UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
____________________________
FORM 10-Q
(mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- ---------
Commission file number 0-8777
-------
COLOR TILE, INC.
------------------
(Exact name of registrant as specified in its charter)
Delaware
75-1606185
- - - ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
515 Houston Street, Fort Worth, Texas 76102
-------------------------------------------
(Address of principal executive office)
(Zip Code)
(817)870-9400
- - - -------------
(Registrant`s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
All of the common stock of the registrant is held by Color Tile
Holdings, Inc., a Delaware corporation. The number of shares
outstanding of the registrant's common stock, $.01 par value, as
of November 1, 1994 was 101.
Exhibit Index is on Page 15
<PAGE>
COLOR TILE, INC.
Table of Contents
PART I - FINANCIAL INFORMATION
Page
----
Item 1 - Financial Statements 3
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition 12
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 15
<PAGE>
<TABLE><CAPTIONS>
COLOR TILE, INC.
Condensed Consolidated Balance Sheet
October 2, 1994 and January 2, 1994
(Amounts in Thousands, except share amounts)
(Unaudited)
ASSETS
October 2, 1994 January 2, 1994
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,977 $ 4,522
Accounts and notes
receivable,net of
allowance for bad debts of
$141 and $369 18,494 13,860
Inventories 90,860 83,552
Deferred income taxes 1,078 1,078
Other current assets 9,344 5,072
--------------- ---------------
Total Current Assets 121,753 108,084
--------------- ---------------
Property, plant and
equipment, net 119,258 119,993
Goodwill, net 264,810 269,824
Other intangible assets, net 35,448 40,696
Deferred financing costs, net 5,856 6,464
Deferred income taxes 13,078 13,078
Other assets 4,907 7,204
--------------- ---------------
Total Assets 565,110 565,343
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of
long-term debt $ 5,982 $ 5,790
Accounts payable 71,598 60,941
Employee compensation 5,968 4,867
Accrued interest 6,804 1,111
Customer deposits 11,692 6,008
Accrued expenses 18,583 24,995
--------------- ---------------
Total Current Liabilities 120,627 103,712
--------------- ---------------
Long-term debt 355,000 347,567
Other noncurrent liabilities 14,668 5,488
--------------- ---------------
Total Liabilities 490,295 456,767
--------------- ---------------
Commitments and Contingencies
(notes 3 and 7)
Redeemable preferred stock
($93,484 liquidation value
at October 2, 1994 89,951 86,838
Common Stockholder's Equity:
Common stock, $.01 par value,
1,000,000 shares authorized,
101 shares issued and outstanding 96,115 105,230
Accumulated deficit (111,251) (83,492)
---------------- ---------------
Total Common
Stockholder's Equity (15,136) 21,738
---------------- ---------------
Total Liabilities and
Stockholder's Equity $ 565,110 $ 565,343
================ ===============
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
<PAGE>
<TABLE><CAPTIONS>
COLOR TILE, INC.
Condensed Consolidated Statement of Operations
For the three months and nine months ended October 2, 1994 and
October 3, 1993
(Amounts in Thousands)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
October 2, October 3, October 2, October 3,
1994 1993 1994 1993
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Systemwide Sales $ 175,450 $ 138,183 $ 522,713 $ 409,993
=========== ========== =========== ==========
Net Sales $ 168,440 $ 135,287 $ 504,360 $ 401,563
Cost and expenses:
Cost of sales 98,488 74,430 293,604 218,631
Selling, general
and administrative 52,666 48,065 158,375 142,259
Depreciation
and amortization 7,360 5,979 21,341 18,034
Special Charges 29,600 29,600
---------- --------- ----------- ----------
Total costs
and expenses 188,114 128,474 502,920 378,924
Operating income
(loss) (19,674) 6,813 1,440 22,639
Loss on disposal of
a line of business (8,720) (2,500) (9,500)
Interest expense, net(8,916) (4,740) (26,189) (14,413)
---------- ---------- ----------- ----------
Loss before
income taxes (28,590) (6,647) (27,249) (1,274)
Provision for
income taxes 168 101 510 624
---------- ---------- ----------- ----------
Net Loss $ (28,758) $ (6,748) $ (27,759) $ (1,898)
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
<PAGE>
<TABLE><CAPTIONS>
COLOR TILE, INC.
Condensed Consolidated Statement of Common Stockholder's Equity
for the nine months ended October 2, 1994
(Amounts in Thousands, Except Share Amounts)
(Unaudited)
Common Stock Additional Accumulated Total
Shares Amount Paid-In Deficit Common
Capital Stockholder's
Equity
----- ------- ---------- ---------- -----------
Balance, January 2,
<C> <C> <C> <C> <C>
1994 101 105,230 (83,492) 21,738
Senior Cumulated
Preferred Stock
dividends, declared
and undeclared (2,169) (2,169)
Accretion of difference
between redemption
value and proceeds
of Senior Cumulative
Preferred Stock (60) (60)
Senior Increasing Rate
Preferred Stock dividends,
declared and undeclared (6,609) (6,609)
Accretion of difference
between redemption
value and proceeds
of Senior Increasing
Rate Preferred Stock (277) (277)
Net Loss (27,759) (27,759)
------- -------- ---------- ---------- --------
101 $ 0 $ 96,115 $(111,251) $(15,136)
The accompanying notes are an integral part of the condensed
consolidated finfinancial statemnts.
</TABLE>
<PAGE>
<TABLE><CAPITONS>
COLOR TILE, INC.
