its counsel may reasonably request, and all legal matters incident to the
transactions contemplated by this Amendment shall be satisfactory to the Agent
and its counsel.
IV
MISCELLANEOUS; REPRESENTATIONS
.1. Cross-References. References in this Amendment to any Part or Subpart
are, unless otherwise specified or otherwise required by the context, to such
Part or Subpart of this Amendment.
.2. Loan Document Pursuant to Existing Credit Agreement. This Amendment is a
Loan Document executed pursuant to the Existing Credit Agreement and shall be
construed, administered and applied in accordance with all of the terms and
provisions of the Existing Credit Agreement (and, following the Sixth
Amendment Effective Date, the Credit Agreement).
.3. Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
.4. Full Force and Effect; Limited Amendment. Except as expressly amended
hereby, all of the representations, warranties, terms, covenants, conditions
and other provisions of the Existing Credit Agreement and the other Loan
Documents shall remain unamended and unwaived and shall continue to be, and
shall remain, in full force and effect in accordance with their respective
terms. The amendments set forth herein shall be limited precisely as provided
for herein to the provisions expressly amended herein and shall not be deemed
to be an amendment to, waiver of, consent to or modification of any other term
or provision of the Existing Credit Agreement, any other Loan Document
referred to therein or herein or of any transaction or further or future
action on the part of the Borrower which would require the consent of the
Lenders under the Existing Credit Agreement or any of the Loan Documents.
.5. Payment of Fees and Expenses. The Borrower hereby agrees to pay and
reimburse the Agent for all of its reasonable fees and expenses incurred in
connection with the negotiation, preparation, execution and delivery of this
Amendment and related documents, including all reasonable fees and
disbursements of counsel to the Agent.
.6. Counterparts. This Amendment may be executed by the parties hereto in
several counterparts, each of which when executed and delivered shall be
deemed to be an original and all of which shall constitute together but one
and the same agreement.
.7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
.8. Compliance with Warranties, No Default, etc. Both before and after
giving effect to the occurrence of the Sixth Amendment Effective Date and the
amendments to the Existing Credit Agreement set forth above, the Borrower
represents and warrants to the Lenders that the following statements are true
and correct:
(a) the representations and warranties set forth in Article VI
(excluding, however, those contained in Section 6.7) of the
Existing Credit Agreement and the representations and
warranties set forth in Article III of each Security Agreement
and in Article III of the Subsidiary Guaranty and in each other
Loan Document are true and correct in all material respects
with the same effect as if then made (unless stated to relate
solely to an earlier date, in which case such representations
and warranties were true and correct as of such earlier date);
(b) except as disclosed by the Borrower to the Agent and the
Lenders pursuant to Section 6.7 of the Existing Credit
Agreement,
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be
pending or, to the knowledge of the Borrower,
threatened against the Borrower or any of its
Subsidiaries which could result in a Material Adverse
Effect (including with respect to this Amendment or
any other Loan Document delivered in connection
herewith); and
(ii) no development has occurred in any labor controversy,
litigation, arbitration or governmental investigation
or proceeding disclosed pursuant to Section 6.7 of
the Existing Credit Agreement which could result in a
Material Adverse Effect (including with respect to
this Amendment or any other Loan Document delivered
in connection herewith); and
(c) no Default shall have then occurred and be continuing.
.9. Additional Representations. In order to induce the Lenders and the
Agents to enter into this Amendment, the Borrower hereby additionally
represents and warrants as follows:
(a) the execution and delivery of this Amendment and the
performance by the Borrower and each of its Subsidiaries of
each of their respective obligations hereunder, under each
other Loan Document, under the Existing Credit Agreement as
amended hereby and, upon the occurrence of the Sixth Amendment
Effective Date, under the Credit Agreement are within such
Person's corporate powers, have been duly authorized by all
necessary corporate action, have received all necessary
governmental approvals (if any shall be required), and do not
(i) contravene such Person's Organic Documents, (ii) contravene
any contractual restriction, law or governmental regulation or
court decree or order binding on or affecting such Person or
(iii) result in, or require the creation or imposition of, any
Lien on any of such Person's properties (other than pursuant to
a Loan Document); and
(b) this Amendment, each other Loan Document, the Existing Credit
Agreement as amended hereby and, upon the occurrence of the
Sixth Amendment Effective Date, the Credit Agreement are the
legal, valid and binding obligations of the Borrower and each
of its Subsidiaries, as applicable, enforceable in accordance
with their respective terms (except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally and by
principles of equity).
.10. Adjusted Percentages. Each of the Lenders party hereto hereby
acknowledges and agrees that upon the occurrence of the Sixth Amendment
Effective Date, such Lender's Percentage for purposes of the Credit Agreement
shall be as set forth opposite its signature hereto, as such percentage may be
amended from time to time hereafter pursuant to Lender Assignment Agreement(s)
executed by such Lender and its Assignee Lender(s) and delivered pursuant to
Section 10.11 of the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
TRIANGLE PACIFIC CORP.
By: /s/ Robert Symon
Title: Executive Vice President,
Treasurer and CFO
Percentages
44.44444444% THE BANK OF NOVA SCOTIA,
Individually and as Agent
By: /s/ Amanda S. Norsworthy
Title: Assistant Agent
33.33333333% BANK OF AMERICA NT&SA, Individually
and as Co-Agent
By: /s/ Jody B. Schneider
Title: Vice President
22.22222222% COMERICA BANK - TEXAS
By: /s/ Reed Allton
Title: Vice President
(..continued)
-26-
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