Condensed Consolidated Statement of Cash Flows
For the nine months ended October 2, 1994 and October 3, 1993
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
October 2, October 3,
1994 1993
------------- -----------
Cash flows from operating
activities:
<S> <C> <C>
Net loss $ (27,759) $ (1,898)
Adjustments to reconcile
to cash provided by
operating activities
Depreciation and amortization 21,949 19,155
Loss on disposal of a
line of business 2,500 8,651
Special charges 29,600
(Increase) decrease in
accounts and notes receivable (4,634) 1,156
Increase in inventories (9,407) (9,123)
Increase in other current assets (4,272) (1,565)
Increase in accounts payable
and accrued expenses 10,407 14,072
Increase in other assets
and liabilities (2,391) (715)
----------- -----------
Total adjustments 43,752 31,631
------------ -----------
Cash provided by operating activities 15,993 29,733
------------ -----------
Cash flows from investing activities:
Purchases of property,
plant and equipment (17,152) (9,357)
Other investing activities (3,008) (4,291)
------------ -----------
Cash used in investing activities (20,160) (13,648)
------------ -----------
Cash flows from financing activities:
Borrowings under revolving
line of credit 173,000 150,200
Payments on revolving line of credit (161,450) (149,600)
Payments on long-term debt (3,925) (11,185)
Dividends paid on Senior
Increasing Rate Preferred Stock (6,003) (5,500)
------------ -----------
Cash provided by (used in)
financing activities 1,622 (16,085)
------------ -----------
Decrease in cash and cash equivalents (2,545)
Cash at beginning of period 4,522
------------ ------------
Cash at end of period $ 1,977 $
============ ============
Supplemental disclosure of
cash flow information:
Cash paid during the year for:
Interest $ 19,888 $
Income taxes $ 547 $ 338
Non-cash investing and
financing activities:
Capital lease obligations
incurred for property,
plant and equipment $ 465 $ 174
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
<PAGE>
COLOR TILE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands)
(unaudited)
1. Basis of Presentation:
Color Tile, Inc. ("Color Tile" or the "Company") is a wholly
owned subsidiary of Color Tile Holdings, Inc. ("Holdings").
Reference is made to the summary of significant accounting
policies in the Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1994. These financial statements
and the related notes should be read in connection with such Form
10-K.
In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements reflect all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position of the Company
as of October 2, 1994 and January 2, 1994 and its results of
operations for the three months and nine months ended October 2,
1994 and October 3, 1993 and cash flows for the nine months ended
October 2, 1994 and October 3, 1993. Information included in the
Condensed Consolidated Balance Sheet as of January 2, 1994 has
been derived from the Company's audited financial statements in
its Annual Report on Form 10-K.
The results of operations for the three months and nine
months ended October 2, 1994 may not be indicative of the results
of operations for the full fiscal year ending January 1, 1995.
2. Systemwide Sales:
Systemwide sales include retail sales of all Company stores,
retail sales of all Franchise stores, sales of American Blind and
Wallpaper Factory ("ABWF") since the date of acquisition
(November 1, 1993) and sales of manufactured products to outside
third parties.
<PAGE>
3. Special Charges:
During the third quarter of fiscal 1994, the Company
recorded a write-down for the impairment of certain intangible assets
and property, plant, and equipment based upon discounted cash
flows, established provisions for store closures and franchise
conversions and provided for a write-down on an unfavorable
long-term inventory purchase commitment and certain discontinued
minor product categories. These write-downs and provisions,
which aggregated $29,600 and are reflected as Special Charges in
the Condensed Consolidated Statement of Operations, consist of:
Impairment of assets $ 15,700
Unfavorable purchase commitment 9,600
Store closures and conversions 4,300
--------
$ 29,600
========
The Company has a wood inventory purchase agreement which
requires the Company to purchase minimum levels of inventory
through May 1998. The impact of purchasing the minimum levels of
inventory, which exceed the Company's inventory needs under
prevailing market conditions has resulted, and is anticipated to
continue to result, in excess inventory levels.
Based on these circumstances, and other provisions in the
wood purchase agreement, the Company recorded a write-down for
inventory to be purchased under this contract of $7,500. The
Unfavorable Purchase Commitment component of the Special Charge
also includes a write-down of $2,100 for inventory in certain
minor product categories to be discontinued.
4. Loss on Disposal of a Line of a Business:
Effective October 3, 1993, the Company elected to dispose of
its wholly owned Canadian subsidiary, Factory Carpet, which
operated 37 retail stores in Canada (including 8 franchised
stores). On May 20, 1994 the Company sold the Canadian
operations. In connection with the disposition of Factory
<PAGE>
Carpet, the Company recorded a charge to continuing operations of
$8,651 in the third quarter of 1993 and an additional estimated
loss on sale of $2,500 in the second quarter of 1994. Factory
Carpet's operations have been eliminated from the individual line
items of the 1993 Condensed Consolidated Statement of Operations
and the pre-tax loss on this line of business has been included
on a one-line basis in the loss on disposal of a line of business
as follows:
Period Ended
October 2, 1993
-----------------
Three Months Nine Months
------------ -----------
Net Sales $ 6,439 $ 18,343
============ ===========
Pre-tax loss ( 69) (849)
Estimated Loss on Sale (8,651) (8,651)
------------ -----------
Loss from disposal of
a line of business $ (8,720) $ (9,500)
============ ===========
5. Inventories:
Inventories consists of the following:
October 2, 1994 January 2, 1994
--------------- ---------------
Finished Goods $ 88,630 $ 81,381
Work in Progress 722 656
Raw Materials 1,508 1,515
--------------- ---------------
$ 90,860 $ 83,552
=============== ===============
6. Long-Term Debt:
As of September 13, 1994, the Company entered into an
amendment to its Senior Credit Agreement. On October 4, 1994,
the Company borrowed an additional $29 million under the term
loan portion of the Senior Credit Agreement, the proceeds of
which were utilized to provide additional working capital for the
business.
<PAGE>
7. Commitments and Contingent Liabilities:
There are various claims and pending actions incident
to the business operations of the Company. In the opinion of
management, the Company's potential liability in all pending
actions and claims, in the aggregate, is not material to the
Company's consolidated financial condition, results of
operations, or liquidity.
8. Income Taxes:
As a result of an ownership change, within the meaning
of Section 382 of the Internal Revenue Code of 1986, as amended,
that occurred with respect to the Company on May 14, 1990, the
Company's ability to utilize approximately $52,347 of its net
operating loss carryforwards for tax purposes is limited to
$4,977 per year. No limitation currently is required by Section
382 with respect to $36,140 of the Company's net operating loss
carryforwards. The Company recognized reductions in federal tax
expense primarily from the utilization of deductible temporary
differences of $683 for the nine months ended October 3,
1993.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Amounts in Thousands)
Results of Operations
Three months ended October 2, 1994, compared to three months
ended October 3, 1993.
Net Sales. Net sales for the three months ended October 2,
1994 increased $33,153, or 24.5%, compared to the prior year
period. The increase in sales resulted primarily from (i) the
addition of $23,972 in sales of ABWF, (ii) a 4.0% increase in
retail sales of Company stores open over one year and (iii)
increased franchise fees and royalties and sales of merchandise
to franchisees.
At October 3, 1994, there were 826 retail stores in
operation selling the Company's products, 124 of which were
operated by franchisees.
Cost of Sales. Cost of sales increased by $24,058 for the
three months ended October 2, 1994 compared to the prior year
period. Cost of sales, as a percentage of Net Sales, increased
to 58.5% for the three months ended October 2, 1994 as compared
to 55.0% for the prior year period. This increase in cost of
sales resulted principally from a sales mix shift resulting from
(i) the addition of sales of ABWF, which operates on lower gross
margins than Color Tile, (ii) increased sales of carpet and
related installation services and (iii) increased sales of
product to franchisees.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses decreased as a percentage of
Net Sales to 31.3% for the three months ended October 2, 1994 as
compared to 35.5% for the prior year period due to the Company's
continued emphasis on control of operating costs and the addition
of ABWF, which operates on lower operating expenses, as a
percentage of Net Sales, than Color Tile. Such expenses increased
in aggregate dollar amount by $4,601 for the three months ended
October 2, 1994 over the prior year period primarily due to (i)
increases in commission-based payroll due to higher sales, (ii)
increased advertising expenditures and (iii) the addition of
ABWF's operating expenses.
Special Charges. During the third quarter of 1994, the
Company recorded a write-down for the impairment of certain
intangible asssets and property, plant and equipment based upon discounted
cash flows, established provisions for store closures and franchise
conversions and provided for a write-down on an unfavorable long-term
inventory purchase commitment and certain discontinued minor product
categories. As a result of these write-downs and provisions,
the Company recorded Special Charges in the amount of $29,600
during the third quarter of 1994. The Company does not believe
there will be any significant impact on liquidity or sources and
uses of capital resources as a result of these Special Charges.
(See Note 3 to Condensed Consolidated Financial Statements)
Interest Expense, Net. Interest expense, net, increased
$4,176 for the three months ended October 2, 1994 as compared to
the prior year period. The increased interest expense resulted
from the issuance of the $200,000 principal amount of 10-3/4% Senior
Notes (the "Senior Notes") during the fourth quarter of 1993 and
higher interest rates on borrowings under the Company's Senior
Credit Agreement.
Pre-Tax Loss. For the three months ended October 2, 1994,
pre-tax loss (after the $29,600 of special charges) was $28,590
as compared to a pre-tax loss of $6,647 for the prior year
period, which included a loss on disposal of a line of business
of $8,720. For the three months ended October 2, 1994, operating
income,excluding the special charges, would have been $9,926, an
increase of $3,113 over the prior period, which only partially
offset the $4,176 increase in interest expense.
Income Taxes. Income tax expense was $168 for the three
months ended October 2, 1994, representing an increase of $67
over the prior year period.
Net Loss. Net loss was $28,758 for the three months ended
October 2, 1994, after Special Charges of $29,600, as compared to
a net loss of $6,748 in the prior year period, which included
an $8,720 loss on disposal of a line of business.
<PAGE>
Nine months ended October 2, 1994, compared to nine months
ended October 3, 1993.
Net Sales. Net sales for the nine months ended October 2,
1994 increased $102,797, or 25.6%, compared to the prior year
period. The increase in sales resulted primarily from (i) the
addition of approximately $71,235 in sales of ABWF, (ii) a 5.0%
increase in retail sales of Company stores open over one year and
(iii) increased franchise fees and royalties and sales of
merchandise to franchisees.
Cost of Sales. Cost of sales increased by $74,973 for the
nine months ended October 2, 1994 compared to the prior year
period. Cost of sales, as a percentage of Net Sales, increased
to 58.2% for the nine months ended October 2, 1994 as compared to
54.4% for the prior year period. This increase in cost of sales
resulted principally from a sales mix shift resulting from (i)
the addition of sales of ABWF, which operates on lower gross
margins than Color Tile, (ii) increased sales of carpet and
related installation services and (iii) increased sales of
product to franchisees.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses decreased as a percentage of
net sales to 31.4% for the nine months ended October 2, 1994 as
compared to 35.4% for the prior year period due to the Company's
continued emphasis on control of operating costs and the addition
of ABWF, which operates on lower operating expenses, as a
percentage of Net Sales, than Color Tile. Such expenses
increased in aggregate dollar amount by $16,116 for the nine
months ended October 2, 1994 over the prior year period
primarily due to (i) increases in commission-based payroll due to
higher sales and (ii) the addition of ABWF's operating expenses.
Special Charges. During the third quarter of 1994, the
Company recorded Special Charges in the amount of $29,600. (See
Note 3 to Condensed Consolidated Financial Statements)
Interest Expense, Net. Interest expense, net, increased
$11,776 for the nine months ended October 2, 1994 as compared to
the prior year period. The increased interest expense resulted
from issuance of the Senior Notes during the fourth quarter of
1993 and the higher interest rates on borrowings under the Senior
Credit Agreement.
Pre-Tax Loss. Pre-tax loss for the nine months ended
October 2, 1994 was $27,249 as compared to a pre-tax loss of
$1,274 for the prior year period. The increase in pre-tax loss
for the nine months ended October 2, 1994 resulted primarily from
the $29,600 Special Charges, the $2,500 loss on disposal of a
line of business and the increase in interest expense of $11,776,
partially offset by the $9,500 prior year loss on disposal of a
line of business.
Income Taxes. Income tax expense was $510 for the nine
months ended October 2, 1994 representing a decrease of $114 from
the prior year period. The Company recognized reductions in
federal income tax expense primarily from the utilization of
deductible temporary differences of $683 for the nine months
ended October 3, 1993.
Net Loss. Net loss was $27,759 for the nine months ended
October 2, 1994 after a $2,500 loss on disposal of a line of
business and the $29,600 in Special Charges, as compared to a net
loss of $1,898 in the prior year period which included a $9,500
loss on disposal of a line of business.
<PAGE>
Liquidity and Capital Resources
In September 1994, the Company entered into an amendment to
its Senior Credit Agreement and, on October 4, 1994, the Company
borrowed an additional $29 million under the term loan portion of
the Senior Credit Agreement, the proceeds of which were utilized
to provide additional working capital for the business.
At October 2, 1994, the Company had $138,150 in outstanding
Borrowings under the Senior Credit Agreement, which bear interest
at fluctuating rates. At that date, the average fluctuating
interest rate on such Borrowings approximated 8.1% per annum.
The Company was in compliance as of October 2, 1994 with all
restrictive covenants contained in the Senior Credit Agreement
and the Senior Note Indenture. At November 15, 1994, the Company
had approximately $22,000 of availability under the revolving
line of credit portion of the Senior Credit Agreement.
During the remainder of fiscal 1994, the Company's principal
payments due under its outstanding long-term mortgage
indebtedness and payments due under capitalized leases will
aggregate approximately $1,500. The next mandatory principal
payment under the term loan portion of the Senior Credit
Agreement will be the quarterly payment of $3,526 due in March
1996. Approximately $2,100 of total cash dividends will be
payable on the Series A Shares during the remainder of 1994. In
1995, the Company's redeemable Senior Preferred Stock will begin
to accrue cash dividends of approximately $5,200 annually with
the first payment of approximately $2,600 due on July 15, 1995.
Capital expenditures for the nine months ended October 2,
1994 were $17,152 as compared to $9,357 for the nine months
ended October 3, 1993. These capital expenditures have been
funded through cash flows from operations, lease financing and
the revolving line of credit portion of the Senior Credit
Agreement. For the remainder of fiscal 1994, the Company
anticipates making additional capital expenditures of
approximately $3,000 to $4,000.
The Company believes that funds generated from operations,
the revolving line of credit portion of the Senior Credit
Agreement, lease financings and purchase money mortgages will
provide sufficient resources through fiscal 1995 to permit it to
make all principal and interest payments on the Senior Notes and
its other existing indebtedness, to pay all cash dividend
payments and to finance all planned capital expenditures.
Impact of Inflation and Changing Prices; Seasonality
Inflation and changing prices have not historically had a
material effect on the Company's overall operations. Generally,
the Company has been able to offset the effect of increases in
product costs through a combination of price increases,
modifications in promotional strategies and the implementation of
operating efficiencies.
The Company's business shows some seasonal variation, with
lower sales levels generally occurring during the winter months.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10 (z) Amendment No. 4, dated as of September 13,
1994, to the Credit Agreement, dated as of
November 27, 1991, as amended, among the Company,
the lenders party thereto and Chemical Bank as
agent.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
COLOR TILE, INC.
(Registrant)
Date:
November 21, 1994 /s/ Daniel J. Gilmartin
Daniel J. Gilmartin,
Senior Vice President,
Treasurer and Chief Financial Officer
EXHIBIT 10(z)
FOURTH AMENDMENT
FOURTH AMENDMENT, dated as of September 13, 1994 (this
"Amendment"), to the Credit Agreement, dated as of November 27,
1991, as heretofore amended (the "Credit Agreement"), among COLOR
TILE, INC., a Delaware corporation (the "Company"), the financial
institutions parties thereto (the "Banks") and Chemical Bank, as
the agent for the Banks (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Banks have
agreed to make, and have made, certain loans and other extensions
of credit to the Company; and
WHEREAS, the Company has requested, and, upon this Amendment
becoming effective, the Banks party hereto have agreed, that
certain provisions of the Credit Agreement be amended in the
manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I. DEFINED TERMS
Terms defined in the Credit Agreement and used herein shall
have the meanings given to them in the Credit Agreement.
ARTICLE II. AMENDMENTS TO CREDIT AGREEMENT AND CONSENTS
1. Amendments to Section 1. Subsection 1.1 of the Credit
Agreement is hereby amended as follows:
(a) by deleting therefrom the definitions of the following
defined terms in their respective entireties and substituting in
lieu thereof the following definitions:
"Commitment": as to any Bank at any time, such Bank's
Swing Line Commitment, Tranche A Term Loan Commitment,
Tranche B Term Loan Commitment, Tranche C Term Loan
Commitment and Revolving Credit Commitment; collectively, as
to all the Banks, the "Commitments".
"Commitment Percentage": as to any Bank at any time,
its Tranche A Term Loan Commitment Percentage, its Tranche B
Term Loan Commitment Percentage, its Tranche C Term Loan
Commitment Percentage or its Revolving Credit Commitment
Percentage, as the context may require.
"Term Loan Notes": collectively, the Tranche A Term
Loan Notes, the Tranche B Term Loan Notes and the Tranche C
Term Loan Notes.
"Term Loans": collectively, the Tranche A Term Loans,
the Tranche B Term Loans and the Tranche C Term Loans.
(b) by adding thereto the following definitions in their
appropriate alphabetical order:
"Fourth Amendment": the Fourth Amendment dated as of
September 13, 1994 to this Agreement.
"Fourth Amendment Effective Date": the date of
effectiveness of the Fourth Amendment.
"Tranche C Bank": each Bank having a Tranche C Term
Loan Commitment which is not zero.
"Tranche C Closing Date": the date on which the Tranche
C Banks make their Tranche C Term Loans.
"Tranche C Commitment Supplement": the supplement
substantially in the form of Exhibit P.
"Tranche C Term Loan Commitment": as to any Bank, its
obligation to make a Tranche C Term Loan to the Company
pursuant to subsection 3A.l in an aggregate amount not to
exceed the amount set forth under such Bank~s name in
Schedule II to the Tranche C Commitment Supplement opposite
the caption "Tranche C Term Loan" or in Schedule II to any
Commitment Transfer Supplement pursuant to which a Bank
acquires its Tranche C Term Loan Commitment, as the same may
be reduced from time to time pursuant to subsection 5.3 or
adjusted pursuant to subsection 12.6(c); collectively, as to
all the Banks, the "Tranche C Term Loan Commitments".
"Tranche C Term Loan Note" and "Tranche C Term Loan
Notes": as defined in subsection 3A 2
"Tranche C Term Loan Commitment Percentage": as to any
Tranche C Bank at any time, the percentage of the aggregate
Tranche C Term Loan Commitments then constituted by such
Tranche C Bank's Tranche C Term Loan Commitment.
"Tranche C Term Loan" and "Tranche C Term Loans": as
defined in subsection 3A.1.
2. Amendments to Section 5. Subsection 5.4 of the Credit
Agreement is hereby amended by deleting paragraph (c) thereof in
its entirety and substituting in lieu thereof the following new
paragraph (c):
"(c) The Tranche A Term Loans and Tranche B Term Loans
shall be repaid in 26 consecutive quarterly installments on
the dates opposite the amounts set forth on Schedule II
under the heading "Tranche A and Tranche B Installment
Amounts, and the Tranche C Term Loans shall be repaid (but
<PAGE>
only if actually borrowed) in 12 consecutive quarterly
installments on the dates opposite the amounts set forth on
Schedule II under the heading "Tranche C Installment Amount"
(each such day, an "Installment Payment Date"), commencing
on September 30, 1992, in the case of the Tranche A Term
Loans and Tranche B Term Loans, and on March 31, 1996, in
the case of the Tranche C Term Loans, in an aggregate amount
equal to the amount specified for each such Installment
Payment Date with respect to such Term Loan on Schedule II,
provided, that, on each Installment Payment Date, until
either the Tranche A Term Loans or the Tranche B Term Loans
shall have been paid in full, one-half of the amount of the
repayment made on such Installment Payment Date applicable
to the Tranche A Term Loans and Tranche B Term Loans shall
be applied to the Tranche A Term Loans and one-half of such
amount shall be applied to the Tranche B Term Loans."
3. Amendments to Section 9. (a) Subsection 9.1 of the Credit
Agreement is hereby amended by (i) deleting the word "and" at the
end of clause (i) thereof, (ii) deleting the period at the end of
clause (j) thereof and substituting "; and" in lieu thereof and
(iii) adding the following new clause (k):
"(k) Indebtedness in respect of commercial letters
of credit (other than Letters of Credit) in an
aggregate amount not to exceed $10,000,000 at any time
outstanding."
(b) Subsection 9.2 of the Credit Agreement is hereby amended
by (i) deleting the word "and" at the end of clause (o) thereof,
(ii) deleting the period at the end of clause (p) thereof and
substituting "; and" in lieu thereof and (iii) adding the
following new clause (q):
"(q) Liens on documents of title and the property
covered thereby and the proceeds thereof securing (i)
Indebtedness in respect of letters of credit permitted
pursuant to subsection 9.1(k) and (ii) obligations in
respect of letters of credit not constituting
Indebtedness hereunder."
(c) Subsection 9.5 of the Credit Agreement is hereby amended
by (i) deleting the figure "$1,000,000" from clause (c) thereof
and substituting in lieu thereof the figure "$2,000,000", (ii)
deleting the word ~and" from the end of clause (j) thereof, (iii)
deleting "." from the end of clause (k) thereof and substituting
in lieu thereof "; and", and (iv) inserting at the end of such
subsection 9.5 the following new clause (l):
"1) sales of equipment of the Company and its
Subsidiaries used in the ordinary course of their
business in connection with the financing of such
equipment and computer software within (i) 180 days
after the Fourth Amendment Effective Date, in the case
<PAGE>
of equipment and computer software owned by the Company
and its Subsidiaries on the Fourth Amendment Effective
Date and having an aggregate fair market value not in
excess of $3,000,000, and (ii) 180 days after its
acquisition, otherwise."
4. Amendments to Schedules. (a) Schedule I to the Credit
Agreement is hereby deleted in its entirety and Schedule I to
this Amendment is hereby substituted in lieu thereof.
(b) Schedule II to the Credit Agreement is hereby deleted in
its entirety and Schedule II to this Amendment is hereby
substituted in lieu thereof.
5. New Section 3A. The Credit Agreement is hereby amended by
inserting, immediately following Section 3, the following new
Section 3A:
"SECTION 3A. TRANCHE C TERM LOANS
3A.1 Tranche C Term Loans. Subject to the terms
and conditions hereof, each Tranche C Bank severally agrees
to make loans in Dollars (individually, a "Tranche C Term
Loans"; collectively, the "Tranche C Term Loans") to the
Company on the Tranche C Closing Date, in a principal amount
not to exceed such Tranche C Bank's Tranche C Term Loan
Commitment. The Tranche C Term Loans shall be made initially
as MHTC Rate Loans.
3A.2 Tranche C Term Loan Notes. The Tranche C Term
Loan made by each Tranche C Bank shall be evidenced by a
promissory note of the Company, substantially in the form of
Exhibit A-3 (a "Tranche C Term Loan Note"), with appropriate
insertions, payable to the order of such Tranche C Bank and
representing the obligation of the Company to pay the lesser
of (a) the amount of the initial Tranche C Term Loan
Commitment of such Tranche C Bank and (b) the aggregate
unpaid principal amount of the Tranche C Term Loan made by
such Tranche C Bank, with interest thereon as prescribed in
subsection 5.5. Each Tranche C Bank is hereby authorized to
record the amount of the Tranche C Term Loan made by such
Tranche C Bank, each payment or prepayment of principal on
the amount of the Tranche C Term Loan, and the date of each
interest rate conversion pursuant to subsection 5.2 and the
principal amount subject thereto, on the schedule annexed to
and constituting a part of its Tranche C Term Loan Note and,
in the absence of manifest error, any such recordation shall
constitute prima facie evidence of the accuracy of the
information so recorded, provided that the failure of any
Tranche C Bank to make such recordation (or any error in
such recordation) shall not affect the obligations of the
Company hereunder or under such Note. Each Tranche C Term
Loan Note shall (i) be dated the Tranche C Closing Date and
(ii) bear interest for the period from the date thereof on
<PAGE>
the unpaid principal amount thereof from time to time
outstanding at the applicable interest rates per annum
specified in subsections 5.5(a), (b) and (c). Interest on
each Tranche C Term Loan Note shall be payable as specified
in subsection 5.5(d).
3A.3 Repayment of Tranche C Term Loans. The Company
shall repay the Tranche C Term Loans as provided in
subsection 5.4(c).
3A.4 Use of Proceeds. The proceeds of the Tranche C
Term Loans shall be used for general corporate purposes.
3A.5 Tranche C Commitment Supplement. It is agreed that
the Tranche C Term Loan Commitments of the Tranche C Banks
shall be as set forth in the Tranche C Commitment Supplement
executed and delivered to the Agent prior to the Tranche C
Closing Date. Such Tranche C Commitment Supplement shall be
deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the assumption of the
Tranche C Term Loan Commitments set forth therein by the
Tranche C Banks, the addition as Banks of any such Tranche C
Banks which were not theretofore Banks under this Agreement,
and the adjustment of the Commitment Percentages arising as
a result of the assumption of such Tranche C Term Loan
Commitments."
6. New Subsection 7.3. The Credit Agreement is hereby
amended by inserting, immediately following subsection 7.2, the
following new subsection 7.3:
"7.3 Conditions to Tranche C Term Loans. The
obligation of any Bank to make its Tranche C Term Loan on
the Trance C Closing Date is subject to the satisfaction, or
waiver by such Tranche C Bank, immediately prior to or
concurrently with the making of such Tranche C Term Loans,
of the following conditions:
(a) Tranche C Commitment Supplement. The Tranche C
Commitment Supplement, providing for Tranche C Term Loan
Commitments in an aggregate amount not less than
$29,000,000, shall have been executed and delivered by each
Bank which shall become a Tranche C Bank thereunder, the
Company and the Agent, and the Agent shall have received an
original executed copy thereof for itself and each Tranche C
Bank.
(b) Tranche C Term Loan Notes. The Agent shall
have received for the account of each Tranche C Bank a
Tranche C Term Loan Note, conforming to the requirements of
the Credit Agreement and executed by a duly authorized
officer of the Company.
(c) Closing Certificates. The Agent shall have
<PAGE>
received a Closing Certificate of each of Holdings, the
Company and each Subsidiary of the Company party to the
Subsidiary Guarantee, dated the Tranche C Closing Date, in
substantially the form of Exhibit B to the Fourth Amendment,
with appropriate insertions and attachments, in form and
substance reasonably satisfactory to the Agent and its
counsel, executed by the President or any Vice President and
the Secretary or any Assistant Secretary of such Credit
party.
(d) Legal Opinion. The Agent shall have received,
dated the Tranche C Closing Date and addressed to the Agent
and the Banks, an opinion of Gibson, Dunn & Crutcher,
counsel to the Company, in form and substance reasonably
satisfactory to the Agent and its counsel.
7. New by inserting A-3. The Credit Agreement is hereby
amended by inserting as a new Exhibit A-3, immediately following
Exhibit A-2, Exhibit A-3 attached to this Amendment.
8. New Exhibit P. The Credit Agreement is hereby amended by
inserting as a new Exhibit P, immediately following Exhibit O-2,
Exhibit P attached to this Amendment.
9. Consent to Accounts Receivable Sale Program. The Company, the
Agent and the Banks hereby consent and agree that, notwithstanding
anything to the contrary contained in the Credit Agreement, (1) subject
to the proviso set forth at the end of this Section 9 of Article II,
the Company shall be permitted to sell accounts receivable from time to
time, (2) the Agent and the Banks shall, at the expense of the Company,
execute and deliver to the Company any releases of security interests
of the Agent and the Banks in such accounts receivable and any other
documents to evidence such releases as the Company may reasonably
request, and (3) the sales of such accounts receivable pursuant to this
Section 9 of Article II shall not be considered "Asset Sales" under the
Credit Agreement; provided, however, that the aggregate face amount of
accounts receivable subject to a program of sale of receivables
permitted by this Section 9 of Article II shall not exceed $10,000,000
at any time, and any such sales of accounts receivable shall be
consummated on terms, reasonably satisfactory to the Agent, pursuant to
which the purchaser thereof shall have no recourse to any Credit Party
or any assets of any Credit Party in connection with such accounts
receivable or such sales.
ARTICLE III. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective on the date (the "Amendment
Effective Date") on which all of the following conditions precedent
have been satisfied or waived:
1. Amendment. The Agent shall have received an original executed
copy of this Amendment for each Bank, duly executed and delivered by a
duly authorized officer of the Company, and the Agent shall have
received evidence satisfactory to it that this Amendment shall have
<PAGE>
been executed and delivered by the Agent and the Required Banks.
2. Affirmation by Guarantors. The Agent shall have received
evidence satisfactory to it that each of Holdings and each Subsidiary
party to the Subsidiaries Guarantee has consented to this Amendment and
reaffirmed its obligations under the Guarantee executed by such Person.
ARTICLE IV. GENERAL
1. Representation and Warranties. To induce the Agent and the
Banks parties hereto to enter into this Amendment, the Company hereby
represents and warrants to the Agent and all of the Banks as of the
Amendment Effective Date that:
(a) Financial Condition. The Company has delivered all of the
financial statements required to be delivered pursuant to subsection
8.1(a) and (b) for the most recently ended fiscal year and fiscal
quarterly period, and such financial statements present fairly the
consolidated financial condition of the Company and its consolidated
Subsidiaries as at the dates thereof, and the consolidated results of
their operations and their consolidated cash flows for the fiscal
periods then ended covered thereby. All such financial statements,
including the related schedules and notes thereto, have been prepared
in accordance with GAAP applied consistently throughout the periods
involved except as approved by such accountants or such officer, as the
case may be, and as disclosed therein). Neither the Company nor any of
its consolidated Subsidiaries had, at the date of the most recent
balance sheet referred to above, any material Contingent Obligation,
contingent liability or liability for taxes, or any long-term lease or
unusual forward or long-term commitment, including, without limitation,
any material interest rate or foreign currency swap or exchange
transaction, which is not reflected in the foregoing statements or in
the notes thereto or expressly permitted to be incurred hereunder.
(b) No Change. Since the date of the most recent financial
statements delivered pursuant to subsection 8.1(a) of the Credit
Agreement (1) there has been no change, and no development or
event involving a prospective change, which has had or could reasonably
be-expected to have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries taken as a whole and (2) no dividends or
other distributions have been declared, paid or made upon the capital
stock of the Company nor has any of the capital stock of the Company
been redeemed, retired, purchased or otherwise acquired for value by
the Company or any of its Subsidiaries, except as permitted under the
terms of the Credit Agreement as in effect during such period.
(c) Corporate Power; Authorization; Enforceable Obligations.
(1) The Company has the corporate power and authority, and the
legal right, to make and deliver this Amendment and the Tranche C Term
Loan Notes (collectively, the "Amendment Documents"), and each other
Credit Party has the corporate power and authority, and the legal
right, to make and deliver the Amendment Documents to which it is a
party, and each Credit Party has the corporate power and authority, and
<PAGE>
the legal right, to perform the Credit Documents to which it is a
party, as amended by the Amendment Documents, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of such Amendment Documents and the performance of such
Credit Documents, as so amended.
(2) No consent or authorization of, approval by, notice to, filing
with or other act by or in respect of, any Governmental Authority or
any other Person is required in connection with the execution and
delivery of the Amendment Documents to which any Credit Party is a
party or with the performance, validity or enforceability of the Credit
Documents to which any of them is a party, as amended by the Amendment
Documents.
(3) Each Amendment Document to which any Credit Party is a party
has been duly executed and delivered on behalf of such Credit Party.
(4) Each Amendment Document to which any Credit Party is a party
and each Credit Document to which it is a party, as amended by the
Amendment Documents, constitutes a legal, valid and binding obligation
of such Credit Party enforceable against such Credit Party in
accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting the enforcement of creditors'
rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing.
(d) No Legal Bar. The execution, delivery and performance of the
Amendment Documents to which any Credit Party is a party and the
performance of the Credit Documents to which it is a party, as amended
by the Amendment Documents, will not violate any Requirement of Law or
Contractual Obligation of such Credit Party and will not result in, or
require, the creation or imposition of any Lien on any of its
properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
(e) Representations and Warranties. The representations and
warranties made by each Credit Party in the Credit Documents to which
it is a party are true and correct in all material respects on and as
of the Amendment Effective Date, before and after giving effect to the
effectiveness of this Amendment, as if made on and as of the Amendment
Effective Date.
2. Payment of Expenses. The Company agrees to pay or reimburse the
Agent for all of its out-of-pocket costs and reasonable expenses
incurred in connection with the Amendment Documents, any other
documents prepared in connection herewith and the transactions
contemplated hereby, including, without limitation, the reasonable fees
and disbursements of counsel to the Agent.
3. No Other Amendments. Except as expressly amended, modified and
supplemented hereby, the provisions of the Credit Agreement, the Notes
and the other Credit Documents are and shall remain in full force and
<PAGE>
effect in accordance with their terms.
4. Confirmation by Banks. Each Bank party hereto acknowledges that
the Collateral Spread Date has occurred, and confirms and agrees that
the principal amount of the Tranche A Term Loan and Tranche B Term Loan
of such Bank outstanding on the date hereof, as reflected in the
records of the Agent, after giving effect to all payments of principal
heretofore received in respect thereof, and as set forth in Schedule I
to this Amendment as the Tranche A Term Loan Commitment and the Tranche
B Term Loan Commitment of such Bank, is the correct amount thereof.
Each Bank party hereto confirms and agrees that the amounts set forth
on Schedule II to this Amendment under the heading "Remaining Tranche A
and B Amortization" correctly sets forth the remaining scheduled
principal amortization of the Tranche A Term Loans and Tranche B Term
Loans of all the Banks. Upon the execution and delivery of this
Amendment by the requisite number of the Banks to approve the
modification referred to in this sentence pursuant to the Credit
Agreement, the proviso to subsection 5.4(c) of the Credit Agreement (as
amended by Article II, Section 2 of this Amendment) shall be deemed
modified to provide that repayments of the Tranche A Term Loans and
Tranche B Term Loans shall be applied to such Term Loans pro rat a
based upon the principal amounts thereof then outstanding.
5. Affirmation of Guarantees. Each of Holdings and each Subsidiary
party to the Subsidiaries Guarantee hereby consents to the execution
and delivery of this Amendment and reaffirms its obligations under the
Guarantee executed by such Person.
6. Governing Law; Counter Parts. (a) This Amendment and the rights
and obligations of the parties hereto shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
New York.
(b) This Amendment may be executed by one or more of the parties
to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and
the same instrument. A set of the copies of this Amendment signed by
all the parties shall be lodged with the Company and the Agent. This
Amendment may be delivered by facsimile transmission of the relevant
signature pages hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written
COLOR TILE, INC.
By: /s/Daniel J. Gilmartin
Title:
THE BANK OF TOKYO TRUST COMPANY
By: /s/Victor Buczacchelli
Title:
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By: /s/Mark A. Harrington
Title:
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE
By: /s/Sean Mounier
Title:
CREDIT LYONNAIS, NEW YORK BRANCH
By: /s/Robert Dial
Title:
HOUSEHOLD COMMERCIAL FINANCIAL
SERVICES, INC.
By: /s/Thomas Thompson
Title:
SOCIETE GENERALE
By: /s/Karel Vasak
Title:
BANQUE PARIBAS
By: /s/David Buseck
Title:
CHEMICAL BANK
By: /s/Hans von Nolde
Title:
CRESCENT/MACH I PARTNERS, L.P.
By: /s/Mark Gold
Title:
FLEET BANK OF MASSACHUSETTS
By: /s/Thomas J. Bullard
Title:
NATIONSBANK OF TEXAS, N.A.
By: /s/Vince Liberio
Title:
PILGRIM PRIME RATE TRUST
By: /s/Michael McAdams
Title:
PROSPECT STREET SENIOR PORTFOLIO,L.P.
By: /s/Dana Erikson
Title:
VAN KAMPEN MERRITT PRIME
RATE INCOME TRUST
By: /s/Jeffrey Maillet
Title:
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/Steve Wood
Title:
THE DAIWA BANK LTD.
By: /s/James T. Wang
Title:
CHEMICAL BANK, as Agent
By: /s/Joseph A. Jabes
Title:
Each of the following guarantors hereby consents to the
execution and delivery of the foregoing Amendment and reaffirms its
obligations under the Guarantee executed by it.
COLOR TILE HOLDINGS, INC.
By: /s/ Eddie Lesok
Its: Vice President
COLOR TILE FRANCHISING, INC.
By: /s/ Eddie Lesok
Its: Chief Executive Officer and
Chairman of the Board
COLOR TILE MANUFACTURING, INC.
By: /s/ Eddie Lesok
Its: President
C. TILE TRANSPORTATION, INC.
By: /s/ Eddie Lesok
Its: President
AMERICAN BLIND FACTORY, INC.
By: /s/ Eddie Lesok
Its: Vice President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COLOR TILE,
INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED OCTOBER
2, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-1-1995
<PERIOD-END> OCT-2-1994
<CASH> 1977
<SECURITIES> 0
<RECEIVABLES> 18635
<ALLOWANCES> 141
<INVENTORY> 90860
<CURRENT-ASSETS> 121753
<PP&E> 119258
<DEPRECIATION> 0
<TOTAL-ASSETS> 565110
<CURRENT-LIABILITIES> 120627
<BONDS> 355000
<COMMON> 0
89951
0
<OTHER-SE> (15136)
<TOTAL-LIABILITY-AND-EQUITY> 565110
<SALES> 504630
<TOTAL-REVENUES> 504360
<CGS> 293604
<TOTAL-COSTS> 502920
<OTHER-EXPENSES> 2500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26189
<INCOME-PRETAX> (27249)
<INCOME-TAX> 510
<INCOME-CONTINUING> (27759)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27759)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
